Three negotiated-rate arrangements involving Tennessee Gas Pipeline were accepted by FERC and take effect this week despite a joint dissent by Chairman Pat Wood and Commissioner Suedeen Kelly.

“We would not have approved these proposed negotiated-rate agreements because they give the pipeline a direct interest in natural gas commodity prices,” the two wrote in a dissenting statement on Monday.

“The Commission’s negotiated-rate policy statement prohibited the use of basis differential pricing in negotiated-rate transactions due to the potential for the pipeline to increase its revenues by withholding capacity in order to increase the relevant basis differentials,” Wood and Kelly noted. “We recognize that the Commission…subsequently permitted the use of basis differentials in discounted rate transactions…Tennessee’s proposal, however, goes beyond using basis differentials to value the transportation and gives the pipeline a direct interest in higher commodity prices.”

Because there was a split vote (two to two) by the Commission, Tennessee’s negotiated-rate filing with Constellation Power Service Inc. and its negotiated-rate deal with NJR Energy Services Co. was considered approved under FERC rules and automatically took, or will take effect on Nov. 1 and Nov. 3, respectively. Commissioners Nora M. Brownell and Joseph Kelliher voted in favor of Tennessee’s agreements, while Wood and Kelly dissented.

There were no “adverse comments or protests” filed by FERC staff or the natural gas industry to the Tennessee filings [RP96-312-142].

Under both arrangements, Tennessee will charge the shippers a rate based on a daily index price in Platts’ Gas Daily and computed with a formula spelled out in a separate letter agreement, the order said. Tennessee will be prohibited from collecting more revenue under the negotiated agreements than it would had it charged maximum tariff rates over the period covered by the negotiated-rate agreements, it noted.

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