FERC yesterday awarded Tennessee Gas Pipeline a certificate forits Eastern Express Project 2000 after it had satisfied all of therequirements of the new policy statement on gas pipelineconstruction.

The project will expand the pipeline’s system by 288,000 Dth/din Zone 6, providing an outlet for natural gas transported over thejoint Maritimes & Northeast Pipeline/Portland Natural GasTransportation System (PNGTS) facilities in the New England region.Tennessee’s system will be expanded from where it will interconnectwith the PNGTS/Maritimes joint system at Dracut and Haverhill, MA,to delivery points at Milford and Meriden, CT, and Mendon, MA.

“…[W]e find Tennessee’s proposed project can proceed withoutsubsidies from its existing customers, and expect it to providepublic benefits without adverse impacts,” the order said[CP99-262]. Additionally, FERC said the pipe could roll in thecosts of the $28 million project in its next rate case barring “asignificant change in the relevant facts and circumstances.”Rolling in the project costs will result in a rate decrease forexisting shippers in Zone 6, Tennessee said.

Allowing rolled-in pricing for Tennessee’s project is consistentwith the Sept. 15 policy statement, which said such rates would bepermitted “in cases of inexpensive expansibility made possible byearlier, costly construction,” the order noted. “This is such acase.”

The Commission also approved the proposed negotiated rates forthe expansion shippers, which Tennessee said would be less thanexisting transportation rates for recourse shippers. “Under [our]policy…..the revenue shortfall due to the lower negotiated ratescannot be recovered from existing shippers. Therefore, our policyis to permit negotiated rates at lower than recourse rates in allcases, even to affiliates, and not only when lower rates are neededto compete for business,” the order said.

Also favorable were Tennessee’s binding precedent agreements for173,000 Dth (60%) of the proposed 288,000 Dth/d capacity, FERCsaid. These precedent agreements “demonstrate that the estimatedrevenues from the proposed project exceed the cost of service by$43,084,914 over the ten-year primary period, and that the annualrevenues will exceed annual costs in each of these ten years. Sincethe long-term project revenues exceed the project costs, it willnot be subsidized by existing customers.”

The Commission said it would require Tennessee to execute firmcontracts “equal to the capacity in which Eastern Express Project2000 shippers have committed themselves” before it can beginconstruction on the expansion.

Because the expansion will be accomplished mostly throughadditional compression, the FERC order said Tennessee’s project”minimizes potential landowner objections…..and no eminent domainauthority will be required.”

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