A FERC majority yesterday reaffirmed the right of interstatepipelines to “reasonably withhold” their consent for customers topermanently transfer their contract liabilities to third-partyreplacement shippers under capacity releases.

In a 4-1 vote on rehearing, the Commission said Texas EasternTransmission (Tetco) wouldn’t be guilty of “abus[ing] itsdiscretion” if it refused to relieve Public Service Electric andGas (PSE&G) of the liability associated with its long-termcontract obligations upon their transfer to a newly createdaffiliate of the New Jersey utility, Public Service Energy Trading.If the latter defaulted, it noted that Tetco essentially could beleft holding the bag for PSE&G’s $750 million remainingobligation to the pipeline.

If Tetco “is economically indifferent to the transfer ofliability and is left in [a] revenue-neutral position [followingthe transfer], it would be unreasonable for the pipeline to refuseto relieve the releasing shipper from liability,” said CommissionerWilliam Massey. “But here…we again find that it would not beunreasonable to withhold consent. The wholly-owned subsidiary towhich PSE&G would release capacity has few tangible assets, noemployees and would remain under PSE&G’s control.”

But Commissioner Curt Hebert Jr., who dissented in the case,insisted the decision was indicative of a “disturbing policy thatwould facilitate regulatory intrusion into business decisions” inthe gas industry. “Looking behind contracts and into businessdecisions is contrary to a position which supports a move to acompetitive utility industry. This is a perfect example ofregulatory capitalism.” He advised the other commissioners and FERCstaff to “let go, let go, let go” of regulation. That makes forgood rhetoric, but “we have these little old problems here withrespect to letting go, letting go. And they happen to be theNatural Gas Act and the Federal Power Act,” countered Massey.

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