Without admitting any wrongdoing, Transwestern Pipeline has entered into a stipulation and consent agreement with FERC to resolve the agency’s concerns about a $550 million loan that the regulated pipeline secured to help bail out its parent, Enron Corp., just weeks before Enron collapsed into bankruptcy last year.
Transwestern signed the agreement with FERC Chief Accountant John Delaware, the Division of Enforcement and Investigations, and the Office of Marketing Oversight and Investigations.
Under the deal, Transwestern has agreed not to recover from ratepayers the costs associated with the $550 million loan that it entered into on Nov. 13, 2001 with Citicorp North American Inc. and JP Morgan Chase Bank as co-administrative agents. Specifically, “Transwestern will not include the loan itself, the interest cost of the $550 million loan, or the cost of acquiring such loan or any successor loans(s) used to retire the $550 million debt, in any future Commission rate proceedings,” said the FERC order approving the consent agreement.
The loan is structured as a revolving line of credit that expires and must be paid in full on or before Nov. 8, according to the agreement. FERC “reserves the right to determine, in any future NGA Section 4 rate proceeding, whether the costs associated with any future refinancing of the $550 million loan is just and reasonable,” and thus recoverable from ratepayers.
The consent agreement also requires Transwestern and its parent company to comply with the provisions of a final rule that would limit regulated pipelines’ involvement in intra-corporate cash management programs, and would require pipelines to maintain written documents on all cash deposits and withdrawals from such accounts. FERC issued a notice of proposed rulemaking addressing the issue in August (see Daily GPI, Aug. 5).
As part of the agreement, Transwestern said it “neither admits nor denies that any of its loans were entered into imprudently,” or that it violated the Commission’s accounting regulations. The deal comes three months after FERC issued an order in which it called into question the propriety of two emergency loans secured by Transwestern and former Enron pipeline, Northern Natural Gas, to aid their ailing parent (see Daily GPI, Aug. 5). The Commission became concerned about the loans — specifically Enron’s intention to repay the pipelines — during a sweeping audit of cash-management programs involving regulated utilities and pipelines and their parent companies, which the agency began last January.
After Enron filed for bankruptcy last December, Transwestern said its loan to Enron “[was] no longer deemed by Transwestern to be recoverable.”
Northern Natural, which is now owned by Berkshire Hathaway’s MidAmerican Energy Holdings Co., negotiated a similar consent arrangement with FERC in mid-August (see Daily GPI, Aug. 9). Northern Natural obtained a $450 million loan to help Enron in late 2002.
FERC said it believes the agreement was an “equitable resolution” of its concerns about the propriety of Transwestern’s loan. However, it noted that “approval of this agreement does not constitute settlement or waiver of any further action or remedies the Commission may find appropriate concerning matters that are not addressed” in the initial Aug. 1 order citing FERC’s questions about the loans. Moreover, “nothing in this approval constitutes immunity from any civil or criminal action that any other federal agency or department may take,” the agency said.
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