FERC last week gave Williams Gas Pipelines Central Inc. one morechance to settle the lingering, controversial cost-recovery issuesarising from the reformation of three of its contracts for gassupply in Colorado.
The order, which was approved notationally last Wednesday,called for a settlement judge to be assigned to the proceeding andgave Williams and protesters 30 days to resolve the ticklish issues[RP99-257]. Reflecting the sentiment of FERC, Commissioner CurtHebert Jr. warned that he would not vote to grant an extension if asettlement wasn’t reached at the end of the 30-day period. Instead,FERC said it “will promptly resolve the pending prudence andeligibility issues” pertaining to Williams’ request for recovery ofgas supply realignment (GSR) costs.
In September 1997, the Commission denied recovery of GSR costsassociated with the Colorado contracts, saying Williams had notentered into them prudently. The company’s request for rehearing ofthat order is now pending before FERC in a related docket[RP94-365]. An administrative law judge already has issued aninitial decision not favorable to Williams.
Last week’s “order does give the parties one more limitedopportunity to reach a settlement in not only this case, but in the14 proceedings in which Williams’ has sought recovery of pricingdifferential costs and buyout costs associated with the Coloradocontracts,” said Commissioner Linda K. Breathitt.
“These cases involve issues as to whether these contracts wereprudently entered into by Williams as well as whether the costs areeligible for recovery as GSR costs,” she noted. Breathitt estimatedthe total GSR costs at stake are almost $180 million withoutinterest.
In March, Williams filed revised tariff sheets to recover about$126 million of the GSR costs in connection with the three Coloradocontracts: the Lockridge contract, the Yuma County Oil Co. contractand the JER Partnership contract. About 95% of the GSR costs($114.5 million) involve the Lockridge contract. The Commissionlast week suspended the Williams’ revised tariffs for the maximumfive-month period, saying they “have not been shown to be just andreasonable…” The tariffs are to become effective on the earlierof Sept. 1 of this year or when the suspension is lifted by anotherorder.
Williams contends that it prudently incurred the GSR expenseswhen it assigned its obligation under the Lockridge contract to anon-affiliated third party, and its other two supply contracts toan affiliate.
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