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FERC Oks Steuben Storage Field

Fortnightly Magazine - March 15 1996

The Federal Energy Regulatory Commission (FERC) has issued a certificate allowing Steuben Gas Storage Co. (SGS) to construct and operate an underground natural gas storage field, the Thomas Corners Field.

In a preliminary finding that SGS lacked market power, the FERC authorized the company to charge market-based rates, subject to reexamination (Docket Nos. CP95-119-000 et al.). But SGS argued that the provision requiring reexamination should be removed because it created regulatory uncertainty that adversely affected its ability to market storage services and finance the project.

The FERC disagreed, noting that although the storage facility will be directly interconnected only to CNG Transmission Corp.'s system, SGS is affiliated through ownership with ANR Pipeline Co., and lies close to Tennessee Gas Pipe Line Co.'s 24-inch diameter interstate pipeline. The FERC said it would reexamine SGS's market power and ability to charge market-based rates, should ANR, its affiliate Coastal Corp., or any other affiliate of either ANR or Coastal enter the New York/Pennsylvania storage market or acquire interest in a transportation facility connected to Steuben, or should SGS connect its storage system to Tennessee's transmission system or other interstate pipeline.

The FERC also found unacceptable the method SGS proposed to graduate its notice-period provision for firm storage (FS) service customers. SGS wanted to require customers with less than three-year terms to give SGS a right-of-first-refusal notice at the start of service, instead of when their service agreements approached expiration. The FERC suggested that SGS use an approach for shorter-term service contracts that consistently places the notice date nearer to the contract expiration date, making the notice provisions for shorter-term customers more like those for customers with longer-term agreements.

In addition, the FERC found SGS's proposed customer creditworthiness tariff too broad. For an FS agreement with a primary term of more than one year, SGS would not commence or continue service, and would terminate service if the customer failed to maintain a Moody's long-term debt rating of at least Baa, or a Standard & Poor's (S&P) long-term debt rating of at least BBB. Further, a customer lacking a Moody's or S&P rating would be required to demonstrate "satisfactory creditworthiness by other means as [SGS] shall determine" [see Ouachita River Gas Storage Co., L.L.C., 68 FERC ¶ 61,402 at 62,601 (1994), reh'g pending].

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