Power & Pipes

On January 6, 2012, FERC issued an order rejecting Portland Natural Gas Transmission System’s (Portland Natural) compliance filing addressing certain nonconforming service agreements.[1] In an order issued in October 2010, FERC found that the firm transportation (FT) agreement between Portland Natural and EnergyNorth Natural Gas (EnergyNorth) contained an impermissible deviation from Portland Natural’s FERC Gas Tariff.[2] Specifically, the agreement granted the shipper the option to reduce its firm Maximum Daily Quantity “in the event that Transporter enters into a . . . contract for firm transportation service with any other shipper, excluding Crown Vantage . . . that calls for delivery at the Berlin Station.”[3] FERC directed Portland Natural to either remove the provision or offer the right to reduce contract demand on a nondiscriminatory basis because such a provision could enable a shipper to avoid significant liability for future reservation charges.

In response to the October 2010 Order, Portland Natural initially proposed to add a tariff provision that offered the right to reduce contract demand solely to 20-year firm shippers whose primary delivery point is at Berlin, New Hampshire. Further, Portland Natural continued to exclude Crown Vantage By name. In an order issued in June 2011, FERC determined that Portland Natural’s revised tariff language was so narrowly tailored that EnergyNorth would be the only shipper that could qualify for the right to reduce contract demand. As a result, FERC found that Portland Natural had not offered the right on a nondiscriminatory basis.[4]

Portland Natural subsequently filed proposed revisions to its General Terms and Conditions (GT&C) of service stating that the disputed paragraph of the EnergyNorth agreement is null and void. FERC rejected this filing as well, finding that Portland Natural’s proposal to render its nonconforming contract compliance By modifying its GT&C contradicts section 154.109(a) of FERC’s regulations, which limits the GT&C to contain only the “terms and conditions of service applicable to all or any of the [pipeline’s] rate schedules.”[5] FERC continued By explaining that if it “allow[ed] pipelines to render their non-conforming contracts compliant By modifying the GT&C instead of modifying the contracts themselves, the result, over time, would be to turn an otherwise transparent and universal tariff into an opaque tangle of cross-references and special exceptions.”[6] Because FERC deemed the provision unduly discriminatory, and neither Portland Natural nor EnergyNorth contested that decision, FERC held that the correct course of action is not to file revised tariff provisions but to file a revised service agreement with the unlawful contract demand reduction provision removed. The other provisions of the agreement remain in effect.