Stephanie:  Confirming our phone conversation today, based on my reading of the Transco order and the PGT order, the FERC relied on a different standard in the Transco case (the 1995 Pricing Policy Statement) than they used in the PGT case (the 1999 Policy Statement on Certification of New Interstate Natural Gas Pipeline Facilities).  

The 1995 Policy Statement said that, when the roll-in increased rates to existing shippers by less than 5%, the pipeline needed to make only a general showing of system benefits, and FERC said that Transco had satisfied that showing.  

The 1999 Policy Statement, however, has a threshold requirement for expansion projects requiring that there can be no subsidization from existing customers - in other words, no increase in costs of any kind.  The PGT order found that there was a possibility that fuel costs could increase for existing shippers; therefore, PGT had to establish a surcharge mechanism to subject expansion shippers to an incremental fuel charge for fuel costs above those that would apply absent the new compression.  If the fuel costs do not increase, then there will be no surcharge.

 -----Original Message-----
From: 	Miller, Stephanie  
Sent:	Monday, November 05, 2001 2:12 PM
To:	Cantrell, Rebecca W.
Cc:	Tycholiz, Barry
Subject:	PGT Fuel Treatment

Greetings Becky:

Met with PGT the other day. Based upon a recent FERC ruling on the treatment of fuel on a project on Transco's Leidy Lateral (last 2 weeks), PGT is going to ask FERC to reverse its ruling on the 2002 expansion. If you remember, FERC was very clear on the notion that existing shippers should not subsidize increased costs associated with incremental shippers. I've been told that Transco received approval for rolled in treatment of higher fuel because they did not have an "incremental" tariff.  

This sounds very suspicious - can you please investigate?

Thanks,

Stephanie