-----Original Message-----
From: 	Cantrell, Rebecca  
Sent:	Tuesday, June 05, 2001 11:17 AM
To:	Fletcher, Brenda H.; McMichael Jr., Ed; Smith, George F.; Muhl, Gil; Townsend, Judy; Olinger, Kimberly S.; Tate, Paul; Superty, Robert; Concannon, Ruth; Calcagno, Suzanne; Lamadrid, Victor
Subject:	FERC Rejects FTW Rates for Transco -- Again

FYI.



NGI's Daily Gas Price Index  published : June 5, 2001 FERC Rejects FTW Rates for Transco -- Again  Transcontinental Gas Pipe Line Corp. last week struck out again in its eight-year effort to obtain firm-to-the-wellhead (FTW) transportation rates similar to those enjoyed by its competitors.  Responding to a remand from the U.S. Court of Appeals for the D.C. Circuit, the Commission after conducting a "detailed review" upheld its earlier rejection of Transco's bid to levy two-part FTW rates on distribution customers served by the pipeline's production-area mainline [RP92-137-050, RP93-136]. It concluded that the FTW rate structure would force distributors to pay for service that's not included in their contracts with Transco. Therefore, Transco's existing IT-feeder transportation rates for service on its supply laterals will remain in force.  The "fundamental issue" in this "long and somewhat tortuous" case is: who should pay the fixed costs of Transco's supply laterals -- 1) the producers and marketers who contract for service on the supply laterals and currently pay all of the fixed costs; or 2) Transco's firm transportation customers (distributors) who converted from bundled sales to transportation on the pipeline's mainline? The producers and marketers, who transport gas on Transco's supply laterals, favor a switch to a two-part FTW rate structure because it would lighten their fixed-cost burden. Transco advocates the rate shift because it believes this would encourage more producers to attach their supplies to its system. But the pipeline's distributor customers are opposed to being charged FTW rates on supply laterals, which they don't use.  FERC agreed with Transco's distributor customers -- who it calls FT-conversion customers -- in its remand decision. After conducting a lengthy examination, "we conclude that the FT- conversion customers' firm contracts [distributors] with Transco do not include service on the supply laterals. Rather, the producers and marketers contract and pay for the IT-feeder service [on the laterals]," last week's order noted. "Therefore, the 'Memphis' clauses of the FT-conversion shippers' contracts cannot authorize Transco to require the FT-conversion customers to pay two-part rates for service on the supply lateral not included in their contracts. We, therefore, reaffirm our rejection of Transco's proposal to unilaterally impose FTW service on the FT-conversion shippers."