The Federal Energy Regulatory Commission has dismissed a complaint filed by BP Energy alleging Natural Gas Pipeline Company of America acted improperly by forcibly bundling a systemwide gas transportation service option as a condition of BP exercising its right of first refusal to bid on continuing firm service.
The dispute involves the reach of FERC rules meant to protect an existing firm customer's need to continue its historical transportation service.
FERC sided with the pipeline company Wednesday in finding that BP was seeking to alter existing service rather than preserve it. The right of first refusal "does not afford the firm shipper a right to change the essential character of its service, as BP seeks to do here," FERC concluded in a Wednesday order (RP20-481).
SYSTEMWIDE OPTION
BP had contended that NGPL, in violation of its tariff and FERC rules, "required BP to take its 'optional' [systemwide] service to retain capacity subject to a regulatory right of first refusal, even though NGPL's own notice of released capacity stated the current capacity holder my elect to match the bids with or without the [systemwide] option."
BP said it had preferred to continue primary point capacity without systemwide service that provided access to secondary points throughout its system.
The net effect of NGPL's approach was to increase the cost of its exercise of its right of first refusal for a single contract by about $7.5 million over the life of the contract, BP argued in its January 31 compliant.
Tenaska Marketing Venture also weighed in in support of the complaint.
NGPL VIEW
NGPL for its part countered that BP was trying to use the right of first refusal to change its existing service, contrary to FERC rules, the pipeline's tariff and BP's contract. It argued that BP exercised its right to match the highest bid to keep its firm service with the systemwide option but now sought to downgrade that service.
BP was using the process to get a different service at a rate below the highest bid received, NGPL asserted.
FERC ultimately concluded that the systemwide option was "essential" to BP's existing firm service, which had a higher maximum reservation rate reflecting the right to secondary access points.
Language in the tariff does not provide BP with a right to discontinue a fundamental part of its existing service that includes a systemwide options while keeping a firm transportation service through a right of first refusal, FERC said.
"Rather, this language ensures that a historical shipper without the [systemwide] option in its existing service may not be compelled to add the [systemwide] option in order to match a competing bid in the [right of first refusal] process," FERC said.
