Texas Eastern

Either I didn't fully understand the December Texas Eastern order or else
FERC has just put a new and unhelpful spin on it. The Thursday rehearing
order dramatically changes how the "shipper must have title" rule applies to
acquisitions of upstream capacity. I thought the Dec. order pretty clearly
allowed a pipe to acquire upstream capacity and then resell that capacity
under the acquiring pipeline's rate schedules. FERC specifically held that
the "shipper must have title" policy won't be applied if the acquiring pipe
treats the acquired capacity "as though it were part of its own system". (p.
61,886) The Dec. order even cited TW's acquisition of park n ride capacity
from PG&E as an example of the type of transaction that (I thought) could be
done without advance Commission approval. Now, FERC explains that it did
not intend a "blanket waiver" of the shipper must have title policy. Pipes
can still acquire upstream capacity without advance FERC permission, but only
if the acquiring pipe is going to use the acquired capacity for operational
needs or to resell under the selling pipe's release mechanism. If the
acquiring pipe wants to use the acquired capacity to support sales of service
under the acquiring pipe's rate schedules, a specific waiver of the "must
have title" policy is required (see FN 20 and text). We are right back to
where we started. I guess the orders signal that FERC is much more likely
to grant waivers of the "must have title" policy than in the past, but I
don't think we are good to go to acquire upstream storage, for example, and
resell it as FDD or IDD until we get permission first.

Shelley--let me know if you hear any expressions of outrage from other
pipes. This might be worth chasing on rehearing since it is such a clear
about face by FERC.