Williston Discount INGAA Reply Comments 8-30-04

In general, the comments submitted confirm INGAA’s view that the CIG/Granite State policy is based on an unsupported presumption that shippers with discounted firm primary capacity are similarly situated with any shipper that has previously obtained a discount for either firm or interruptible transportation at any other point on the system. The comments also support the operational and economic concerns, addressed by the Court of Appeals (see Williston Basin Interstate Pipeline Co. v. FERC, 358 F.3d 45, 49-50 (2004), that the policy will discourage economically efficient discounting that contributes to the effective use and management of the system, and encourage uneconomic discounting that benefits only the capacity holder/arbitrageurs. Those commenters urging retention of the CIG/Granite State policy (BP America Production Company, et al. and Dominion Resources, Inc.), and those urging additional restrictions on pipelines’ secondary point pricing (ProLiance Energy LLC), fail to come to grips with the economic ramifications of a regulatory policy that compels pipelines to discount capacity under circumstances that do not justify the discount.

Given the serious downside of the CIG/Granite State policy, and the failure of any party to substantiate an upside, the policy should not be allowed to override contractual agreements between pipelines and their shippers. Reinstating the El Paso policy, on the other hand, will encourage pipelines and shippers to negotiate the pricing of specific points up front. El Paso thus actually promotes price transparency by establishing rates that apply at a variety of points regardless whether the capacity is retained by the original holder or released. Accordingly, INGAA urges the Commission not to adopt the CIG/Granite State policy, and to reinstate the El Paso policy.