Background

The October 29 order granted Tennessee, United, and Midwestern the authority to abandon certain levels of transportation and exchange services, including specifically exchange and transportation services for United performed under Tennessee's Rate Schedule X-45 and exchange and transportation services for Tennessee performed under United's complementary Rate Schedule X-60, effective April 1, 1990. The order also granted a waiver of Tennessee's first-come, first-served tariff provisions to permit Tennessee to convert its transportation service for United under Tennessee's Rate Schedule T-63 to Part 284 service, effective November 1, 1990, at the same position in Tennessee's transportation queue. Further, the order denied Tennessee's and United's similar requests for waivers of their first-come, first-served tariff provisions to permit conversion of their exchange-related transportation services under Tennessee's Rate Schedules X-45 and United's complementary Rate Schedule X-60 to services under Part 284 without loss of priority. The order noted that the record showed no evidence that Tennessee and United had relied on the respective services and that the requested waiver would move a new service to the head of the transportation queue and not merely continue an existing service under different authority.

United requests rehearing of that portion of the order denying the request for waivers of Tennessee's first-come, first-served tariff provision to convert Rate Schedule X-45 service to Part 284 transportation service under the appropriate rate schedule. Tennessee also requests reconsideration of the portion of the order which denies the requested waiver,

United's Request for Rehearing

United bases its request for rehearing on the following four factors: (1) United states that it has relied extensively on Tennessee's Rate Schedule X-45 exchange-related transportation service to provide system flexibility, realize substantial cost savings for United's customers, and preclude the need for United to make significant capital expenditures to replicate the benefits of the Tennessee service; (2) United will continue to require transportation service equivalent to that provided under firm exchange-related service under Tennessee Rate

3 The ITS Agreement between United and Tennessee is dated April 1, 1990, and calls for Tennessee to transport for United up to 307,500 Dt/d on an interruptible basis.

4 See 53 FERC 61,120, at p. 61,383.

5 The affidavit (see Appendix A) was signed by Mr. David L. Kirkland, United's Assistant Vice President, Operations.

Schedule X-45; (3) United and Tennessee, pursuant to a Letter Agreement dated September 15, 1989, have executed an ITS transportation contract3 calling for Tennessee to provide interruptible transportation service similar to the exchange-related service provided by Tennessee's Rate Schedule X-45, with United maintaining its existing priority in Tennessee's firstcome, first-served queue; and (4) the Commission has permitted waivers of other pipelines' first-come, first-served tariff provisions for shippers similarly situated to United in the instant proceeding.

United states that the Commission rejected the request to waive the first-come, first-served tariff provisions of Tennessee's tariff because the record in this proceeding failed to show that United has relied on the service provided by Tennessee under Rate Schedule X-45.4 United asserts that the Commission's order is not consistent with the facts. United has submitted an affidavit5 to demonstrate that United has relied significantly on Tennessee's Rate Schedule X-45 to move substantial volumes of gas into United's system and ensure the consistent operation of its system. United contends that rather than constituting a request for new service, converting Tennessee's Rate Schedule X-45 service to Part 284 service actually would allow existing Tennessee service to continue under different authority, specifically Tennessee's Part 284 open-access blanket certificate.

The affidavit of Mr. Kirkland is claimed to indicate that the services provided under Rate Schedule X-45 benefit all of United's customers by increasing capacity available on United's system and saving the costs of facilities which would otherwise be required. United submits that the continued realization of these benefits by United's customers requires a waiver of Tennessee's first-come, first-served tariff.

Further, United notes that permitting Tennessee to convert firm exchange service under Rate Schedule X-45, without any volumetric limitations, to interruptible service with a daily maximum transport obligation of 307,500 Dt of natural gas will benefit Tennessee's customers by opening up capacity on Tennessee's system. United claims that such capacity would not have been available to Tennessee's other customers if United continued to have

6 United states that it has received 120,689,386 Mcf of gas into its system through the Rate Schedule X-45 service since 1986, and has received 11,421,574 Mcf of gas through the Rate Schedule X-45 exchange service during the first three months of 1990.

7 On September 15, 1989, United and Tennessee executed an ITS transportation contract calling for Tennessee to provide interruptible transportation ser

8

the right to call on its open-ended firm exchange service entitlements under Rate Schedule X-45. In support, United cites Transcontinental Gas Pipe Line Corporation, where the Commission permitted Transco to waive its first-come, first-served tariff provisions to permit Florida Gas Transmission (Florida Gas) to retain its original queue position after a partial abandonment of specifically authorized firm transportation service and conversion of Florida Gas' remaining service entitlement to Part 284 transportation. United contends that the Commission held in Transco that such a waiver of Transco's tariff was in the public convenience and necessity because partial abandonment of the firm service would immediately make available capacity to Transco's other customers that otherwise would be unavailable if not for the abandonment.

United urges the Commission to grant rehearing of the October 29 order and permit Tennessee to waive its first-come, first-served tariff provisions to permit the ITS transportation agreement executed by United and Ten-. nessee to become effective on April 1, 1990.

Tennessee's Motion for Reconsideration

In its motion for reconsideration, Tennessee also urges the Commission to reconsider its denial of the requested waiver. Tennessee believes that the Commission has misunderstood Tennessee's use of service under United's Rate Schedule X-60. Tennessee states that it did not mean to imply in its applications seeking approval for abandonment that United's service was of no value to Tennessee or that Tennessee had no need to continue the service at a lower level after abandonment. Tennessee requests that the Commission modify its October 29 order, and grant the request for waiver (Footnote Continued)

vice similar to the exchange-related service provided under Tennessee's Rate Schedule X-45, with United maintaining its existing priority in Tennessee's firstcome, first-served queue.

8 49 FERC 61,106 (1989).
949 FERC 61,106 (1989).

10 49 FERC at p. 61,473 (1989). Tennessee asserts that the factual situation presented in this proceeding is essentially that presented in Transco, upon which the Commission relied in granting the limited waivers allowed by the October 29 order, and urges the Commission upon reconsideration to grant the requested waiver.

11 Citing Texas Eastern Transmission Co., 42 FERC 61,042 (1988); and Viking Gas Transmission Co., 52 FERC ¶ 61,015 (1990).

12 Tennessee has pending applications to reduce Columbia's sales entitlement under Rate Schedule CD-3 in Docket No. CP89-1253 and the sales entitlement of CNG Transmission Corp. under the same

for up to 30,000 Dth per day of the original entitlement.

Tennessee also cites the Commission's decision in Transco,9 and argues that the waiver was granted in Transco to avoid "an interruption in the firm transportation service currently being provided to Florida [Gas Transmission Company]."10 Also, Tennessee submits that waiver is consistent with the general principle that a customer is entitled to maintain its existing priority when converting from traditionally authorized service to Part 284 service. Tennessee urges the Commission to reconsider its October 29 order and grant a waiver of United's first-come, first-service tariff provisions to permit Tennessee to convert 30,000 Dth per day of the exchange-related transportation services provided under. United's Rate Schedule X-60 to firm transportation services under Part 284.

13 See Tennessee Pipeline Company, 53 FERC 61,379 (1990). In this order, the Commission accepted a recovery mechanism proposed by Tennessee which allocates take-or-pay responsibility among Tennessee's customers based on their 1988 Annual Quantity Limitations (AQLs). Consolidated Edison argues that Columbia Gas Transmission Co., the customer bearing the largest share of Tennessee's take-orpay costs, has claimed that use of 1988 AQLS violates the filed rate doctrine, and may raise that argument again on rehearing. If Columbia were to prevail on rehearing, the size of Columbia's current sales entitlement would have a significant impact on the take-orpay responsibility of Tennessee's remaining sales customers, assuming that take-or-pay responsibility continues to be allocated on the basis of AQLs, submits Consolidated Edison.

mechanism submitted by Tennessee and in which Consolidated Edison is an active participant.14 Consolidated Edison has presented no good cause why it should be granted late intervention to participate in this proceeding. The concerns raised by Consolidated Edison have been reviewed and decided. Therefore, Consolidated Edison's motion to intervene is denied, and its protest is dismissed.

Discussion

United states that the Commission rejected the request to waive the first-come, first-served tariff provisions of Tennessee's tariff because the record in the proceeding failed to demonstrate that United has relied on the service provided by Tennessee under Rate Schedule X-45. The information provided by United in the affidavit of Mr. Kirkland demonstrates to our satisfaction that United has relied on the service provided by Tennessee under Rate Schedule X-45 to move significant volumes of gas into United's system. 15 The reasonable inference is that Rate Schedule X-45 service benefits United's customers by freeing capacity on United's system and producing cost savings.

Tennessee also reiterated and explained more fully, in its motion for reconsideration, data which demonstrates that Tennessee has relied on the transportation service under United's Rate Schedule X-60, although in quantities below Tennessee's entitlement.16 Tennessee states that it did not mean to imply that the service provided by United was of no value or that it had no need to continue the service at a lower level after the exchange was abandoned. Tennessee estimates that it will need up to 30,000 Dth per day of the entitlement originally provided under United's Rate Schedule X-60, and has limited its request to that amount. Further, in the joint application filed in Docket No. CP90-910-000 on March 5, 1990, Tennessee represented that it has and will continue to have a continuing need for a portion of the service originally provided under Rate Schedule X-60.

The Commission finds it appropriate to modify the initial order issued in this proceeding to grant the waivers requested by United and Tennessee. The evidence presented by United

and Tennessee demonstrates that both parties have relied to some extent on the service provided under their respective rate schedules. The waivers will allow the continuation of service under different authority and will permit the parties to maintain their priority in the transportation queue. We note specifically that no other party opposed the requested priority retention. In Transco, the Commission recognized that denial of the requested waiver to permit priority retention could result in the interruption of transportation service. The Commission, in granting the request, noted that the waiver did not prejudice the rights of other customers in the queue for transportation services and did allow the continuation of service without disruption. 18

The Commission will grant a waiver of United's first-come, first-served tariff provisions to permit Tennessee to convert up to 30,000 Dth per day of the exchange-related transportation services provided under United's Rate Schedule X-60 to firm transportation services under Part 284 without loss of its transportation queue priority. United states that it will need up to 307,500 Dth per day of the original entitlement provided under Tennessee's Rate Schedule X-45, and indicates that United and Tennessee entered into an agreement on April 1, 1990, which provides for Tennessee to transport up to 307,500 Dth per day on an interruptible basis. According to the figures presented by United, it received 120,689,368 Dth into its system from Tennessee under rate schedule X-45 during the period from from 1986 through 1989. Information subsequently made available by United shows that it received approximately 12,360,359 Dth from Tennessee in 1990 under rate schedule X-45 and the replacement ITS schedule. Thus, on an average daily basis during 1990, United received approximately 33,864 Dth per day under Rate Schedules X-45 and ITS. In our opinion, this amount is more representative of the actual volumes. The Commission will grant a waiver of Tennessee's first-come, first-served tariff provisions to permit United to convert up to 33,864 Dth per day of the exchange-related transportation services provided under Tennessee's Rate Schedule X-45.

16 Tennessee delivered and received approximately 1 Bcf under United's Rate Schedule X-60 during the twelve months ended July 1989. This order grants the remedy requested originally by Tennessee and restated in its motion for reconsideration and thus the Commission will grant Tennessee's motion for reconsideration.

17 See Transco, 49 FERC at pp. 61,472-73.

18 Id.

Request for Rehearing Concerning CD
Volumes

North Penn asserts that the August 27 order erred in holding that its rates should have been based on daily volumes of 31,568 Dt, because the contract demand volumes of 31,568 Dt per day have been superseded. According to North Penn, Tennessee and North Penn, by contract dated January 30, 1989, have agreed to partial abandonment down to the levels reflected in the rates proposed in North Penn's quarterly PGA filing. Further, North Penn argues that its new purchase obligations and Tennessee's new service obligations under the January 30 contract became effective automatically under Order Nos. 490 and 490-A.6 In support of this argument, North Penn cites United Gas Pipe Line Co., 51 FERC ¶ 61,336 (1990) (United).? North Penn argues that the Commission, through a letter of the Director of OPPR, confirmed that partial abandonment of North Penn's purchase obligation occurs automatically as specified in the January 30 contract and that corresponding reductions to North Penn's billing demand occur simultaneously with these abandonments. The September 14 Director's letter order, which North Penn refers to, granted Tennessee certain abandonment authorizations under section 7(b) under the Natural Gas Act (NGA). Because these reductions in service were among those included in the January 30 contract, North Penn asserts that the September 14 order implicitly authorized the other reductions contained in the January 30 agreement with Tennessee. North Penn argues that requiring it to use rates based on CD volumes higher than those agreed to will result in artificially high rates for its customers.

Request for Clarification Concerning Standby Charges

North Penn requests clarification that it need not wait for a later PGA proceeding to request waiver to recover through its PGA the standby costs that it paid to CNG, but may obtain waiver of the regulations now, to include such costs in the rate sheet of this PGA as a separately identified component. North Penn argues that the Commission has previously

5 The contract provided for four contract reductions: (1) to 31,568 Dt on February 1, 1989; (2) to 25,139 Dt per day on November 1, 1989 or such earlier date designated by Tennessee in its sole discretion; (3) to 22,139 Dt per day on November 1, 1990; and (4) to 12,139 Dt per day on February 1, 1992, or such earlier date as specified by Tennessee in its sole discretion.

6 Order No. 490, Abandonment of Sales and Purchases of Natural Gas Under Expired, Terminated, or Modified Contracts, FERC Statutes and

allowed immediate collection of standby charges under circumstances similar to those here, citing Raton Gas Transmission Co., 52 FERC 61,021 (1990) (Raton) and Algonquin Gas Transmission Co., 49 FERC 61,224 (1989) (Algonquin).

On September 24, 1990, North Penn submitted a tariff sheet in Docket No. TQ90-3-27-002 in response to the August 27 order letter order. The September 24 filing states standby charges separately from purchased gas costs, but did not contain a specific request for waiver of the Commission's regulations to permit collection of standby charges. However, on October 22, 1990, North Penn filed tariff sheets in Docket No. RP91-10-000 and working papers in Docket No. TA90-1-27-002 which contain proposed language to allow North Penn to include standby charges as part of its PGA filing. The Commission addressed the September 24 compliance filing and the October 22 tariff filing in an order issued on November 21, 1990.9 In the November 21 order, the Commission accepted the tariff sheet filed in Docket No.

TQ90-3-27-002, which included standby charges as a separate component of the rates, subject to certain modifications and rejected the proposed tariff language in Docket No. RP90-10-000 because, among other things, it would define standby charges as purchased gas costs. The Commission's order stated that if North Penn intends to seek recovery of standby charges as part of its PGA, it must request specific waiver of the Commission's regulations. Acceptance of North Penn's tariff sheet in Docket No. TQ90-3-27-002 was made subject to North Penn's filing revisions to its PGA clause to track CNG's standby charges on an as-billed basis and to Commission acceptance of such language. Acceptance was further conditioned upon the disposition of the instant rehearing and clarification request.