Texas Eastern Transmission Corporation; Notice of Application

Take notice that on July 13, 2000, Texas Eastern Transmission Corporation (Texas Eastern), 5400 Westheimer Court, Houston, Texas 77056-5310, filed an application in Docket No. CP00-404-000 pursuant to Section 7(c) of the Natural Gas Act (NGA) seeking a certificate of public convenience and necessity (i) to uprate the maximum allowable operating pressure (MAOP) of its existing Line No. 1-A in the Philadelphia area, and to construct, own, operate, and maintain certain facilities to render a firm lateral transportation service for up to 84,000 Dekatherms per day (Dth/d) of natural gas for PG&E Energy Trading—Power; L.P. (PGET), and Liberty Electric Power, LLC (LEP), and (ii) to establish a Section 7(c) initial recourse rate for the incremental facilities proposed herein, all as more fully set forth in the application which is on file with the Commission and open to public inspection. This filing may be viewed on the web at http://www.ferc.us/online/rims.htm (call 202-208-2222 for assistance).

Texas Eastern states that the name address, and telephone number of the person to whom correspondence and communication concerning this application should be addressed is: Steven E. Tillman, Director of Regulatory Affairs, Texas Eastern Transmission Corporation, P.O. Box 1642, Houston, Texas 77251-1642, (713) 627-5113, (713) 627-5947 (FAX).

In addition, Texas Eastern requests, pursuant to Section 4 of the NGA and Section 29 of the General Terms and Conditions (GT&C) of its FERC Gas Tariff, approval of the negotiated rates for the services described more fully herein.

Texas Eastern states that it intends to provide firm transportation for PGET and LEP at the Liberty electric generating plant (Columbia Liberty Plant), which is a 567.7 megawatt gas-fired electric power plant being developed by, and to be owned by, LEP in the Borough of Eddystone, Delaware County, Pennsylvania. In order to provide this service, Texas Eastern proposes to expand its existing Philadelphia Lateral system to make available 84,000 dth/d of firm transportation capacity required to fuel the Columbia Liberty Plant. Texas Eastern proposes to install one 4,000 horsepower (hp) electric compressor at its existing Eagle Compressor Station site (Eagle Station), replacing, in situ, various segments of the existing 20-inch Line No. 1-A pipeline, uprating the operating pressure of the 20-inch Line No. 1-A, and constructing approximately 0.6 miles of 12-inch pipeline and associated metering facilities, to establish the connection with the Columbia Liberty Plant.

According to Texas Eastern, the 0.6 mile lateral pipe will extend from milepost (MP) 3.2 on Texas Eastern's 16-inch Line No. 1-A to a proposed tie-in point within the Columbia Liberty Plant (Liberty Lateral). Texas Eastern also proposes to construct a meter station at the interconnection between the proposed Liberty Lateral and the Columbia Liberty Plant. In addition, at the interconnection of the proposed Liberty Lateral and Texas Eastern's 16-inch Line No. 1-A, Texas Eastern proposes to construct new aboveground valve and piping facilities to be located within the existing rights-of-way (ROW). The new facilities will also include a 4,000 hp electric driven compression unit at Texas Eastern's existing Eagle Station and associated piping, valves, and instrumentation facilities which will provide the compression necessary for the proposed service.

Texas Eastern states that prior to developing the scope of work for the expansion proposed herein, Texas Eastern conducted an in-line inspection of its existing 20-inch Line No. 1-A. Based on the evaluation of that inspection, Texas Eastern proposes to replace certain pipeline anomaly segments identified on its existing 20-inch Line No. 1-A. Texas Eastern states that all of these replacements will be in-situ. Subsequent to the replacements, Texas Eastern states that it will perform a hydrostatic test of approximately 22.7 miles of the 20-inch Line No. 1-A between Eagle Station located at MP 0.0 in Chester County, Pennsylvania, and Chester Junction located at MP 22.7 in Delaware County, Pennsylvania. According to Texas Eastern, this hydrostatic test will allow for an increase in the MAOP of the 20-inch Line No. 1-A from 400 psig to 656 psig. It is stated that this increase in MAOP, together with installation of the other proposed facilities, is required to accommodate deliveries to the Columbia Liberty Plant at LEP's required delivery pressure of 500 psig.

Texas Eastern states that the cost of the proposed facilities is estimated to be approximately $21.5 million. Texas Eastern further states that the facilities proposed herein will be constructed in compliance with the Natural Gas Pipeline Safety Act of 1968, and operated in accordance with federal safety codes applicable to gas transmission pipelines.

According to Texas Eastern, LEP will own and operate the Columbia Liberty Plant. To market the plant's electric output, LEP has entered into a Tolling Agreement with PGET, pursuant to which LEP will sell its energy output to PGET for a term of approximately 14.5 years subject to extension and early termination under certain circumstances. Texas Eastern states that under the Tolling Agreement, PGET has the right to purchase and market 100% of the electricity generated by the Columbia Liberty Plant except under certain limited circumstances. It is stated that for the term of the Tolling Agreement, PGET will also be the fuel manager for the Columbia Liberty Plant. Texas Eastern contends that following the expiration or other termination of the Tolling Agreement, LEP intends to procure its own gas supply for delivery to the Columbia Liberty plant under the Lateral Service Agreement to support its operation of the Columbia Liberty Plant as a “merchant” generating facility. Texas Eastern states that LEP is obligated under the Tolling Agreement to commence delivery of power to PGET by April 1, 2002.

Texas Eastern states that the Lateral Service Agreement provides for the firm lateral transportation service of up to a maximum daily quantity (“MDQ”) of 84,000 Dth/d for a primary term of 25 years. It is stated that the proposed service will fully utilize the capacity that will result from the construction of facilities proposed herein. The primary receipt point under the Lateral Service Agreement will be at Texas Eastern's existing Eagle Station, and the primary delivery point will be at the downstream terminus of the proposed Columbia Liberty Lateral at the interconnection with the Columbia Liberty Plant. Texas Eastern states that the Lateral Service Agreement is a lateral-only service; PGET and LEP will have no rights under this FT-1 service agreement to receive service on any portion of Texas Eastern's system other than the Philadelphia Lateral facilities. Texas Eastern further states that service under the Lateral Service Agreement will be provided at a negotiated rate. According to Texas Eastern, the executed precedent agreement and Lateral Service Agreement demonstrate that the Columbia Liberty Project is being built for a specific new market and will not rely on subsidies from existing customers. Texas Eastern states that these agreements are submitted as evidence of the benefits of this project pursuant to the Commission's Statement of Policy on Certificating New Interstate Pipeline Facilities (“Policy Statement”).

Texas Eastern states that in conjunction with the Lateral Service Agreement, PGET, LEP and Texas Eastern have entered into, as an essential component of this transaction, the Mainline Service Agreement, which is a Rate Schedule FT-1 service agreement for mainline service in Market Zone M3 on a secondary basis. This mainline Zone M3 service allows for secondary firm transportation rights in Texas Eastern's Zone M3 at a negotiated rate. It is stated that this service was required by PGET and LEP and is intended for utilization only during those periods and to the extent that the Columbia Liberty Plant is not operating at full load. According to Texas Eastern, this service will allow LEP and PGET to have secondary access to other Zone M3 markets in order to have the opportunity to sell gas that is not needed at the Columbia Liberty Plant. It is stated that this service applies to gas that already is being transported on the mainline and would be subsequently transported down the lateral under the Lateral Service Agreement, absent the Columbia Liberty Plant not operating at full load. Since the Mainline Service Agreement provides secondary only transportation rights, Texas Eastern states that there is no firm capacity reserved for the Mainline Service Agreement. Because no firm capacity is reserved for this service agreement, Texas Eastern contends that it did not award this contract under its net present value allocation mechanism included in Section 3.12 of the GT&C of Texas Eastern's FERC Gas Tariff. Although Texas Eastern does not believe it is required, to the extent the Commission deems necessary, Texas Eastern requests a waiver of Section 3.12 of the GT&C of Texas Eastern's FERC Gas Tariff for the award of the Mainline Service Agreement.

Texas Eastern states that a separate negotiated rate agreement was executed for the Mainline Service Agreement, and is designed to reflect the purpose for which the parties entered into the agreement which is solely to mitigate demand charge costs at times when the Columbia Liberty Plant is not operating at full load. Specifically, the negotiated rate for the Mainline Service Agreement is limited to a total aggregate quantity of 84,000 Dth/d being delivered under the Mainline Service Agreement and the Lateral Service Agreement. According to Texas Eastern, this is designed to ensure that on any given day not more than 84,000 Dth/d (the MDQ of the Lateral Service Agreement) is transported at the negotiated rates for the lateral service and/or the secondary mainline service. These secondary rights will allow PGET and LEP to utilize secondary transportation rights only in Zone M3 after existing customers' primary firm transportation entitlements have been scheduled and will not have an adverse impact on Texas Eastern's ability to meet its primary firm service obligations.

Texas Eastern states that PGET and LEP will obtain its own gas supply. Through the Texas Eastern system, PGET and LEP will have access to gas supplies attached to the North American pipeline grid. Texas Eastern states that natural gas will be delivered to the Columbia Liberty Project facilities at the upstream terminus of the Philadelphia Lateral facilities, by acquisition of capacity through capacity release, by utilizing interruptible capacity or by third-party deliveries under other service agreements.

Texas Eastern proposes to establish an NGA Section 7(c) initial recourse rate, which is a cost based and separately stated incremental reservation rate equal to $4.461 per Dth per month under Texas Eastern's Rate Schedule FT-1 for the lateral only service to PGET and LEP. Texas Eastern contends that this rate has been designed using Texas Eastern's incremental cost-of-service for this project and is shown on the Pro Forma Rate Schedule FT-1 tariff sheets. Texas Eastern states that it will maintain a separate record of capital costs for this project in its book of accounts.

Notwithstanding the foregoing, PGET, LEP and Texas Eastern have agreed to negotiated rates for both of the services described herein, in accordance with and pursuant to the negotiated rate authority contained in Section 29 of the GT&C of Texas Eastern's FERC Gas Tariff. Texas Eastern states that included in Exhibit P to its application are tariff sheets which identify the negotiated rate agreements. In addition, Texas Eastern states that it included a copy of each negotiated rate agreement in Exhibit I to its application. Texas Eastern requests that the proposed tariff sheets detailing the negotiated rate transactions with PGET and LEP be approved as part of the certificate issued in this proceeding. Texas Eastern requests waiver of Section 154.207 of the Commission's regulations to allow for this effective date. Texas Eastern submits that good cause exists for granting this waiver, as the negotiated rate agreements are integral components of this proposal. According to Texas Eastern, the tariff sheets filed herewith affirm that the actual negotiated rate agreements do not deviate in any material respect from the form of service agreement. Finally, Texas Eastern states that the accounting treatment for negotiated rates will be consistent with Section 29 of the GT&C of Texas Eastern's FERC Gas Tariff.

Since the costs of the proposed facilities will be recovered through the proposed incremental rate, Texas Eastern states that the project will have no adverse impact on existing customers. Texas Eastern states that the project is financially viable without subsidies from Texas Eastern's existing customers, thus meeting the threshold requirements established in the Commission's Policy Statement.

Texas Eastern states that the Columbia Liberty Plant is currently being constructed and is scheduled to take initial test gas commencing September 1, 2001. Texas Eastern requests that the Commission issue a Preliminary Determination on the non-environmental aspects of its proposal by January 1, 2001 and that a final certificate be issued on before March 1, 2001. Texas Eastern stated that LEP has informed it that since the Columbia Liberty Plant is currently under construction, significant capital commitments for long lead-time construction items have been made and that receipt of a final certificate by March 1, 2001 is critical. According to Texas Eastern, Issuance of a Preliminary Determination and the authorizations requested herein by January 1, 2001 and March 1, 2001, respectively, will provide LEP with assurance regarding connection to the gas grid, which is necessary to fuel the Columbia Liberty Plant and enable LEP to continue to pursue construction and related activities required to meet the September 1, 2001 schedule for test gas for the Columbia Liberty Plant.

Any person desiring to be heard or to make protest with reference to said application should on or before August 10, 2000, file with the Federal Energy Regulatory Commission, 888 First Street, NE, Washington, D.C. 20426, a motion to intervene or a protest in accordance with the requirements of the Commission's Rules of Practice and Procedure (18. CFR 385.211 or 385.214) and the regulations under the Natural Gas Act (18 CFR 157.10). All protests filed with the Commission will be considered by it in determining the appropriate action to be taken but will not serve to make the protestants parties to the proceeding. The Commission's rules require that protestors provide copies of their protests to the party or parties directly involved. Any person wishing to become a party to a proceeding or to participate as a party in any hearing therein must file a motion to intervene in accordance with the Commission's rules.

A person obtaining intervenor status will be placed on the service list maintained by the Commission and will receive copies of all documents issued by the Commission, filed by the applicant, or filed by all other intervenors. An intervenor can file for rehearing of any Commission order and can petition for court review of any such order. However, an intervenor must submit copies of comments or any other filing it makes with the Commission to every other intervenor in the proceeding, as well as 14 copies with the Commission.

A person does not have to intervene, however, in order to have comments considered. A person, instead, may submit two copies of comments to the Secretary of the Commission. Commeters will be placed on the Commission's environmental mailing list, will receive copies of environmental documents and will be able to participate in meetings associated with the Commission's environmental review process. Commenters will not be required to serve copies of filed documents on all other parties. However, commenters will not receive copies of all documents filed by other parties or issued by the Commission and will not have the right to seek rehearing or appeal the Commission's final order to a federal court.

The Commission will consider all comments and concerns equally, whether filed by commenters or those requesting intervener status.

Take further notice that, pursuant to the authority contained in and subject to jurisdiction conferred upon the Commission by Sections 7 and 15 of the NGA and the Commission's Rules of Practice and Procedure, a hearing will be held without further notice before the Commission or its designee on this application if no motion to intervene is filed within the time required herein, if the Commission on its own review of the matter finds that a grant of the certificate is required by the public convenience and necessity. If a motion for leave to intervene is timely filed, or if the Commission on its own motion believes that a formal hearing is required, further notice of such hearing will be duly given.

Under the procedure herein provided for, unless otherwise advised, it will be unnecessary for Texas Eastern to appear or be represented at the hearing.