On September 29, 2023, FERC approved Tennessee Gas Pipeline Company, L.L.C.’s (“TGP”) proposal to lease intrastate capacity from Kinder Morgan Texas Pipeline LLC (“Kinder Morgan”) to offer a new hourly transportation “PowerServe” service. According to the parties’ joint application, PowerServe will offer increased flexibility to shippers serving gas-fired power generation facilities that backstop renewable energy sources. Commissioner Danly concurred in part and dissented in part with a separate statement that has not been issued at the time of this article.

TGP filed a joint application under section 7(c) of the Natural Gas Act for approval of a long-term capacity lease agreement where TGP will lease transportation capacity on Kinder Morgan’s intrastate pipeline system in Texas and provide service under TGP’s FERC Gas Tariff. Furthermore, Kinder Morgan requested a limited jurisdiction certificate authorizing it to carry out its FERC-jurisdictional responsibilities under the capacity lease agreement but remain a non-jurisdictional entity with respect to its intrastate activities. In addition to the joint application, TGP simultaneously filed tariff records proposing its new PowerServe rate schedule, which is a firm hourly transportation service with an optional no-notice component. TGP explained that the PowerServe service will allow eligible shippers to receive their entire daily entitlement in as little as eight hours or over the course of twenty-four hours. TGP further argued that its new PowerServe service is needed to provide more flexible options to shippers serving gas-fired power generation facilities that backstop renewable energy sources. To provide such service, TGP explained that the PowerServe service will use available unsubscribed transportation capacity on its system coupled with the off-system capacity arrangement with Kinder Morgan.

Some shippers filed comments and protests, expressing concern that it was unclear how TGP would determine that it had available capacity and infrastructure to enter into PowerServe agreements and how TGP would ensure that existing service would not be degraded. TGP responded that none of its existing firm customers would be adversely affected, nor would the quality of their services be degraded because TGP will use unsubscribed transportation capacity on TGP’s system and the capacity lease agreement with Kinder Morgan.

Regarding the capacity lease agreement between TGP and Kinder Morgan, the Commission determined that the agreement satisfied the Commission’s three-part test for capacity leases. Specifically, the Commission concluded that (1) the capacity lease agreement will provide significant public interest benefits by allowing TGP to provide the PowerServe service without building new pipeline facilities; (2) the proposed lease payment is less than Kinder Morgan’s current interruptible transportation rate; and (3) the capacity lease agreement will not adversely affect existing customers. Additionally, the Commission approved Kinder Morgan’s limited jurisdiction certificate request to allow it to lease the proposed capacity to TGP and operate as an interstate facility during the lease without affecting its non-jurisdictional status of its other intrastate assets and activities.

Similarly, FERC determined that TGP’s PowerServe proposal is just and reasonable and accepted TGP’s tariff records, subject to a compliance filing. FERC explained that it has approved requests from pipelines to offer transportation services that provide increased flexibility to their customers when such services do not degrade the services provided to the pipeline’s existing shippers. The Commission determined that PowerServe service will allow TGP to meet the demand swings of electric generators and other market participants by providing more flexible options to eligible shippers without degradation of existing services or subsidization by other customers. However, the Commission ordered TGP to submit a compliance filing incorporating revisions proposed by certain TGP customers clarifying that TGP will only provide PowerServe service if it has available and unsubscribed capacity, including receipt and delivery points, and it can provide such service without degrading or otherwise adversely affecting existing shippers’ firm service.

The order can be found here.