Contract analysis

I. Executive Summary This memorandum addresses Deficiency Item No. 2 identified in the January 19, 2023 Deficiency Letter issued by the Federal Energy Regulatory Commission's ("FERC" or the "Commission") Office of Energy Market Regulation ("OEMR"), authored by Dr. Miriam Okafor, Lead Economic Analyst, which requires Ridgeline Midstream Services LLC ("Ridgeline" or the "Pipeline") to include a fuel-use and lost-and-un

II. Background A. The Ridgeline Pipeline System — Operational Context for FL&U An understanding of the physical and operational characteristics of the Ridgeline Pipeline System is essential to the design of an appropriate FL&U tracker mechanism, because the magnitude and composition of fuel use and system losses are directly determined by system configuration, compression capacity, throughput levels, and measurement

III. FERC Policy and Precedent on FL&U Tracker Mechanisms A. Regulatory Framework The Commission has long recognized that fuel costs and gas losses on interstate natural gas pipelines are inherently variable and difficult to predict with precision. Fuel consumption is affected by throughput volumes, ambient temperature, gas quality, compressor efficiency, and other operational factors that fluctuate over time. Simila

IV. Proposed FL&U Tracker Mechanism Design A. Structure Overview Based on our review of FERC policy and precedent, the operational characteristics of the Ridgeline Pipeline System, and the positions of the intervenors and FERC Staff, we recommend the following structure for the FL&U tracker mechanism: Recommended Structure: An in-kind percentage retention mechanism applied to all gas tendered for transportation on th

1. Fuel Use (Compressor Fuel): The quantity of natural gas consumed as fuel in the operation of the three compressor stations on the Ridgeline Pipeline System (Wetzel Station, Mannington Station, and Waynesburg Station), measured by dedicated fuel gas meters installed at each compressor station.

2. Lost and Unaccounted For Gas (L&U): The residual difference between total metered receipts and total metered deliveries on the system, after accounting for fuel use, changes in line pack, and any gas stored or in transit. This component encompasses measurement differentials between receipt and delivery meters, blowdowns for maintenance and emergency operations, fugitive emissions, venting, and other operational sy

V. Analysis of Key Design Considerations A. In-Kind vs. Cash Reimbursement As noted in Section IV.A, we recommend in-kind percentage retention as the structure for the FL&U tracker mechanism. This recommendation is based on the following considerations: Administrative Simplicity. In-kind retention is significantly simpler to administer than cash reimbursement. Under in-kind retention, the pipeline retains a percentag