1016-00005 · Dunmore Energy Holdings · Correspondence/FERC

letter-to-ferc-staff-informal-conference.docx DOCUMENT Finance & Banking

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CALDERWOOD & HARKNESS LLP Attorneys at Law 1601 K Street NW, Suite 900 Washington, DC 20006

Telephone: (202) 555-4100 Facsimile: (202) 555-4101 www.calderwoodharkness.com

May 15, 2023

VIA ELECTRONIC FILING AND FIRST-CLASS MAIL

Jonathan Briggs, Esq. Lead Trial Attorney Office of the General Counsel Federal Energy Regulatory Commission 888 First Street NE Washington, DC 20426

Re: Ridgeline Midstream Services LLC — FERC Docket Nos. RP22-847-000 (Rate Case) and RP22-847-001 (Interconnection)

Request for Informal Staff-Level Conference Regarding Remaining Deficiency Items

Dear Mr. Briggs:

I write on behalf of Ridgeline Midstream Services LLC ("Ridgeline" or the "Company"), a wholly-owned subsidiary of Dunmore Energy Holdings Ltd. ("DEH"), in the above-captioned proceedings. Calderwood & Harkness LLP ("C&H") serves as counsel of record for Ridgeline in these matters, C&H Matter No. 1016-00005. The purpose of this letter is to respectfully request an informal staff-level conference with representatives of the Commission's Office of Energy Market Regulation ("OEMR") and the Office of the General Counsel ("OGC") to discuss the six remaining deficiency items identified in the Deficiency Letter issued by OEMR on January 19, 2023 (the "Deficiency Letter"), which were not addressed in Ridgeline's Partial Response filed on March 15, 2023 (the "Partial Response").

Ridgeline values constructive engagement with FERC Trial Staff and believes that an informal conference at this juncture would materially advance the ongoing tariff redesign process, promote the efficient resolution of the outstanding issues, and assist Ridgeline in meeting the August 28, 2023 filing deadline established by the presiding Administrative Law Judge. As discussed more fully below, several of the remaining deficiency items involve matters of first impression or evolving regulatory policy, and Ridgeline respectfully submits that early dialogue with Staff will reduce the likelihood of further deficiency findings and facilitate a more complete and responsive filing.

I. Background and Procedural History

On May 12, 2022, Ridgeline filed with the Commission an application for an initial tariff rate and interconnection authorization pursuant to Sections 4 and 7 of the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717c and 717f, and the Commission's regulations at 18 C.F.R. Parts 154, 157, and 284 (the "Application"). The Application sought approval of the FERC Gas Tariff, Original Volume No. 1 (the "Proposed Tariff"), with a proposed recourse rate of $0.2265 per dekatherm ("Dth"), consisting of a reservation charge of $0.2223/Dth and a usage charge of $0.0042/Dth. These rates were derived from a total cost of service of $97.36 million and a rate base of $612.40 million, as supported by the cost-of-service study and related workpapers submitted with the Application.

Ridgeline owns and operates the Ridgeline Pipeline System (the "System"), a 187-mile, 24-inch-diameter high-pressure natural gas transmission pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia, to the Waynesburg Compressor Station in Greene County, Pennsylvania, with a certificated design capacity of 1.2 billion cubic feet per day ("Bcf/d"). The System includes three compressor stations — the Wetzel Station, the Mannington Station, and the Waynesburg Station — with an aggregate of 45,000 horsepower ("HP") of installed compression. The interconnection component of the Application, docketed at RP22-847-001, concerns the physical interconnection of the System with the existing pipeline network of Appalachian Trunk Pipeline Company, LLC ("ATPC") at ATPC Milepost 412.6, which provides Ridgeline shippers with access to downstream markets through ATPC's 640-mile, 3.8 Bcf/d interstate pipeline system.

The Commission issued its Notice of Filing on June 14, 2022, and notices of intervention were timely filed by ATPC, the Mountainside Gas Producers Coalition ("MGPC"), and the Clearwater Municipal Gas Authority ("CMGA"). By order dated September 22, 2022, the Commission granted all three interventions. MGPC, a coalition of fourteen independent natural gas producers operating in the Appalachian Basin, intervened to raise concerns regarding rate design, creditworthiness provisions, and shipper access. CMGA, a municipal gas distribution utility serving approximately 45,000 customers in southwestern Pennsylvania, intervened to address issues relating to the proposed recourse rate, load factor assumptions, and the interconnection agreement with ATPC.

On November 14, 2022, the Commission's Chief Administrative Law Judge designated the Honorable Clara Whitfield as the presiding Administrative Law Judge in these proceedings and established a Track II procedural schedule. Ridgeline filed the direct testimony and exhibits of seven witnesses on December 5, 2022, covering cost of service, rate design, engineering and construction, environmental compliance, market analysis, interconnection operations, and regulatory policy. Answering testimony was filed by ATPC, MGPC, and CMGA on January 9, 2023.

On January 19, 2023, OEMR issued the Deficiency Letter, identifying fourteen specific deficiencies in Ridgeline's Proposed Tariff filing and requesting supplemental information and revised tariff provisions. In response, ALJ Whitfield issued an order on February 6, 2023, staying the procedural schedule — including all discovery and the filing of rebuttal testimony — pending Ridgeline's response to the Deficiency Letter.

On March 15, 2023, Ridgeline filed its Partial Response, substantively addressing eight of the fourteen deficiency items (specifically, Items 1, 2, 3, 4, 7, 8, 9, and 10), as discussed in Section II below. The Partial Response explained that Ridgeline required additional time to address the remaining six items (Items 5, 6, 11, 12, 13, and 14), which involve more complex tariff redesign and, in certain cases, novel regulatory questions.

On April 28, 2023, Ridgeline filed a Motion for Extension of Time requesting an additional 120 calendar days from the date of the order to complete the tariff redesign for the remaining six deficiency items. ALJ Whitfield granted the motion by order dated May 10, 2023, establishing a new deadline of August 28, 2023, for Ridgeline to file its Complete Supplemental Response.

To assist with the comprehensive tariff redesign necessitated by the remaining deficiency items, Ridgeline has engaged Braswell Energy Consulting Group LLC ("Braswell"), effective April 15, 2023, under engagement number BEC-2023-0041. Braswell is led by Dr. Raymond Braswell, a former senior economist with the Commission's OEMR, who brings extensive expertise in natural gas pipeline rate design, cost-of-service methodologies, and FERC tariff compliance. Dr. Braswell and his team have been actively engaged in developing the revised tariff provisions that are the subject of this letter.

II. Items Previously Addressed in the Partial Response (March 15, 2023)

For context and to provide Staff with a complete picture of the current posture of Ridgeline's deficiency response, the following is a brief summary of the eight deficiency items that were substantively addressed in the Partial Response filed on March 15, 2023. Ridgeline's responses to each of these items were accompanied by supporting workpapers, draft tariff language, and, where applicable, revised testimony.

Item 1 — Updated Cost-of-Service Support for Proposed ROE. The Deficiency Letter requested updated support for Ridgeline's proposed return on equity ("ROE") of 14.0%. In the Partial Response, Ridgeline provided preliminary updated discounted cash flow ("DCF") proxy group data, including an expanded proxy group of twelve comparable natural gas pipeline companies, updated dividend yields, and revised growth rate estimates reflecting market conditions through the first quarter of 2023. Ridgeline's analysis, prepared by Dr. Braswell, indicated a median ROE range of 12.8% to 14.5% under the two-step DCF methodology. Ridgeline reserved the right to further update this analysis in its Complete Supplemental Response.

Item 2 — Fuel-Use and Lost-and-Unaccounted-For Gas (FL&U) Tracker Mechanism. The Deficiency Letter noted the absence of a fuel-use and lost-and-unaccounted-for gas tracker in the Proposed Tariff. In the Partial Response, Ridgeline provided a framework for the proposed FL&U tracker, including a draft Rate Schedule FL&U-1, proposed annual true-up procedures, and supporting tariff language. The proposed tracker contemplates an initial FL&U percentage of 1.85%, subject to annual adjustment based on actual pipeline operations data.

Item 3 — Interruptible Transportation (IT) Rate Derivation. The Deficiency Letter requested additional support for the derivation of the proposed interruptible transportation rate. In the Partial Response, Ridgeline provided the methodology for the proposed IT rate under Rate Schedule IT-1, demonstrating that the proposed IT rate of $0.2425/Dth exceeds the maximum applicable firm rate on a 100% load factor basis, consistent with Commission policy.

Item 4 — Support for 100% Load Factor Billing Determinant Assumption. The Deficiency Letter questioned Ridgeline's use of a 100% load factor billing determinant in the rate design. In the Partial Response, Ridgeline provided justification for the assumption, including system utilization projections and contractual commitments, while noting that this assumption is under ongoing re-evaluation as part of the comprehensive tariff redesign, particularly given the System's current throughput of approximately 680 MMcf/d, which represents a utilization rate of approximately 56.67%.

Item 7 — Electronic Bulletin Board (EBB) Posting Requirements. The Deficiency Letter identified deficiencies in the proposed EBB posting provisions. In the Partial Response, Ridgeline provided revised tariff provisions for its proposed EBB, including specifications for the posting of available capacity, scheduled and actual flow data, and index of customers, consistent with 18 C.F.R. § 284.13 and applicable NAESB standards.

Item 8 — Shipper-Must-Have-Title Provisions. The Deficiency Letter noted that the Proposed Tariff lacked adequate shipper-must-have-title provisions. In the Partial Response, Ridgeline provided revised tariff language incorporating shipper-must-have-title requirements consistent with Commission Order Nos. 712 and 712-A and the Commission's regulations at 18 C.F.R. § 284.8(h).

Item 9 — Interconnection Agreement Filed as a Rate Schedule. The Deficiency Letter required that the interconnection agreement between Ridgeline and ATPC be filed as a rate schedule. In the Partial Response, Ridgeline confirmed that the interconnection agreement will be filed as a rate schedule under the Proposed Tariff and referenced Draft Interconnection Agreement Version 3.0, which was included as an appendix to the Partial Response.

Item 10 — Penalty Revenue Crediting Mechanism. The Deficiency Letter identified the absence of a mechanism for crediting penalty revenues to non-offending shippers. In the Partial Response, Ridgeline provided a proposed penalty revenue crediting mechanism, including draft tariff language specifying that all penalty revenues collected under Rate Schedule FT-1 and Rate Schedule IT-1 will be credited to non-offending shippers on a pro rata basis, net of costs incurred by the pipeline as a direct result of the shipper violation.

Ridgeline notes that FERC Staff's review of and feedback on these Partial Response items remains outstanding as of the date of this letter. Ridgeline respectfully submits that discussion of these items at the proposed informal conference would also be beneficial, as Staff's preliminary reactions to the Partial Response would inform Ridgeline's approach to the Complete Supplemental Response and assist in ensuring that the final filing is comprehensive and responsive to all of Staff's concerns.

III. Remaining Six Deficiency Items Requiring Discussion

The following discussion addresses each of the six remaining deficiency items (Items 5, 6, 11, 12, 13, and 14) that were not addressed in the Partial Response and that are the primary focus of the requested informal conference. For each item, Ridgeline provides a summary of the deficiency identified, a description of the work undertaken to date, and specific areas where Staff guidance would be particularly valuable. Ridgeline's objective in identifying these areas is not to seek advisory opinions, but rather to ensure that the tariff redesign is properly directed and responsive to Staff's expectations.

A. Deficiency Item 5: Capacity Release Provisions

The Deficiency Letter noted that Ridgeline's original filing did not include capacity release provisions in the General Terms and Conditions of the Proposed Tariff, notwithstanding the Commission's long-standing requirement that open-access transportation tariffs include such provisions. See 18 C.F.R. § 284.8; Regulation of Short-Term Natural Gas Transportation Services and Regulation of Interstate Natural Gas Transportation Services, Order No. 637, 65 Fed. Reg. 10,156 (Feb. 25, 2000), FERC Stats. & Regs. ¶ 31,091 (2000), order on reh'g, Order No. 637-A, FERC Stats. & Regs. ¶ 31,099 (2000), order on reh'g, Order No. 637-B, 92 FERC ¶ 61,062 (2000).

Ridgeline acknowledges this omission and is developing comprehensive capacity release provisions for inclusion in the General Terms and Conditions of the revised Proposed Tariff, consistent with the requirements of 18 C.F.R. § 284.8 and applicable Commission precedent. This work is being conducted under Dr. Braswell's direction, with input from Ridgeline's commercial operations team.

However, the development of these provisions has raised several questions on which Staff guidance would be particularly valuable. Specifically, Ridgeline seeks to discuss the following areas with Staff:

(a) Treatment of Prearranged Capacity Release Transactions. Ridgeline is developing provisions to address prearranged deals, including the appropriate posting periods, bidding windows, and the circumstances under which a prearranged deal may be matched by a third-party bidder. Ridgeline seeks Staff's current views on the treatment of prearranged capacity release transactions in the context of a newly certificated pipeline with a limited initial shipper base.

(b) Posting Requirements and Bidding Procedures. The capacity release provisions must interface with the proposed EBB, which was addressed in Ridgeline's Partial Response at Item 7. Ridgeline seeks to ensure that the posting requirements, bidding procedures, and notification timelines in the capacity release provisions are fully consistent with the EBB tariff provisions and with NAESB standards. Staff input on any specific formatting or data field requirements would be helpful at this stage.

(c) Recall and Reput Rights. Ridgeline is evaluating the appropriate scope of recall and reput rights for releasing shippers under the Proposed Tariff. This issue is of particular importance given the System's current utilization rate of approximately 56.67% and the potential for capacity release to facilitate more efficient use of available system capacity. Ridgeline seeks Staff's views on the permissible scope of contractual restrictions on recall and reput, particularly in the context of short-term capacity release transactions.

(d) Integration with Rate Schedule FT-1. The capacity release provisions must be fully integrated with the proposed firm transportation rate schedule (Rate Schedule FT-1). Ridgeline seeks Staff's guidance on the appropriate treatment of released capacity for purposes of rate design, including the allocation of pipeline costs among releasing shippers, replacement shippers, and the pipeline itself.

B. Deficiency Item 6: NAESB Standards Compliance in Operational Flow Order Provisions

The Deficiency Letter identified incomplete compliance with the North American Energy Standards Board ("NAESB") Wholesale Gas Quadrant ("WGQ") Version 3.2 standards in the operational flow order ("OFO") provisions of the Proposed Tariff. The Deficiency Letter specifically referenced Ridgeline's scheduling provisions, nomination and confirmation cycle specifications, and the OFO penalty structure as areas of non-compliance.

Since the filing of the Partial Response, Ridgeline has undertaken a comprehensive gap analysis of its proposed tariff language against the full suite of NAESB WGQ Version 3.2 standards, including but not limited to the standards governing nominations, confirmations, scheduling, flowing gas provisions, imbalance management, and OFO procedures. This gap analysis is being conducted by Braswell in coordination with Ridgeline's gas control and scheduling operations personnel, and is expected to be complete by mid-June 2023.

The areas of particular complexity identified to date include:

(a) Scheduling Provisions. The gap analysis has identified several instances in which the Proposed Tariff's scheduling provisions do not fully conform to the NAESB WGQ Version 3.2 timelines and data exchange protocols for intra-day nominations and scheduling. Ridgeline is revising these provisions accordingly, but seeks Staff's guidance on the level of specificity expected in the tariff text, as opposed to general incorporation by reference to NAESB standards.

(b) Nomination and Confirmation Cycles. Ridgeline's original filing specified four daily nomination cycles, consistent with NAESB Version 3.2, but the tariff language did not fully detail the confirmation procedures, bumping priorities, and scheduling rights associated with each cycle. Ridgeline is drafting revised language to address these gaps and seeks to confirm with Staff that the proposed approach is consistent with current OEMR expectations.

(c) Imbalance Management. The Proposed Tariff included general provisions for imbalance management, but the Deficiency Letter identified the need for more detailed provisions addressing daily and monthly imbalance tolerances, cash-out mechanisms, and the treatment of operational imbalances versus shipper imbalances. Ridgeline is developing a comprehensive imbalance management framework and seeks Staff's views on the appropriate tolerance levels and penalty structures for a pipeline system of Ridgeline's size and configuration.

(d) OFO Penalty Structures. The Deficiency Letter specifically noted that Ridgeline's proposed OFO penalty structure did not adequately distinguish between critical and non-critical OFO events, or specify the penalty levels associated with each. Ridgeline is developing a tiered penalty structure and seeks Staff's guidance on the appropriate penalty magnitudes and the circumstances warranting declaration of critical versus non-critical OFO events, including coordination with ATPC at the interconnection point.

Ridgeline respectfully submits that an informal dialogue with Staff on these NAESB compliance issues would be particularly productive, as several of the issues identified in the gap analysis involve areas where the Commission has exercised discretion in applying NAESB standards to individual pipeline tariffs, and Staff's practical guidance would significantly assist in the tariff redesign.

C. Deficiency Item 11: Creditworthiness Provisions

The Deficiency Letter identified the creditworthiness provisions in the Proposed Tariff as inadequate, noting that the provisions did not specify the forms of acceptable financial assurance, did not establish clear credit evaluation criteria, and did not include adequate provisions for addressing changes in a shipper's creditworthiness during the term of a service agreement.

Ridgeline acknowledges that the creditworthiness provisions in the original filing were insufficiently detailed and is undertaking a comprehensive revision. The revised provisions, which are being drafted with input from Ridgeline's finance and risk management teams as well as outside counsel, will address the following areas:

(a) Acceptable Forms of Collateral. The revised provisions will specify the forms of financial assurance acceptable to Ridgeline, including irrevocable standby letters of credit issued by creditworthy financial institutions, cash deposits held in segregated accounts, and parent or affiliate guarantees, subject to specified minimum credit quality requirements for the guarantor.

(b) Unsecured Credit Limits. Ridgeline is developing a framework for establishing unsecured credit limits based on a shipper's credit rating, financial condition, and payment history. The proposed framework will specify the maximum unsecured credit exposure permitted for shippers at each credit rating level and the methodology for calculating the credit exposure.

(c) Credit Rating Thresholds. The revised provisions will establish minimum credit rating thresholds for unsecured credit, including the treatment of shippers that are rated by multiple credit rating agencies and the methodology for determining the applicable rating where ratings differ.

(d) Material Adverse Change Triggers. Ridgeline is developing provisions that will specify the events constituting a material adverse change ("MAC") in a shipper's creditworthiness, including but not limited to a credit rating downgrade below a specified threshold, a bankruptcy filing, a failure to make timely payment, and specified adverse financial developments. The provisions will set forth the pipeline's remedies upon the occurrence of a MAC event, including the right to demand additional collateral and, in extreme cases, to suspend or terminate service.

(e) Cure Periods. The revised provisions will include reasonable cure periods during which a shipper may remedy a creditworthiness deficiency before the pipeline exercises its remedies, consistent with Commission precedent.

With respect to this deficiency item, Ridgeline seeks Staff's views on several specific issues. First, Ridgeline notes that many of the fourteen member companies of MGPC are independent producers that may not carry investment-grade credit ratings. Ridgeline is committed to developing creditworthiness provisions that appropriately balance pipeline protection against credit risk with the Commission's interest in ensuring non-discriminatory access to pipeline transportation services for all qualified shippers, including smaller, non-investment-grade producers. Staff's guidance on the appropriate calibration of this balance would be particularly valuable.

Second, Ridgeline has identified questions regarding the interaction between the creditworthiness provisions in the general terms and conditions of the Proposed Tariff and the credit-related provisions in the proposed interconnection agreement with ATPC (Draft Interconnection Agreement Version 3.0). To the extent that the interconnection agreement imposes separate credit requirements on Ridgeline or on shippers utilizing the interconnection, Ridgeline seeks to ensure that the two sets of provisions are internally consistent and that Staff finds the proposed approach acceptable.

D. Deficiency Item 12: Segmentation and Flexible Receipt/Delivery Point Provisions

The Deficiency Letter identified the absence of provisions for segmentation of capacity and flexible receipt/delivery point designations as a deficiency in the Proposed Tariff. The Commission has generally encouraged pipelines to offer segmentation and flexible point rights to promote the efficient use of pipeline capacity and to enhance the liquidity of the capacity release market. See, e.g., Order No. 637 at ¶¶ 60-65.

The Ridgeline Pipeline System's physical configuration — a 187-mile, 24-inch-diameter pipeline with three compressor stations (the Wetzel Station at approximately Milepost 0, the Mannington Station at approximately Milepost 78, and the Waynesburg Station at approximately Milepost 187) — lends itself to segmentation at the compressor station boundaries, creating two potential pipeline segments: Segment 1 (Wetzel Station to Mannington Station, approximately 78 miles) and Segment 2 (Mannington Station to Waynesburg Station, approximately 109 miles).

Ridgeline is developing segmentation provisions that would allow shippers to release or utilize capacity on individual segments, subject to operationally feasible constraints. These provisions are being designed in conjunction with the capacity release provisions discussed in Section III.A above, as the ability to segment capacity is closely linked to the capacity release framework. In parallel, Ridgeline is drafting flexible receipt/delivery point provisions that would permit shippers to designate primary and secondary receipt and delivery points within the System, subject to the pipeline's operational discretion and available capacity at each point.

The development of these provisions has raised several questions on which Staff guidance would be particularly valuable:

(a) Mandatory vs. Permissive Segmentation. Ridgeline seeks Staff's views on whether the Commission expects segmentation to be mandatory (i.e., shippers have the right to segment capacity as a matter of tariff entitlement) or permissive (i.e., segmentation is available at the pipeline's discretion based on operational conditions). This distinction has significant implications for rate design, scheduling, and capacity allocation.

(b) Treatment of Capacity at Segment Boundaries. The allocation of capacity at segment boundaries — particularly at the Mannington Station — raises complex questions regarding the relationship between segment-level capacity and overall System design capacity. The System's design capacity is 1.2 Bcf/d on a path basis from the Wetzel County Interconnect to the Waynesburg Compressor Station. Current throughput is approximately 680 MMcf/d, representing approximately 56.67% utilization. Ridgeline seeks Staff's guidance on the appropriate methodology for determining the capacity available on each segment and the treatment of segment boundary points for scheduling and nomination purposes.

(c) Flexible Receipt/Delivery Point Provisions. Ridgeline is developing provisions that would allow shippers to designate both primary and secondary receipt/delivery points, with secondary points available on an as-available basis subject to scheduling priority. Ridgeline seeks Staff's views on the appropriate priority hierarchy for secondary points and the interaction between flexible point rights and the pipeline's obligation to provide firm service on primary paths.

(d) Rate Design Implications. Ridgeline seeks to understand Staff's expectations regarding the rate design treatment of segmented capacity, including whether the Commission expects distance-based or postage-stamp rates for individual segments, and how the rates for segmented capacity should relate to the system-wide recourse rate.

E. Deficiency Item 13: Greenhouse Gas Emission Cost Recovery Provisions

The Deficiency Letter noted the absence of provisions in the Proposed Tariff addressing the recovery of costs associated with greenhouse gas ("GHG") emissions, including costs that may be incurred under existing or future federal and state carbon pricing, emission reduction mandates, or methane monitoring and mitigation requirements.

Ridgeline acknowledges that GHG emission cost recovery is an area of evolving regulatory policy at both the federal and state levels. The System operates in West Virginia and Pennsylvania, both of which have implemented or are considering regulatory programs that may impose costs on midstream natural gas pipeline operations. Ridgeline is conducting a comprehensive analysis of the current and anticipated regulatory landscape in both states, including:

(a) Pennsylvania's participation in the Regional Greenhouse Gas Initiative ("RGGI") and the potential implications for upstream and midstream natural gas operations;

(b) West Virginia's regulatory framework governing methane emissions from natural gas infrastructure, including recent rulemaking activity by the West Virginia Department of Environmental Protection;

(c) The U.S. Environmental Protection Agency's proposed rules under the Clean Air Act addressing methane emissions from the oil and natural gas sector, including Subpart OOOOb and OOOOc requirements; and

(d) Potential future federal carbon pricing legislation or regulation that may affect the cost of operating natural gas transmission infrastructure.

Based on this analysis, Ridgeline is developing a proposed GHG cost tracker and passthrough mechanism (the "GHG Tracker") that would allow recovery of incremental costs associated with compliance with applicable GHG regulations. The proposed GHG Tracker would operate as a separate surcharge on the reservation and/or usage rates, subject to annual true-up based on actual costs incurred and recovered. The mechanism is being designed to be technology-neutral and responsive to changes in the applicable regulatory framework over time.

Given the relative novelty of GHG emission cost recovery provisions in the context of midstream natural gas pipeline tariffs, Ridgeline particularly values Staff's perspectives on the appropriate tariff structure, including the following specific questions:

(a) Tracker vs. Periodic Rate Adjustment. Ridgeline seeks Staff's views on whether a tracker mechanism with annual true-up is the preferred approach, or whether the Commission would favor a provision that addresses GHG costs through periodic rate adjustments filed under Section 4 of the NGA.

(b) Scope of Recoverable Costs. Ridgeline seeks guidance on the categories of costs that may appropriately be included in the GHG Tracker, including direct compliance costs (e.g., emission allowances, monitoring equipment, reporting requirements), capital expenditures for emission reduction technologies, and any applicable penalties or offset purchase costs.

(c) Carbon Offset and Renewable Energy Credit Considerations. Ridgeline notes that DEH's broader energy portfolio includes a 250 MW wind generation portfolio currently under development in southwestern Pennsylvania. Ridgeline seeks to understand whether and how the Proposed Tariff should address the potential use of carbon offsets or renewable energy credits ("RECs") generated by affiliated renewable energy facilities to satisfy GHG compliance obligations, and whether any such provisions would raise affiliate transaction concerns under the Commission's regulations.

Ridgeline believes that an informal discussion with Staff on these issues would be particularly productive, as it would allow Ridgeline to calibrate its GHG Tracker proposal to Staff's expectations before investing significant additional resources in tariff drafting.

F. Deficiency Item 14: Order No. 2222 — Distributed Energy Resource Aggregation Implications

The Deficiency Letter identified a failure to address the implications of FERC Order No. 2222 for Ridgeline's proposed tariff, specifically with respect to distributed energy resource ("DER") aggregation and renewable energy interconnection. See Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 2222, 172 FERC ¶ 61,247 (2020), order on reh'g, Order No. 2222-A, 174 FERC ¶ 61,197 (2021), order on reh'g, Order No. 2222-B, 175 FERC ¶ 61,227 (2021).

Ridgeline acknowledges the importance of Order No. 2222 and the Commission's broader policy objectives regarding the integration of DER aggregations into wholesale energy markets. However, Ridgeline respectfully notes that Order No. 2222 was primarily directed at regional transmission organizations ("RTOs") and independent system operators ("ISOs") operating wholesale electricity markets, and did not directly impose compliance obligations on FERC-jurisdictional natural gas pipelines operating under Part 284 of the Commission's regulations. The application of Order No. 2222 principles to a natural gas pipeline tariff under NGA Section 4 is, to Ridgeline's knowledge, a matter of first impression, and the scope of the Commission's expectations in this context is not entirely clear from the Deficiency Letter.

Notwithstanding this uncertainty, Ridgeline is undertaking a good-faith analysis of the potential implications of Order No. 2222 for the Proposed Tariff, focusing on the following areas:

(a) Interconnections with DER-Adjacent Facilities. Ridgeline is analyzing whether and how the Proposed Tariff should accommodate potential interconnections with facilities associated with DER aggregations, including gas-fired distributed generation facilities, combined heat and power installations, and natural gas fueling stations that may serve as components of DER aggregations participating in PJM Interconnection, L.L.C. wholesale electricity markets.

(b) Gas-Electric Coordination. DEH's 250 MW wind portfolio under development in the same geographic region as the System raises potential gas-electric coordination considerations. Ridgeline is evaluating whether the Proposed Tariff should include provisions addressing the scheduling and operational coordination between natural gas pipeline service and electric generation service, particularly in the context of DER aggregations that may include both gas-fired and renewable generation resources.

(c) Implications for the ATPC Interconnection. The proposed interconnection with ATPC at Milepost 412.6 may have implications for Order No. 2222 compliance to the extent that DER aggregations downstream of the interconnection point rely on natural gas transportation through the Ridgeline System. Ridgeline seeks to understand whether and how the interconnection agreement between Ridgeline and ATPC should address DER-related considerations, given ATPC's role as a major interstate pipeline serving multiple distribution and end-use markets.

Ridgeline respectfully requests clarification from Staff on the scope of what is expected under this deficiency item as applied to a FERC-jurisdictional natural gas pipeline tariff under Part 284, Subpart G. In particular, Ridgeline seeks to understand:

(a) Whether the Commission intends Ridgeline to include specific tariff provisions addressing DER aggregation, or whether the deficiency may be satisfied through a more general discussion of Order No. 2222's applicability in the tariff filing;

(b) The specific aspects of Order No. 2222 that Staff believes are relevant to a natural gas pipeline tariff, as distinguished from the Order's requirements for RTOs and ISOs; and

(c) Whether Staff anticipates that the Commission will issue further guidance on the application of Order No. 2222 principles to natural gas pipeline tariffs, and if so, whether Ridgeline's tariff redesign should be structured to accommodate such guidance.

Ridgeline emphasizes that its inquiry on this deficiency item is made in good faith and reflects a genuine desire to comply with Staff's expectations. Given the novelty and complexity of these issues, Ridgeline submits that an informal conference would be the most efficient means of obtaining the guidance necessary to develop an appropriate and responsive tariff provision.

IV. Proposed Conference Format and Logistics

Ridgeline respectfully proposes that the informal conference be held at the Commission's offices at 888 First Street NE, Washington, DC 20426, at a mutually convenient date within thirty (30) days of this letter (i.e., by approximately June 14, 2023). In the alternative, Ridgeline is amenable to conducting the conference by videoconference if that format is preferred by Staff. Ridgeline anticipates that a conference of approximately two to three hours in duration would be sufficient to address all six remaining deficiency items and any preliminary comments Staff may have on the eight items addressed in the Partial Response.

Ridgeline proposes the following attendees on its behalf:

• George Trujillo, Responsible Partner, Energy & Infrastructure Group, Calderwood & Harkness LLP;

• Brett Callahan, Lead Associate, Energy & Infrastructure Group, Calderwood & Harkness LLP;

• Dr. Natasha Orlov, Director of Rates & Regulatory, Ridgeline Midstream Services LLC; and

• Dr. Raymond Braswell, Lead Consultant, Braswell Energy Consulting Group LLC.

Ridgeline respectfully requests that appropriate representatives from both the Office of Energy Market Regulation and the Office of the General Counsel participate in the conference. In particular, Ridgeline would welcome the participation of Dr. Miriam Okafor, Lead Economic Analyst in OEMR, whose involvement in the review of Ridgeline's cost-of-service filing and rate design would contribute to a productive discussion of the remaining deficiency items.

To facilitate a more productive conference, Ridgeline is prepared to share preliminary draft tariff language on each of the six remaining deficiency items with Staff in advance of the conference. This would allow Staff to review and consider the proposed approaches before the meeting, and would enable the discussion to focus on specific provisions and policy questions rather than general concepts. If Staff prefers this approach, Ridgeline requests guidance on the appropriate timeline for submitting these preliminary materials.

Ridgeline notes that ALJ Whitfield has granted a 120-day extension with a new filing deadline of August 28, 2023, for the Complete Supplemental Response. Scheduling the proposed conference at the earliest practicable date would maximize the time available for Ridgeline to incorporate Staff's guidance into the tariff redesign and would reduce the risk that further extensions or supplemental deficiency findings may be necessary.

V. Coordination with Other Parties

Ridgeline is mindful that these proceedings involve multiple active parties whose interests may be affected by the tariff redesign. Settlement discussions are ongoing before Settlement Judge Howard Margolis, with settlement conferences held on November 30, 2022 and March 8, 2023, and additional settlement conferences anticipated in the coming weeks. Ridgeline has participated actively and in good faith in all settlement proceedings to date.

Ridgeline understands that counsel for the other active parties — specifically, William Pratt, Esq. of Kellner, Royce & Dillard LLP (counsel for ATPC), Rebekah Montague, Esq. of Whitmore & Sable LLP (counsel for MGPC), and Stephen Greer, Esq. of Fordham Municipal Law Group PC (counsel for CMGA) — may be interested in participating in or being informed of the proposed informal conference with Staff. Ridgeline is amenable to either a bilateral meeting between Ridgeline and Staff or a broader conference including all active parties, at Staff's preference. Ridgeline will provide copies of this letter to counsel for all active parties contemporaneously with its filing.

Ridgeline emphasizes that the primary purpose of the proposed conference is to obtain Staff's technical and policy guidance on the tariff redesign in order to ensure that the Complete Supplemental Response is fully responsive to the Deficiency Letter. The conference is not intended as a settlement proceeding, and Ridgeline does not seek to prejudice any party's substantive positions in the ongoing proceedings before ALJ Whitfield or Settlement Judge Margolis.

VI. Conclusion

For the reasons set forth above, Ridgeline Midstream Services LLC respectfully requests that Mr. Briggs or his designee contact undersigned counsel at the earliest convenient date to arrange the proposed informal conference. Ridgeline is committed to completing its tariff redesign in a thorough and timely manner and firmly believes that Staff engagement at this critical stage of the proceeding will promote efficiency, reduce the likelihood of further deficiency findings, and facilitate the resolution of the remaining issues in a manner consistent with the Commission's policies and the public interest.

Ridgeline expresses its sincere appreciation for Staff's attention to this matter, for the careful and thorough review reflected in the Deficiency Letter, and for Staff's willingness to engage constructively with Ridgeline throughout these proceedings. We look forward to a productive dialogue on the path forward.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

George Trujillo Responsible Partner, Energy & Infrastructure Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Tel: (202) 555-4127

Email: gtrujillo@calderwoodharkness.com

cc (via electronic mail and first-class mail):

Hon. Clara Whitfield, Administrative Law Judge, Federal Energy Regulatory Commission

Hon. Howard Margolis, Settlement Judge, Federal Energy Regulatory Commission

Dr. Miriam Okafor, Lead Economic Analyst, Office of Energy Market Regulation, Federal Energy Regulatory Commission

William Pratt, Esq., Kellner, Royce & Dillard LLP (counsel for Appalachian Trunk Pipeline Company, LLC)

Rebekah Montague, Esq., Whitmore & Sable LLP (counsel for Mountainside Gas Producers Coalition)

Stephen Greer, Esq., Fordham Municipal Law Group PC (counsel for Clearwater Municipal Gas Authority)

James K. Winfield, CEO & President, Ridgeline Midstream Services LLC

Dr. Natasha Orlov, Director of Rates & Regulatory, Ridgeline Midstream Services LLC

Patricia Dunmore, Chairperson, Dunmore Energy Holdings Ltd.

CALDERWOOD & HARKNESS LLP Attorneys at Law 1601 K Street NW, Suite 900 Washington, DC 20006
Telephone: (202) 555-4100 Facsimile: (202) 555-4101 www.calderwoodharkness.com
May 15, 2023
VIA ELECTRONIC FILING AND FIRST-CLASS MAIL
Jonathan Briggs, Esq. Lead Trial Attorney Office of the General Counsel Federal Energy Regulatory Commission 888 First Street NE Washington, DC 20426
Re: Ridgeline Midstream Services LLC — FERC Docket Nos. RP22-847-000 (Rate Case) and RP22-847-001 (Interconnection)
Request for Informal Staff-Level Conference Regarding Remaining Deficiency Items
Dear Mr. Briggs:
I write on behalf of Ridgeline Midstream Services LLC ("Ridgeline" or the "Company"), a wholly-owned subsidiary of Dunmore Energy Holdings Ltd. ("DEH"), in the above-captioned proceedings. Calderwood & Harkness LLP ("C&H") serves as counsel of record for Ridgeline in these matters, C&H Matter No. 1016-00005. The purpose of this letter is to respectfully request an informal staff-level conference with representatives of the Commission's Office of Energy Market Regulation ("OEMR") and the Office of the General Counsel ("OGC") to discuss the six remaining deficiency items identified in the Deficiency Letter issued by OEMR on January 19, 2023 (the "Deficiency Letter"), which were not addressed in Ridgeline's Partial Response filed on March 15, 2023 (the "Partial Response").
Ridgeline values constructive engagement with FERC Trial Staff and believes that an informal conference at this juncture would materially advance the ongoing tariff redesign process, promote the efficient resolution of the outstanding issues, and assist Ridgeline in meeting the August 28, 2023 filing deadline established by the presiding Administrative Law Judge. As discussed more fully below, several of the remaining deficiency items involve matters of first impression or evolving regulatory policy, and Ridgeline respectfully submits that early dialogue with Staff will reduce the likelihood of further deficiency findings and facilitate a more complete and responsive filing.
I. Background and Procedural History
On May 12, 2022, Ridgeline filed with the Commission an application for an initial tariff rate and interconnection authorization pursuant to Sections 4 and 7 of the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717c and 717f, and the Commission's regulations at 18 C.F.R. Parts 154, 157, and 284 (the "Application"). The Application sought approval of the FERC Gas Tariff, Original Volume No. 1 (the "Proposed Tariff"), with a proposed recourse rate of $0.2265 per dekatherm ("Dth"), consisting of a reservation charge of $0.2223/Dth and a usage charge of $0.0042/Dth. These rates were derived from a total cost of service of $97.36 million and a rate base of $612.40 million, as supported by the cost-of-service study and related workpapers submitted with the Application.
Ridgeline owns and operates the Ridgeline Pipeline System (the "System"), a 187-mile, 24-inch-diameter high-pressure natural gas transmission pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia, to the Waynesburg Compressor Station in Greene County, Pennsylvania, with a certificated design capacity of 1.2 billion cubic feet per day ("Bcf/d"). The System includes three compressor stations — the Wetzel Station, the Mannington Station, and the Waynesburg Station — with an aggregate of 45,000 horsepower ("HP") of installed compression. The interconnection component of the Application, docketed at RP22-847-001, concerns the physical interconnection of the System with the existing pipeline network of Appalachian Trunk Pipeline Company, LLC ("ATPC") at ATPC Milepost 412.6, which provides Ridgeline shippers with access to downstream markets through ATPC's 640-mile, 3.8 Bcf/d interstate pipeline system.
The Commission issued its Notice of Filing on June 14, 2022, and notices of intervention were timely filed by ATPC, the Mountainside Gas Producers Coalition ("MGPC"), and the Clearwater Municipal Gas Authority ("CMGA"). By order dated September 22, 2022, the Commission granted all three interventions. MGPC, a coalition of fourteen independent natural gas producers operating in the Appalachian Basin, intervened to raise concerns regarding rate design, creditworthiness provisions, and shipper access. CMGA, a municipal gas distribution utility serving approximately 45,000 customers in southwestern Pennsylvania, intervened to address issues relating to the proposed recourse rate, load factor assumptions, and the interconnection agreement with ATPC.
On November 14, 2022, the Commission's Chief Administrative Law Judge designated the Honorable Clara Whitfield as the presiding Administrative Law Judge in these proceedings and established a Track II procedural schedule. Ridgeline filed the direct testimony and exhibits of seven witnesses on December 5, 2022, covering cost of service, rate design, engineering and construction, environmental compliance, market analysis, interconnection operations, and regulatory policy. Answering testimony was filed by ATPC, MGPC, and CMGA on January 9, 2023.
On January 19, 2023, OEMR issued the Deficiency Letter, identifying fourteen specific deficiencies in Ridgeline's Proposed Tariff filing and requesting supplemental information and revised tariff provisions. In response, ALJ Whitfield issued an order on February 6, 2023, staying the procedural schedule — including all discovery and the filing of rebuttal testimony — pending Ridgeline's response to the Deficiency Letter.
On March 15, 2023, Ridgeline filed its Partial Response, substantively addressing eight of the fourteen deficiency items (specifically, Items 1, 2, 3, 4, 7, 8, 9, and 10), as discussed in Section II below. The Partial Response explained that Ridgeline required additional time to address the remaining six items (Items 5, 6, 11, 12, 13, and 14), which involve more complex tariff redesign and, in certain cases, novel regulatory questions.
On April 28, 2023, Ridgeline filed a Motion for Extension of Time requesting an additional 120 calendar days from the date of the order to complete the tariff redesign for the remaining six deficiency items. ALJ Whitfield granted the motion by order dated May 10, 2023, establishing a new deadline of August 28, 2023, for Ridgeline to file its Complete Supplemental Response.
To assist with the comprehensive tariff redesign necessitated by the remaining deficiency items, Ridgeline has engaged Braswell Energy Consulting Group LLC ("Braswell"), effective April 15, 2023, under engagement number BEC-2023-0041. Braswell is led by Dr. Raymond Braswell, a former senior economist with the Commission's OEMR, who brings extensive expertise in natural gas pipeline rate design, cost-of-service methodologies, and FERC tariff compliance. Dr. Braswell and his team have been actively engaged in developing the revised tariff provisions that are the subject of this letter.
II. Items Previously Addressed in the Partial Response (March 15, 2023)
For context and to provide Staff with a complete picture of the current posture of Ridgeline's deficiency response, the following is a brief summary of the eight deficiency items that were substantively addressed in the Partial Response filed on March 15, 2023. Ridgeline's responses to each of these items were accompanied by supporting workpapers, draft tariff language, and, where applicable, revised testimony.
Item 1 — Updated Cost-of-Service Support for Proposed ROE. The Deficiency Letter requested updated support for Ridgeline's proposed return on equity ("ROE") of 14.0%. In the Partial Response, Ridgeline provided preliminary updated discounted cash flow ("DCF") proxy group data, including an expanded proxy group of twelve comparable natural gas pipeline companies, updated dividend yields, and revised growth rate estimates reflecting market conditions through the first quarter of 2023. Ridgeline's analysis, prepared by Dr. Braswell, indicated a median ROE range of 12.8% to 14.5% under the two-step DCF methodology. Ridgeline reserved the right to further update this analysis in its Complete Supplemental Response.
Item 2 — Fuel-Use and Lost-and-Unaccounted-For Gas (FL&U) Tracker Mechanism. The Deficiency Letter noted the absence of a fuel-use and lost-and-unaccounted-for gas tracker in the Proposed Tariff. In the Partial Response, Ridgeline provided a framework for the proposed FL&U tracker, including a draft Rate Schedule FL&U-1, proposed annual true-up procedures, and supporting tariff language. The proposed tracker contemplates an initial FL&U percentage of 1.85%, subject to annual adjustment based on actual pipeline operations data.
Item 3 — Interruptible Transportation (IT) Rate Derivation. The Deficiency Letter requested additional support for the derivation of the proposed interruptible transportation rate. In the Partial Response, Ridgeline provided the methodology for the proposed IT rate under Rate Schedule IT-1, demonstrating that the proposed IT rate of $0.2425/Dth exceeds the maximum applicable firm rate on a 100% load factor basis, consistent with Commission policy.
Item 4 — Support for 100% Load Factor Billing Determinant Assumption. The Deficiency Letter questioned Ridgeline's use of a 100% load factor billing determinant in the rate design. In the Partial Response, Ridgeline provided justification for the assumption, including system utilization projections and contractual commitments, while noting that this assumption is under ongoing re-evaluation as part of the comprehensive tariff redesign, particularly given the System's current throughput of approximately 680 MMcf/d, which represents a utilization rate of approximately 56.67%.
Item 7 — Electronic Bulletin Board (EBB) Posting Requirements. The Deficiency Letter identified deficiencies in the proposed EBB posting provisions. In the Partial Response, Ridgeline provided revised tariff provisions for its proposed EBB, including specifications for the posting of available capacity, scheduled and actual flow data, and index of customers, consistent with 18 C.F.R. § 284.13 and applicable NAESB standards.
Item 8 — Shipper-Must-Have-Title Provisions. The Deficiency Letter noted that the Proposed Tariff lacked adequate shipper-must-have-title provisions. In the Partial Response, Ridgeline provided revised tariff language incorporating shipper-must-have-title requirements consistent with Commission Order Nos. 712 and 712-A and the Commission's regulations at 18 C.F.R. § 284.8(h).
Item 9 — Interconnection Agreement Filed as a Rate Schedule. The Deficiency Letter required that the interconnection agreement between Ridgeline and ATPC be filed as a rate schedule. In the Partial Response, Ridgeline confirmed that the interconnection agreement will be filed as a rate schedule under the Proposed Tariff and referenced Draft Interconnection Agreement Version 3.0, which was included as an appendix to the Partial Response.
Item 10 — Penalty Revenue Crediting Mechanism. The Deficiency Letter identified the absence of a mechanism for crediting penalty revenues to non-offending shippers. In the Partial Response, Ridgeline provided a proposed penalty revenue crediting mechanism, including draft tariff language specifying that all penalty revenues collected under Rate Schedule FT-1 and Rate Schedule IT-1 will be credited to non-offending shippers on a pro rata basis, net of costs incurred by the pipeline as a direct result of the shipper violation.
Ridgeline notes that FERC Staff's review of and feedback on these Partial Response items remains outstanding as of the date of this letter. Ridgeline respectfully submits that discussion of these items at the proposed informal conference would also be beneficial, as Staff's preliminary reactions to the Partial Response would inform Ridgeline's approach to the Complete Supplemental Response and assist in ensuring that the final filing is comprehensive and responsive to all of Staff's concerns.
III. Remaining Six Deficiency Items Requiring Discussion
The following discussion addresses each of the six remaining deficiency items (Items 5, 6, 11, 12, 13, and 14) that were not addressed in the Partial Response and that are the primary focus of the requested informal conference. For each item, Ridgeline provides a summary of the deficiency identified, a description of the work undertaken to date, and specific areas where Staff guidance would be particularly valuable. Ridgeline's objective in identifying these areas is not to seek advisory opinions, but rather to ensure that the tariff redesign is properly directed and responsive to Staff's expectations.
A. Deficiency Item 5: Capacity Release Provisions
The Deficiency Letter noted that Ridgeline's original filing did not include capacity release provisions in the General Terms and Conditions of the Proposed Tariff, notwithstanding the Commission's long-standing requirement that open-access transportation tariffs include such provisions. See 18 C.F.R. § 284.8; Regulation of Short-Term Natural Gas Transportation Services and Regulation of Interstate Natural Gas Transportation Services, Order No. 637, 65 Fed. Reg. 10,156 (Feb. 25, 2000), FERC Stats. & Regs. ¶ 31,091 (2000), order on reh'g, Order No. 637-A, FERC Stats. & Regs. ¶ 31,099 (2000), order on reh'g, Order No. 637-B, 92 FERC ¶ 61,062 (2000).
Ridgeline acknowledges this omission and is developing comprehensive capacity release provisions for inclusion in the General Terms and Conditions of the revised Proposed Tariff, consistent with the requirements of 18 C.F.R. § 284.8 and applicable Commission precedent. This work is being conducted under Dr. Braswell's direction, with input from Ridgeline's commercial operations team.
However, the development of these provisions has raised several questions on which Staff guidance would be particularly valuable. Specifically, Ridgeline seeks to discuss the following areas with Staff:
(a) Treatment of Prearranged Capacity Release Transactions. Ridgeline is developing provisions to address prearranged deals, including the appropriate posting periods, bidding windows, and the circumstances under which a prearranged deal may be matched by a third-party bidder. Ridgeline seeks Staff's current views on the treatment of prearranged capacity release transactions in the context of a newly certificated pipeline with a limited initial shipper base.
(b) Posting Requirements and Bidding Procedures. The capacity release provisions must interface with the proposed EBB, which was addressed in Ridgeline's Partial Response at Item 7. Ridgeline seeks to ensure that the posting requirements, bidding procedures, and notification timelines in the capacity release provisions are fully consistent with the EBB tariff provisions and with NAESB standards. Staff input on any specific formatting or data field requirements would be helpful at this stage.
(c) Recall and Reput Rights. Ridgeline is evaluating the appropriate scope of recall and reput rights for releasing shippers under the Proposed Tariff. This issue is of particular importance given the System's current utilization rate of approximately 56.67% and the potential for capacity release to facilitate more efficient use of available system capacity. Ridgeline seeks Staff's views on the permissible scope of contractual restrictions on recall and reput, particularly in the context of short-term capacity release transactions.
(d) Integration with Rate Schedule FT-1. The capacity release provisions must be fully integrated with the proposed firm transportation rate schedule (Rate Schedule FT-1). Ridgeline seeks Staff's guidance on the appropriate treatment of released capacity for purposes of rate design, including the allocation of pipeline costs among releasing shippers, replacement shippers, and the pipeline itself.
B. Deficiency Item 6: NAESB Standards Compliance in Operational Flow Order Provisions
The Deficiency Letter identified incomplete compliance with the North American Energy Standards Board ("NAESB") Wholesale Gas Quadrant ("WGQ") Version 3.2 standards in the operational flow order ("OFO") provisions of the Proposed Tariff. The Deficiency Letter specifically referenced Ridgeline's scheduling provisions, nomination and confirmation cycle specifications, and the OFO penalty structure as areas of non-compliance.
Since the filing of the Partial Response, Ridgeline has undertaken a comprehensive gap analysis of its proposed tariff language against the full suite of NAESB WGQ Version 3.2 standards, including but not limited to the standards governing nominations, confirmations, scheduling, flowing gas provisions, imbalance management, and OFO procedures. This gap analysis is being conducted by Braswell in coordination with Ridgeline's gas control and scheduling operations personnel, and is expected to be complete by mid-June 2023.
The areas of particular complexity identified to date include:
(a) Scheduling Provisions. The gap analysis has identified several instances in which the Proposed Tariff's scheduling provisions do not fully conform to the NAESB WGQ Version 3.2 timelines and data exchange protocols for intra-day nominations and scheduling. Ridgeline is revising these provisions accordingly, but seeks Staff's guidance on the level of specificity expected in the tariff text, as opposed to general incorporation by reference to NAESB standards.
(b) Nomination and Confirmation Cycles. Ridgeline's original filing specified four daily nomination cycles, consistent with NAESB Version 3.2, but the tariff language did not fully detail the confirmation procedures, bumping priorities, and scheduling rights associated with each cycle. Ridgeline is drafting revised language to address these gaps and seeks to confirm with Staff that the proposed approach is consistent with current OEMR expectations.
(c) Imbalance Management. The Proposed Tariff included general provisions for imbalance management, but the Deficiency Letter identified the need for more detailed provisions addressing daily and monthly imbalance tolerances, cash-out mechanisms, and the treatment of operational imbalances versus shipper imbalances. Ridgeline is developing a comprehensive imbalance management framework and seeks Staff's views on the appropriate tolerance levels and penalty structures for a pipeline system of Ridgeline's size and configuration.
(d) OFO Penalty Structures. The Deficiency Letter specifically noted that Ridgeline's proposed OFO penalty structure did not adequately distinguish between critical and non-critical OFO events, or specify the penalty levels associated with each. Ridgeline is developing a tiered penalty structure and seeks Staff's guidance on the appropriate penalty magnitudes and the circumstances warranting declaration of critical versus non-critical OFO events, including coordination with ATPC at the interconnection point.
Ridgeline respectfully submits that an informal dialogue with Staff on these NAESB compliance issues would be particularly productive, as several of the issues identified in the gap analysis involve areas where the Commission has exercised discretion in applying NAESB standards to individual pipeline tariffs, and Staff's practical guidance would significantly assist in the tariff redesign.
C. Deficiency Item 11: Creditworthiness Provisions
The Deficiency Letter identified the creditworthiness provisions in the Proposed Tariff as inadequate, noting that the provisions did not specify the forms of acceptable financial assurance, did not establish clear credit evaluation criteria, and did not include adequate provisions for addressing changes in a shipper's creditworthiness during the term of a service agreement.
Ridgeline acknowledges that the creditworthiness provisions in the original filing were insufficiently detailed and is undertaking a comprehensive revision. The revised provisions, which are being drafted with input from Ridgeline's finance and risk management teams as well as outside counsel, will address the following areas:
(a) Acceptable Forms of Collateral. The revised provisions will specify the forms of financial assurance acceptable to Ridgeline, including irrevocable standby letters of credit issued by creditworthy financial institutions, cash deposits held in segregated accounts, and parent or affiliate guarantees, subject to specified minimum credit quality requirements for the guarantor.
(b) Unsecured Credit Limits. Ridgeline is developing a framework for establishing unsecured credit limits based on a shipper's credit rating, financial condition, and payment history. The proposed framework will specify the maximum unsecured credit exposure permitted for shippers at each credit rating level and the methodology for calculating the credit exposure.
(c) Credit Rating Thresholds. The revised provisions will establish minimum credit rating thresholds for unsecured credit, including the treatment of shippers that are rated by multiple credit rating agencies and the methodology for determining the applicable rating where ratings differ.
(d) Material Adverse Change Triggers. Ridgeline is developing provisions that will specify the events constituting a material adverse change ("MAC") in a shipper's creditworthiness, including but not limited to a credit rating downgrade below a specified threshold, a bankruptcy filing, a failure to make timely payment, and specified adverse financial developments. The provisions will set forth the pipeline's remedies upon the occurrence of a MAC event, including the right to demand additional collateral and, in extreme cases, to suspend or terminate service.
(e) Cure Periods. The revised provisions will include reasonable cure periods during which a shipper may remedy a creditworthiness deficiency before the pipeline exercises its remedies, consistent with Commission precedent.
With respect to this deficiency item, Ridgeline seeks Staff's views on several specific issues. First, Ridgeline notes that many of the fourteen member companies of MGPC are independent producers that may not carry investment-grade credit ratings. Ridgeline is committed to developing creditworthiness provisions that appropriately balance pipeline protection against credit risk with the Commission's interest in ensuring non-discriminatory access to pipeline transportation services for all qualified shippers, including smaller, non-investment-grade producers. Staff's guidance on the appropriate calibration of this balance would be particularly valuable.
Second, Ridgeline has identified questions regarding the interaction between the creditworthiness provisions in the general terms and conditions of the Proposed Tariff and the credit-related provisions in the proposed interconnection agreement with ATPC (Draft Interconnection Agreement Version 3.0). To the extent that the interconnection agreement imposes separate credit requirements on Ridgeline or on shippers utilizing the interconnection, Ridgeline seeks to ensure that the two sets of provisions are internally consistent and that Staff finds the proposed approach acceptable.
D. Deficiency Item 12: Segmentation and Flexible Receipt/Delivery Point Provisions
The Deficiency Letter identified the absence of provisions for segmentation of capacity and flexible receipt/delivery point designations as a deficiency in the Proposed Tariff. The Commission has generally encouraged pipelines to offer segmentation and flexible point rights to promote the efficient use of pipeline capacity and to enhance the liquidity of the capacity release market. See, e.g., Order No. 637 at ¶¶ 60-65.
The Ridgeline Pipeline System's physical configuration — a 187-mile, 24-inch-diameter pipeline with three compressor stations (the Wetzel Station at approximately Milepost 0, the Mannington Station at approximately Milepost 78, and the Waynesburg Station at approximately Milepost 187) — lends itself to segmentation at the compressor station boundaries, creating two potential pipeline segments: Segment 1 (Wetzel Station to Mannington Station, approximately 78 miles) and Segment 2 (Mannington Station to Waynesburg Station, approximately 109 miles).
Ridgeline is developing segmentation provisions that would allow shippers to release or utilize capacity on individual segments, subject to operationally feasible constraints. These provisions are being designed in conjunction with the capacity release provisions discussed in Section III.A above, as the ability to segment capacity is closely linked to the capacity release framework. In parallel, Ridgeline is drafting flexible receipt/delivery point provisions that would permit shippers to designate primary and secondary receipt and delivery points within the System, subject to the pipeline's operational discretion and available capacity at each point.
The development of these provisions has raised several questions on which Staff guidance would be particularly valuable:
(a) Mandatory vs. Permissive Segmentation. Ridgeline seeks Staff's views on whether the Commission expects segmentation to be mandatory (i.e., shippers have the right to segment capacity as a matter of tariff entitlement) or permissive (i.e., segmentation is available at the pipeline's discretion based on operational conditions). This distinction has significant implications for rate design, scheduling, and capacity allocation.
(b) Treatment of Capacity at Segment Boundaries. The allocation of capacity at segment boundaries — particularly at the Mannington Station — raises complex questions regarding the relationship between segment-level capacity and overall System design capacity. The System's design capacity is 1.2 Bcf/d on a path basis from the Wetzel County Interconnect to the Waynesburg Compressor Station. Current throughput is approximately 680 MMcf/d, representing approximately 56.67% utilization. Ridgeline seeks Staff's guidance on the appropriate methodology for determining the capacity available on each segment and the treatment of segment boundary points for scheduling and nomination purposes.
(c) Flexible Receipt/Delivery Point Provisions. Ridgeline is developing provisions that would allow shippers to designate both primary and secondary receipt/delivery points, with secondary points available on an as-available basis subject to scheduling priority. Ridgeline seeks Staff's views on the appropriate priority hierarchy for secondary points and the interaction between flexible point rights and the pipeline's obligation to provide firm service on primary paths.
(d) Rate Design Implications. Ridgeline seeks to understand Staff's expectations regarding the rate design treatment of segmented capacity, including whether the Commission expects distance-based or postage-stamp rates for individual segments, and how the rates for segmented capacity should relate to the system-wide recourse rate.
E. Deficiency Item 13: Greenhouse Gas Emission Cost Recovery Provisions
The Deficiency Letter noted the absence of provisions in the Proposed Tariff addressing the recovery of costs associated with greenhouse gas ("GHG") emissions, including costs that may be incurred under existing or future federal and state carbon pricing, emission reduction mandates, or methane monitoring and mitigation requirements.
Ridgeline acknowledges that GHG emission cost recovery is an area of evolving regulatory policy at both the federal and state levels. The System operates in West Virginia and Pennsylvania, both of which have implemented or are considering regulatory programs that may impose costs on midstream natural gas pipeline operations. Ridgeline is conducting a comprehensive analysis of the current and anticipated regulatory landscape in both states, including:
(a) Pennsylvania's participation in the Regional Greenhouse Gas Initiative ("RGGI") and the potential implications for upstream and midstream natural gas operations;
(b) West Virginia's regulatory framework governing methane emissions from natural gas infrastructure, including recent rulemaking activity by the West Virginia Department of Environmental Protection;
(c) The U.S. Environmental Protection Agency's proposed rules under the Clean Air Act addressing methane emissions from the oil and natural gas sector, including Subpart OOOOb and OOOOc requirements; and
(d) Potential future federal carbon pricing legislation or regulation that may affect the cost of operating natural gas transmission infrastructure.
Based on this analysis, Ridgeline is developing a proposed GHG cost tracker and passthrough mechanism (the "GHG Tracker") that would allow recovery of incremental costs associated with compliance with applicable GHG regulations. The proposed GHG Tracker would operate as a separate surcharge on the reservation and/or usage rates, subject to annual true-up based on actual costs incurred and recovered. The mechanism is being designed to be technology-neutral and responsive to changes in the applicable regulatory framework over time.
Given the relative novelty of GHG emission cost recovery provisions in the context of midstream natural gas pipeline tariffs, Ridgeline particularly values Staff's perspectives on the appropriate tariff structure, including the following specific questions:
(a) Tracker vs. Periodic Rate Adjustment. Ridgeline seeks Staff's views on whether a tracker mechanism with annual true-up is the preferred approach, or whether the Commission would favor a provision that addresses GHG costs through periodic rate adjustments filed under Section 4 of the NGA.
(b) Scope of Recoverable Costs. Ridgeline seeks guidance on the categories of costs that may appropriately be included in the GHG Tracker, including direct compliance costs (e.g., emission allowances, monitoring equipment, reporting requirements), capital expenditures for emission reduction technologies, and any applicable penalties or offset purchase costs.
(c) Carbon Offset and Renewable Energy Credit Considerations. Ridgeline notes that DEH's broader energy portfolio includes a 250 MW wind generation portfolio currently under development in southwestern Pennsylvania. Ridgeline seeks to understand whether and how the Proposed Tariff should address the potential use of carbon offsets or renewable energy credits ("RECs") generated by affiliated renewable energy facilities to satisfy GHG compliance obligations, and whether any such provisions would raise affiliate transaction concerns under the Commission's regulations.
Ridgeline believes that an informal discussion with Staff on these issues would be particularly productive, as it would allow Ridgeline to calibrate its GHG Tracker proposal to Staff's expectations before investing significant additional resources in tariff drafting.
F. Deficiency Item 14: Order No. 2222 — Distributed Energy Resource Aggregation Implications
The Deficiency Letter identified a failure to address the implications of FERC Order No. 2222 for Ridgeline's proposed tariff, specifically with respect to distributed energy resource ("DER") aggregation and renewable energy interconnection. See Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 2222, 172 FERC ¶ 61,247 (2020), order on reh'g, Order No. 2222-A, 174 FERC ¶ 61,197 (2021), order on reh'g, Order No. 2222-B, 175 FERC ¶ 61,227 (2021).
Ridgeline acknowledges the importance of Order No. 2222 and the Commission's broader policy objectives regarding the integration of DER aggregations into wholesale energy markets. However, Ridgeline respectfully notes that Order No. 2222 was primarily directed at regional transmission organizations ("RTOs") and independent system operators ("ISOs") operating wholesale electricity markets, and did not directly impose compliance obligations on FERC-jurisdictional natural gas pipelines operating under Part 284 of the Commission's regulations. The application of Order No. 2222 principles to a natural gas pipeline tariff under NGA Section 4 is, to Ridgeline's knowledge, a matter of first impression, and the scope of the Commission's expectations in this context is not entirely clear from the Deficiency Letter.
Notwithstanding this uncertainty, Ridgeline is undertaking a good-faith analysis of the potential implications of Order No. 2222 for the Proposed Tariff, focusing on the following areas:
(a) Interconnections with DER-Adjacent Facilities. Ridgeline is analyzing whether and how the Proposed Tariff should accommodate potential interconnections with facilities associated with DER aggregations, including gas-fired distributed generation facilities, combined heat and power installations, and natural gas fueling stations that may serve as components of DER aggregations participating in PJM Interconnection, L.L.C. wholesale electricity markets.
(b) Gas-Electric Coordination. DEH's 250 MW wind portfolio under development in the same geographic region as the System raises potential gas-electric coordination considerations. Ridgeline is evaluating whether the Proposed Tariff should include provisions addressing the scheduling and operational coordination between natural gas pipeline service and electric generation service, particularly in the context of DER aggregations that may include both gas-fired and renewable generation resources.
(c) Implications for the ATPC Interconnection. The proposed interconnection with ATPC at Milepost 412.6 may have implications for Order No. 2222 compliance to the extent that DER aggregations downstream of the interconnection point rely on natural gas transportation through the Ridgeline System. Ridgeline seeks to understand whether and how the interconnection agreement between Ridgeline and ATPC should address DER-related considerations, given ATPC's role as a major interstate pipeline serving multiple distribution and end-use markets.
Ridgeline respectfully requests clarification from Staff on the scope of what is expected under this deficiency item as applied to a FERC-jurisdictional natural gas pipeline tariff under Part 284, Subpart G. In particular, Ridgeline seeks to understand:
(a) Whether the Commission intends Ridgeline to include specific tariff provisions addressing DER aggregation, or whether the deficiency may be satisfied through a more general discussion of Order No. 2222's applicability in the tariff filing;
(b) The specific aspects of Order No. 2222 that Staff believes are relevant to a natural gas pipeline tariff, as distinguished from the Order's requirements for RTOs and ISOs; and
(c) Whether Staff anticipates that the Commission will issue further guidance on the application of Order No. 2222 principles to natural gas pipeline tariffs, and if so, whether Ridgeline's tariff redesign should be structured to accommodate such guidance.
Ridgeline emphasizes that its inquiry on this deficiency item is made in good faith and reflects a genuine desire to comply with Staff's expectations. Given the novelty and complexity of these issues, Ridgeline submits that an informal conference would be the most efficient means of obtaining the guidance necessary to develop an appropriate and responsive tariff provision.
IV. Proposed Conference Format and Logistics
Ridgeline respectfully proposes that the informal conference be held at the Commission's offices at 888 First Street NE, Washington, DC 20426, at a mutually convenient date within thirty (30) days of this letter (i.e., by approximately June 14, 2023). In the alternative, Ridgeline is amenable to conducting the conference by videoconference if that format is preferred by Staff. Ridgeline anticipates that a conference of approximately two to three hours in duration would be sufficient to address all six remaining deficiency items and any preliminary comments Staff may have on the eight items addressed in the Partial Response.
Ridgeline proposes the following attendees on its behalf:
• George Trujillo, Responsible Partner, Energy & Infrastructure Group, Calderwood & Harkness LLP;
• Brett Callahan, Lead Associate, Energy & Infrastructure Group, Calderwood & Harkness LLP;
• Dr. Natasha Orlov, Director of Rates & Regulatory, Ridgeline Midstream Services LLC; and
• Dr. Raymond Braswell, Lead Consultant, Braswell Energy Consulting Group LLC.
Ridgeline respectfully requests that appropriate representatives from both the Office of Energy Market Regulation and the Office of the General Counsel participate in the conference. In particular, Ridgeline would welcome the participation of Dr. Miriam Okafor, Lead Economic Analyst in OEMR, whose involvement in the review of Ridgeline's cost-of-service filing and rate design would contribute to a productive discussion of the remaining deficiency items.
To facilitate a more productive conference, Ridgeline is prepared to share preliminary draft tariff language on each of the six remaining deficiency items with Staff in advance of the conference. This would allow Staff to review and consider the proposed approaches before the meeting, and would enable the discussion to focus on specific provisions and policy questions rather than general concepts. If Staff prefers this approach, Ridgeline requests guidance on the appropriate timeline for submitting these preliminary materials.
Ridgeline notes that ALJ Whitfield has granted a 120-day extension with a new filing deadline of August 28, 2023, for the Complete Supplemental Response. Scheduling the proposed conference at the earliest practicable date would maximize the time available for Ridgeline to incorporate Staff's guidance into the tariff redesign and would reduce the risk that further extensions or supplemental deficiency findings may be necessary.
V. Coordination with Other Parties
Ridgeline is mindful that these proceedings involve multiple active parties whose interests may be affected by the tariff redesign. Settlement discussions are ongoing before Settlement Judge Howard Margolis, with settlement conferences held on November 30, 2022 and March 8, 2023, and additional settlement conferences anticipated in the coming weeks. Ridgeline has participated actively and in good faith in all settlement proceedings to date.
Ridgeline understands that counsel for the other active parties — specifically, William Pratt, Esq. of Kellner, Royce & Dillard LLP (counsel for ATPC), Rebekah Montague, Esq. of Whitmore & Sable LLP (counsel for MGPC), and Stephen Greer, Esq. of Fordham Municipal Law Group PC (counsel for CMGA) — may be interested in participating in or being informed of the proposed informal conference with Staff. Ridgeline is amenable to either a bilateral meeting between Ridgeline and Staff or a broader conference including all active parties, at Staff's preference. Ridgeline will provide copies of this letter to counsel for all active parties contemporaneously with its filing.
Ridgeline emphasizes that the primary purpose of the proposed conference is to obtain Staff's technical and policy guidance on the tariff redesign in order to ensure that the Complete Supplemental Response is fully responsive to the Deficiency Letter. The conference is not intended as a settlement proceeding, and Ridgeline does not seek to prejudice any party's substantive positions in the ongoing proceedings before ALJ Whitfield or Settlement Judge Margolis.
VI. Conclusion
For the reasons set forth above, Ridgeline Midstream Services LLC respectfully requests that Mr. Briggs or his designee contact undersigned counsel at the earliest convenient date to arrange the proposed informal conference. Ridgeline is committed to completing its tariff redesign in a thorough and timely manner and firmly believes that Staff engagement at this critical stage of the proceeding will promote efficiency, reduce the likelihood of further deficiency findings, and facilitate the resolution of the remaining issues in a manner consistent with the Commission's policies and the public interest.
Ridgeline expresses its sincere appreciation for Staff's attention to this matter, for the careful and thorough review reflected in the Deficiency Letter, and for Staff's willingness to engage constructively with Ridgeline throughout these proceedings. We look forward to a productive dialogue on the path forward.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
George Trujillo Responsible Partner, Energy & Infrastructure Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Tel: (202) 555-4127
Email: gtrujillo@calderwoodharkness.com
cc (via electronic mail and first-class mail):
Hon. Clara Whitfield, Administrative Law Judge, Federal Energy Regulatory Commission
Hon. Howard Margolis, Settlement Judge, Federal Energy Regulatory Commission
Dr. Miriam Okafor, Lead Economic Analyst, Office of Energy Market Regulation, Federal Energy Regulatory Commission
William Pratt, Esq., Kellner, Royce & Dillard LLP (counsel for Appalachian Trunk Pipeline Company, LLC)
Rebekah Montague, Esq., Whitmore & Sable LLP (counsel for Mountainside Gas Producers Coalition)
Stephen Greer, Esq., Fordham Municipal Law Group PC (counsel for Clearwater Municipal Gas Authority)
James K. Winfield, CEO & President, Ridgeline Midstream Services LLC
Dr. Natasha Orlov, Director of Rates & Regulatory, Ridgeline Midstream Services LLC
Patricia Dunmore, Chairperson, Dunmore Energy Holdings Ltd.

CALDERWOOD & HARKNESS LLP Attorneys at Law 1601 K Street NW, Suite 900 Washington, DC 20006

VIA ELECTRONIC FILING AND FIRST-CLASS MAIL

CALDERWOOD & HARKNESS LLP

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