PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — FOR INTERNAL REVIEW AND DISCUSSION PURPOSES ONLY — NOT FOR FILING
FERC GAS TARIFF
ORIGINAL VOLUME NO. 1 — REVISED
(FIRST DRAFT)
Ridgeline Midstream Services LLC
FERC Code: 960442
Docket Nos. RP22-847-000 (Rate Case) and RP22-847-001 (Interconnection)
August 2023
Prepared by:
Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006
On behalf of Ridgeline Midstream Services LLC
C&H Matter No. 1016-00005
Consultant Reference:
Braswell Energy Consulting Group LLC Engagement No. BEC-2023-0041
FIRST DRAFT — PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — FOR INTERNAL REVIEW AND DISCUSSION PURPOSES ONLY — NOT FOR FILING
COVER MEMORANDUM — DRAFTING NOTES
August 14, 2023
MEMORANDUM
TO: George Trujillo, Esq. (Calderwood & Harkness LLP) Patricia Dunmore (Dunmore Energy Holdings Ltd. / Calderwood & Harkness LLP)
FROM: Brett Callahan, Esq. (Calderwood & Harkness LLP)
RE: FERC Gas Tariff, Original Volume No. 1 — Revised — First Draft Ridgeline Midstream Services LLC Docket Nos. RP22-847-000 and RP22-847-001 C&H Matter No. 1016-00005
CC: James K. Winfield (Ridgeline, CEO) Dr. Natasha Orlov (Ridgeline, Director of Rates & Regulatory) Angela Moretti (Ridgeline, VP Finance & Treasurer) Thomas Greaves (Ridgeline, Director of Operations) Dr. Raymond Braswell (Braswell Energy Consulting Group LLC)
George and Patricia:
Enclosed for your review and internal discussion is the First Draft (v1.0) of the revised FERC Gas Tariff, Original Volume No. 1 for Ridgeline Midstream Services LLC ("Ridgeline"). This memorandum summarizes the scope of the revisions contained in this draft and identifies items that remain outstanding for treatment in subsequent drafts.
I. Purpose and Scope of This Draft
This first draft incorporates initial revisions to the tariff intended to address certain deficiency items identified in the Deficiency Letter issued by the Commission's Office of Energy Market Regulation ("OEMR") on January 19, 2023 (the "Deficiency Letter"), which was issued under the signature of Dr. Miriam Okafor, Director, Division of Pipeline Certificates. As you will recall, the Deficiency Letter identified fourteen (14) discrete items requiring supplemental information, revised tariff provisions, or additional justification in connection with Ridgeline's rate case filing in Docket No. RP22-847-000 and its interconnection filing in Docket No. RP22-847-001.
II. Deficiency Items Addressed in This Draft
This first draft addresses, in whole or in substantial part, the following deficiency items:
Item 2 (FL&U Tracker Mechanism): We have drafted an entirely new Section 27 of the General Terms and Conditions establishing a fuel-use and lost-and-unaccounted-for gas ("FL&U") tracker mechanism. The new section includes provisions for an initial FL&U retainage percentage (currently estimated at 2.0–3.5% pending Braswell's final engineering analysis), an annual true-up procedure, quarterly reporting on Ridgeline's electronic bulletin board ("EBB"), and an annual filing with FERC. Corresponding references have been added to Rate Schedule FT-1, Section 5 and Rate Schedule IT-1, Section 6. A data reporting template has been prepared as Appendix E.
Item 3 (IT Rate Derivation): We have drafted the entirety of new Rate Schedule IT-1 (Interruptible Transportation Service), which was absent from the original filing. The IT rate has been derived as the 100% load factor equivalent of the maximum firm reservation rate on a per-Dth basis, consistent with Commission policy. The IT-1 maximum rate is $0.2265/Dth, equal to the total FT-1 maximum recourse rate. This rate will be subject to revision in the second draft upon completion of Braswell's updated cost-of-service model.
Item 5 (Capacity Release Provisions): We have drafted an entirely new Section 29 of the General Terms and Conditions establishing comprehensive capacity release procedures, including posting and bidding requirements, prearranged deal provisions, recall rights, replacement shipper creditworthiness requirements, and FERC reporting. Corresponding provisions have been added to Rate Schedule FT-1, Section 8.
Item 7 (EBB Posting Requirements): We have substantially revised and expanded Section 28 of the General Terms and Conditions governing the electronic bulletin board. The revised section includes detailed posting requirements covering available capacity, capacity release offers and awards, index of customers, operational flow orders, FL&U data, system operational notices, tariff sheets, and penalty revenue reports. The section also addresses NAESB WGQ Version 3.2 compliance for Internet Electronic Transport, access and registration procedures, and security protocols.
Item 6 (NAESB Compliance) — Partially Addressed: We have revised Sections 5 (Nominations and Scheduling) and 6 (Operational Flow Orders) of the General Terms and Conditions to incorporate references to NAESB WGQ Version 3.2 standards, including the timely nomination cycle, evening nomination cycle, intraday nomination cycles, elapsed prorata procedures, and OFO posting requirements. We have also prepared Appendix D (NAESB Compliance Matrix) identifying the status of compliance for each applicable NAESB standard. However, certain NAESB compliance gaps remain, as noted in Appendix D, and will be addressed in subsequent drafts.
Item 11 (Creditworthiness Provisions) — Partially Addressed: We have revised Section 11 of the General Terms and Conditions to include expanded creditworthiness standards, including investment-grade credit rating thresholds, unsecured credit limits, collateral requirements for non-investment-grade shippers, ongoing evaluation procedures, and material adverse change provisions. However, certain aspects of the creditworthiness provisions require additional FERC policy analysis, and the section will be finalized in a subsequent draft.
III. Deficiency Items Deferred or Addressed in Placeholder Form
The following deficiency items are either addressed only in placeholder form or deferred entirely to subsequent drafts:
Item 1 (ROE Proxy Group Update): Deferred to the second draft. Dr. Braswell's team at Braswell Energy Consulting Group LLC is in the process of updating the discounted cash flow ("DCF") proxy group analysis. Preliminary indications suggest a reduction in the allowed return on equity from 14.00% to approximately 12.50%, which would materially affect the cost-of-service and rate design. We anticipate receiving Braswell's final DCF analysis by November 2023.
Item 4 (Load Factor Justification): Deferred to the second draft. Braswell is evaluating a shift from 100% load factor billing determinants to 75% load factor billing determinants, which would increase the maximum recourse rate. We will coordinate with Dr. Orlov and Ms. Moretti on the load factor assumption and its implications for Ridgeline's competitive positioning vis-à-vis Appalachian Trunk Pipeline Company.
Item 8 (Shipper-Must-Have-Title): This item was addressed in Ridgeline's Partial Response to the Deficiency Letter filed on March 15, 2023. The provisions from the Partial Response have been incorporated into Section 12 of the General Terms and Conditions.
Item 9 (Interconnection Agreement as Rate Schedule): Placeholder only. Appendix F contains a placeholder for the interconnection agreement with Appalachian Trunk Pipeline Company, LLC ("ATPC"). As you know, negotiations with ATPC (represented by William Pratt of Kellner, Royce & Dillard LLP) regarding cost allocation for the interconnection facilities remain ongoing. The current Ridgeline proposal allocates costs at 34.08% ($7.6 million) to Ridgeline and 65.92% ($14.7 million) to ATPC, while ATPC advocates for a 50/50 split. The full interconnection agreement will be incorporated in a subsequent draft once these negotiations are resolved.
Item 10 (Penalty Revenue Crediting): Placeholder provisions have been included in Section 25 (Penalties) and Section 30 (Interruptible Transportation Revenue Crediting). The detailed crediting mechanism will be finalized in a subsequent draft.
Item 12 (Segmentation/Flexible Receipt-Delivery): Placeholder only. Section 14 of the General Terms and Conditions reserves space for segmentation and flexible receipt/delivery point provisions, but substantive provisions are deferred to a subsequent draft pending further analysis.
Item 13 (GHG Emission Cost Recovery): Placeholder only. Section 31 reserves space for greenhouse gas emission cost recovery provisions. A separate Calderwood & Harkness memorandum analyzing GHG cost recovery mechanisms and emerging FERC policy is in progress.
Item 14 (Order No. 2222 DER Provisions): Placeholder only. Section 32 reserves space for provisions addressing FERC Order No. 2222 and distributed energy resource aggregation implications. A separate Calderwood & Harkness memorandum on Order No. 2222 implications is in progress.
IV. Cost-of-Service and Rate Design
This draft retains the originally filed rate base of $612.40 million and total cost of service of $97.36 million. These figures are placeholders pending completion of Braswell Energy Consulting Group's updated cost-of-service model. As noted above, the anticipated revisions include:
• Reduction in return on equity from 14.00% to approximately 12.50% (based on updated DCF proxy group analysis);
• Shift from 100% load factor billing determinants (438,000,000 Dth/yr) to 75% load factor billing determinants (328,500,000 Dth/yr);
• Resulting revised total cost of service of approximately $103.15 million (reflecting reduction in return component partially offset by other adjustments); and
• Resulting revised maximum recourse rate of approximately $0.3140/Dth (comprising approximately $0.3102 reservation charge and $0.0038 usage charge).
We have coordinated with Dr. Natasha Orlov (Director of Rates & Regulatory) and Angela Moretti (VP Finance & Treasurer) on the cost-of-service inputs underlying these preliminary estimates. We anticipate receiving Braswell's final revised cost-of-service model in December 2023, which will be incorporated into the second draft.
V. Braswell Energy Consulting Group Recommendations
Dr. Raymond Braswell, lead consultant on Engagement No. BEC-2023-0041, has provided preliminary recommendations on several of the deficiency items. We have incorporated these recommendations to the extent feasible in this first draft, particularly with respect to Items 2 (FL&U tracker design), 3 (IT rate derivation methodology), and 7 (EBB posting requirements). Dr. Braswell's recommendations regarding Items 1 (ROE), 4 (load factor), and 13 (GHG cost recovery) will be reflected in the second draft upon completion of his analyses.
VI. Next Steps
We anticipate delivering the second draft (v2.0) in January 2024, which will incorporate:
• Braswell's revised cost-of-service model and updated rate figures;
• Revised ROE and load factor assumptions;
• Finalized creditworthiness provisions;
• Substantive segmentation and flexible receipt/delivery provisions;
• Penalty revenue crediting methodology;
• GHG emission cost recovery provisions (if Calderwood & Harkness memorandum is completed);
• Order No. 2222 provisions (if Calderwood & Harkness memorandum is completed); and
• Interconnection agreement (if ATPC negotiations are resolved).
Please do not hesitate to contact me with any questions or comments on this draft. I recommend that we schedule an internal working group call for the week of August 28 to discuss the draft in detail.
Brett Callahan Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Tel: (202) 555-7400
Email: bcallahan@calderwoodharkness.com
Enclosure: First Draft (v1.0) — FERC Gas Tariff, Original Volume No. 1 — Revised
PRELIMINARY STATEMENT
Section 1: Name and Description of Pipeline
1.1 The entity filing this tariff is Ridgeline Midstream Services LLC, a limited liability company duly organized and existing under the laws of the State of Delaware (the "Transporter" or "Ridgeline"). Ridgeline's sole member is Dunmore Energy Holdings Ltd. ("DEH"), an exempted limited company organized under the laws of the Cayman Islands, Cayman Registry No. CR-381204. Ridgeline's Employer Identification Number is 87-4231956. Ridgeline's FERC Code is 960442.
1.2 Ridgeline's principal office is located at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301. Ridgeline's registered agent in the State of Delaware is Capitol Filings Inc., 1209 Orange Street, Wilmington, Delaware 19801.
1.3 Ridgeline owns and operates the Ridgeline Pipeline System (the "System"), a 187-mile, 24-inch-diameter high-pressure natural gas pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia, to the Waynesburg Compressor Station in Greene County, Pennsylvania. The System is designed, constructed, and operated for the transportation of natural gas in interstate commerce.
1.4 The System includes the following principal receipt and delivery points:
(a) Primary Receipt Point: Wetzel County Interconnect, located in Wetzel County, West Virginia, at approximate coordinates 39.6120° N, 80.7540° W. The Wetzel County Interconnect is the point of physical interconnection between the System and the system of Appalachian Trunk Pipeline Company, LLC ("ATPC"), at ATPC Milepost 412.6, corresponding to Ridgeline Milepost 0.0.
(b) Primary Delivery Point: Waynesburg Compressor Station, located in Greene County, Pennsylvania, at approximate coordinates 39.8965° N, 80.1810° W, corresponding to Ridgeline Milepost 187.0.
1.5 The System includes three (3) compressor stations, as follows:
(a) Wetzel Station, located at approximately Ridgeline Milepost 0.5, Wetzel County, West Virginia;
(b) Mannington Station, located at approximately Ridgeline Milepost 78.2, Marion County, West Virginia; and
(c) Waynesburg Station, located at approximately Ridgeline Milepost 186.5, Greene County, Pennsylvania.
The aggregate installed compression at the three compressor stations is 45,000 horsepower ("HP"). The compressor stations are equipped with natural gas-fired reciprocating compressor units and are integrated with the System's supervisory control and data acquisition ("SCADA") system for real-time monitoring and operational control.
1.6 The System has a certificated design capacity of 1.2 billion cubic feet per day ("Bcf/d"), equivalent to 1,200,000 dekatherms per day ("Dth/d") at an assumed heating value of 1,000 British thermal units per cubic foot ("BTU/cf"). The design capacity is based on maximum allowable operating pressure ("MAOP") of 1,480 pounds per square inch gauge ("psig") and operation of all three compressor stations.
1.7 The System was placed in service on October 1, 2021, pursuant to certificates of public convenience and necessity issued by the Federal Energy Regulatory Commission ("FERC" or the "Commission"). As of the date of this tariff, the System is transporting approximately 680 million cubic feet per day ("MMcf/d"), representing a utilization rate of approximately 56.67% of design capacity.
1.8 The Wetzel County Interconnect is a bidirectional interconnection facility with a design capacity of 800 MMcf/d, expandable to 1.2 Bcf/d. The metering facilities at the Wetzel County Interconnect consist of three (3) runs of 12-inch ultrasonic flow meters, gas chromatographs, and associated SCADA instrumentation, as more fully described in Section 4 (Measurement) of the General Terms and Conditions of this tariff.
Section 2: FERC Regulatory Authority
2.1 The Transporter is a natural gas company within the meaning of Section 1(b) of the Natural Gas Act, 15 U.S.C. § 717a(6) ("NGA"), and is subject to the jurisdiction of the Commission with respect to the transportation of natural gas in interstate commerce and the sale of natural gas for resale in interstate commerce.
2.2 This tariff is filed pursuant to the NGA and the Commission's regulations thereunder, including without limitation:
(a) Section 4 of the NGA, 15 U.S.C. § 717c, which requires natural gas companies to file tariffs setting forth all rates, charges, classifications, and terms and conditions of service, and which provides for the filing of rate changes;
(b) Section 5 of the NGA, 15 U.S.C. § 717d, which authorizes the Commission to investigate and, upon finding that existing rates are unjust, unreasonable, unduly discriminatory, or preferential, to determine and fix just and reasonable rates;
(c) Section 7 of the NGA, 15 U.S.C. § 717f, which requires natural gas companies to obtain certificates of public convenience and necessity prior to constructing or extending facilities or commencing service; and
(d) The Commission's regulations at 18 C.F.R. Parts 154 (Rate Schedules and Tariffs), 157 (Applications for Certificates of Public Convenience and Necessity and for Orders Permitting and Approving Abandonment), and 284 (Certain Sales and Transportation of Natural Gas Under the Natural Gas Policy Act of 1978 and Related Authorities), including Part 284, Subpart G (Blanket Certificates Authorizing Certain Transportation by Interstate Pipelines on Behalf of Others and Services by Local Distribution Companies).
2.3 This tariff is designated as FERC Gas Tariff, Original Volume No. 1 for Ridgeline Midstream Services LLC, and has been filed in connection with Docket No. RP22-847-000 (the Rate Case proceeding) and Docket No. RP22-847-001 (the Interconnection proceeding).
2.4 The Transporter holds blanket transportation certificates under Part 284, Subpart G authorizing the provision of open-access transportation service on a firm and interruptible basis.
Section 3: Nature of Service
3.1 The Transporter offers open-access interstate natural gas transportation service on a non-discriminatory basis pursuant to this tariff. Transportation service is available under the following rate schedules:
(a) Rate Schedule FT-1 — Firm Transportation Service. Firm transportation service provides shippers with reserved capacity on the System up to their contracted Maximum Daily Quantity ("MDQ"). Firm shippers are entitled to schedule and transport natural gas up to their MDQ on a guaranteed basis, subject to force majeure and other conditions specified in this tariff.
(b) Rate Schedule IT-1 — Interruptible Transportation Service. Interruptible transportation service provides shippers with transportation service on an as-available basis without reserved capacity. Interruptible service is subject to availability of capacity after all firm transportation commitments have been satisfied and is subject to curtailment or interruption at any time to accommodate firm service. Rate Schedule IT-1 is a new rate schedule included in this revised tariff in response to Deficiency Item 3 of the FERC OEMR Deficiency Letter dated January 19, 2023.
3.2 The System is designed and operated to provide bidirectional transportation service at the Wetzel County Interconnect, with a design capacity of 800 MMcf/d at the interconnect, expandable to 1.2 Bcf/d. The Wetzel County Interconnect connects with the system of Appalachian Trunk Pipeline Company, LLC (FERC Code: 840117) at ATPC Milepost 412.6.
3.3 All transportation service under this tariff is subject to the General Terms and Conditions set forth herein and to the terms of the applicable service agreement executed between the Transporter and the shipper.
Section 4: Effective Date
4.1 The effective date of this tariff, and of all rate schedules, General Terms and Conditions, and appendices contained herein, shall be as determined and approved by the Commission. The original proposed effective date for this tariff has passed; accordingly, a revised effective date will be specified in the transmittal letter accompanying the filing of this tariff with the Commission.
4.2 Pending the Commission's action on this tariff, the rates, terms, and conditions of service specified herein shall be subject to refund from the effective date, to the extent required by applicable law and Commission order.
RATE SCHEDULES
RATE SCHEDULE FT-1
FIRM TRANSPORTATION SERVICE
Section 1: Availability
1.1 Firm Transportation Service ("FT-1 Service") is available under this Rate Schedule FT-1 to any shipper (the "Shipper") that meets the creditworthiness requirements set forth in Section 11 of the General Terms and Conditions and that has executed a Service Agreement for FT-1 Service with Ridgeline Midstream Services LLC (the "Transporter").
1.2 FT-1 Service provides the Shipper with reserved transportation capacity on the Transporter's System on a firm, contractual basis. The Shipper shall be entitled to schedule and transport natural gas up to the Maximum Daily Quantity ("MDQ") specified in the Shipper's Service Agreement, subject to the terms and conditions of this tariff.
1.3 The primary receipt point for FT-1 Service is the Wetzel County Interconnect, located in Wetzel County, West Virginia. The primary delivery point for FT-1 Service is the Waynesburg Compressor Station, located in Greene County, Pennsylvania. Shippers may request secondary receipt and delivery points, subject to the Transporter's operational capabilities and the terms of Section 14 (Segmentation and Flexible Receipt/Delivery Point Provisions) of the General Terms and Conditions.
1.4 FT-1 Service is available up to the aggregate design capacity of the System (1,200,000 Dth/d), subject to currently subscribed capacity. Available firm capacity shall be posted on the Transporter's electronic bulletin board ("EBB") as described in Section 28 of the General Terms and Conditions.
Section 2: Applicability and Character of Service
2.1 FT-1 Service is open-access transportation service provided under Part 284, Subpart G of the Commission's regulations, 18 C.F.R. § 284.221 et seq., pursuant to the Transporter's blanket certificates for open-access transportation.
2.2 FT-1 Service entitles the Shipper to reserved capacity on the System up to the MDQ stated in the Shipper's executed Service Agreement. The Shipper's entitlement to reserved capacity is subject to the Shipper's compliance with the terms and conditions of this tariff, including without limitation the Shipper's payment obligations, nomination and scheduling requirements, balancing obligations, and quality specifications.
2.3 FT-1 Service shall be provided in accordance with and subject to all provisions of the General Terms and Conditions of this tariff, as such General Terms and Conditions may be amended, supplemented, or revised from time to time in accordance with the NGA and the Commission's regulations.
2.4 The Transporter shall provide FT-1 Service on a non-discriminatory basis. All Shippers receiving FT-1 Service shall be subject to the same rates, charges, terms, and conditions as specified in this tariff, except as to rates negotiated pursuant to Section 3.5 of this Rate Schedule FT-1 and except to the extent that differences in terms are justified by differences in the nature or circumstances of the service provided.
Section 3: Rate
3.1 The maximum recourse rates for FT-1 Service, as originally filed and pending revision in a subsequent draft of this tariff, are as follows:
3.2 The rates set forth in Section 3.1 are derived from the following cost-of-service and billing determinant inputs:
(a) Rate Base: $612.40 million (as filed);
(b) Total Cost of Service: $97.36 million (as filed, pending update);
(c) Billing Determinants: 438,000,000 Dth/yr, calculated as the product of the System's design capacity of 1,200,000 Dth/d multiplied by 365 days per year, at a 100% load factor;
(d) Capital Structure: 55% equity / 45% debt;
(e) Return on Equity: 14.00% (as filed, pending revision); and
(f) Weighted Average Cost of Capital: 10.0625%.
A summary of the cost-of-service calculation is set forth in Appendix C.
3.3 The minimum rate for FT-1 Service shall be $0.00/Dth, representing the floor rate for negotiated rate transactions.
3.4 The Shipper shall pay the applicable reservation charge and usage charge as set forth in the Shipper's Service Agreement. Unless the Service Agreement provides for a negotiated rate, the Shipper shall pay the maximum recourse rates set forth in Section 3.1, subject to any applicable surcharges or tracker adjustments (including, without limitation, the FL&U retainage percentage described in Section 5 of this Rate Schedule).
3.5 Negotiated rates are available for FT-1 Service. The Transporter and a Shipper may negotiate a rate for FT-1 Service at any rate between the minimum rate ($0.00/Dth) and the maximum recourse rate set forth in Section 3.1, inclusive. Negotiated rate transactions shall comply with the Commission's policies governing negotiated rate arrangements, including without limitation the requirement that the recourse rate remain available as an alternative to any negotiated rate.
Drafting Note: The rate figures set forth in this Section 3 are the rates as originally filed and are subject to revision in the second draft of this tariff upon completion of Braswell Energy Consulting Group LLC's updated cost-of-service model. Anticipated revisions include a reduction in the return on equity from 14.00% to approximately 12.50% (based on an updated discounted cash flow proxy group analysis) and a shift from 100% load factor billing determinants (438,000,000 Dth/yr) to 75% load factor billing determinants (328,500,000 Dth/yr). These changes are expected to result in a revised total cost of service of approximately $103.15 million and a revised maximum recourse rate of approximately $0.3140/Dth (approximately $0.3102 reservation charge and $0.0038 usage charge).
Section 4: Reservation Charge Obligation
4.1 The Shipper shall be obligated to pay the full reservation charge applicable to the Shipper's contracted MDQ, regardless of whether the Shipper actually schedules or transports any gas on the System during the applicable billing period. The reservation charge is a demand charge reflecting the Shipper's reservation of capacity on the System and is payable in full each month during the term of the Service Agreement.
4.2 The reservation charge shall be calculated monthly as follows:
Monthly Reservation Charge = MDQ (Dth/d) × Reservation Rate ($/Dth/d) × Number of Days in Billing Month
4.3 No adjustment to the reservation charge shall be made on account of the Shipper's failure to nominate or transport gas, the Shipper's inability to obtain gas supplies, market conditions affecting the value of transportation, or other circumstances within the Shipper's control.
4.4 In the event of a force majeure event (as defined in Section 9 of the General Terms and Conditions) that prevents the Transporter from providing service for a period exceeding a number of consecutive days to be specified in the final tariff, the Shipper's reservation charge obligation shall be adjusted as provided in Section 9 of the General Terms and Conditions.
Drafting Note: The threshold number of consecutive days for reservation charge relief during force majeure events is a placeholder to be determined in a subsequent draft. Calderwood & Harkness recommends evaluating Commission precedent on force majeure reservation charge relief thresholds, which typically range from 10 to 30 consecutive days.
Section 5: Fuel-Use and Lost-and-Unaccounted-For Gas (FL&U) Retainage
5.1 In addition to the rates and charges set forth in Section 3 of this Rate Schedule, the Transporter shall retain in-kind a percentage of the natural gas tendered by the Shipper at the receipt point to cover fuel consumed at the Transporter's compressor stations and system lost-and-unaccounted-for gas ("FL&U"). This Section 5 is a new provision included in this revised tariff to address Deficiency Item 2 of the FERC OEMR Deficiency Letter dated January 19, 2023.
5.2 The initial FL&U retainage percentage applicable to FT-1 Service shall be as specified in Section 27 of the General Terms and Conditions.
Drafting Note: The initial FL&U retainage percentage is a placeholder pending completion of Braswell Energy Consulting Group LLC's engineering analysis. The estimated range is 2.0–3.5%, based on the System's three-compressor-station configuration and 45,000 HP aggregate installed compression.
5.3 The FL&U retainage shall be assessed on all gas tendered at the receipt point and shall be retained in-kind by the Transporter. No cash equivalent option is available under this tariff for FL&U retainage. The quantity of gas delivered at the delivery point shall be the quantity of gas tendered at the receipt point less the FL&U retainage amount.
5.4 The FL&U retainage percentage shall be subject to the annual true-up mechanism and quarterly reporting requirements set forth in Section 27 of the General Terms and Conditions.
5.5 The FL&U retainage assessed under this Section 5 shall be separate from, and in addition to, any reservation charges and usage charges assessed under Section 3 of this Rate Schedule.
Section 6: Term of Service
6.1 The minimum contract term for FT-1 Service shall be one (1) year from the effective date of the Shipper's Service Agreement.
6.2 An existing firm Shipper shall have a right of first refusal ("ROFR") to continue FT-1 Service at the expiration of the Shipper's Service Agreement, subject to the conditions and procedures set forth in Section 13 (Right of First Refusal) of the General Terms and Conditions.
6.3 Unless terminated or extended by mutual agreement of the Transporter and the Shipper, the Service Agreement for FT-1 Service shall automatically renew at the expiration of the primary term for successive one-year periods, at the then-applicable maximum recourse rate or such other rate as the parties may negotiate, unless either party provides written notice of termination not less than one hundred eighty (180) days prior to the expiration of the then-current term.
6.4 Any termination of a Service Agreement for FT-1 Service shall be without prejudice to any rights, obligations, or liabilities accrued by either party prior to the effective date of such termination, including without limitation the Shipper's obligation to pay all accrued and unpaid charges and any amounts owed under the FL&U true-up mechanism.
Section 7: Scheduling and Nominations
7.1 Nominations for FT-1 Service shall be submitted in accordance with the nomination and scheduling procedures set forth in Section 5 of the General Terms and Conditions, which provisions have been revised to conform to NAESB WGQ Version 3.2 standards as required by Deficiency Item 6 of the FERC OEMR Deficiency Letter dated January 19, 2023.
7.2 The Shipper shall submit nominations for each Day using the nomination cycles established by the Transporter, including the timely nomination cycle, the evening nomination cycle, and intraday nomination cycles, as more fully described in Section 5 of the General Terms and Conditions.
7.3 Nominations shall be confirmed with the interconnecting pipeline (ATPC) in accordance with the confirmation procedures established by the Transporter and ATPC. The Shipper acknowledges that confirmed quantities may be less than nominated quantities due to capacity constraints, confirmation discrepancies, or other operational factors.
7.4 Scheduled quantities for FT-1 Service shall not exceed the Shipper's MDQ as specified in the Shipper's Service Agreement, unless the Transporter, in its sole discretion, authorizes overrun quantities, which shall be subject to the unauthorized overrun penalties set forth in Section 25 of the General Terms and Conditions.
Section 8: Capacity Release
8.1 A Shipper holding FT-1 Service capacity ("Releasing Shipper") may release all or a portion of its contracted capacity to a replacement shipper ("Replacement Shipper") in accordance with the capacity release procedures set forth in Section 29 of the General Terms and Conditions. This Section 8 is a new provision included in this revised tariff to address Deficiency Item 5 of the FERC OEMR Deficiency Letter dated January 19, 2023.
8.2 Capacity releases shall be effectuated through the Transporter's EBB, in accordance with the posting, bidding, and award procedures set forth in Section 29 of the General Terms and Conditions.
8.3 Released capacity may be offered at any rate between the minimum rate ($0.00/Dth) and the maximum recourse rate set forth in Section 3.1 of this Rate Schedule. Capacity released at rates at or above the maximum recourse rate shall be exempt from the competitive bidding requirements, consistent with Commission policy. Capacity released at rates below the maximum recourse rate shall be subject to the competitive bidding procedures set forth in Section 29 of the General Terms and Conditions.
8.4 A Releasing Shipper may specify recall rights in the capacity release offer, as provided in Section 29.4 of the General Terms and Conditions. The exercise of recall rights shall be subject to the conditions and limitations set forth therein.
8.5 A Replacement Shipper receiving released capacity shall be required to satisfy the creditworthiness standards set forth in Section 11 of the General Terms and Conditions prior to commencing service under the released capacity.
8.6 Release of capacity under this Section 8 shall not relieve the Releasing Shipper of its obligations under its Service Agreement to the extent provided in Section 29.5 of the General Terms and Conditions.
RATE SCHEDULE IT-1
INTERRUPTIBLE TRANSPORTATION SERVICE
This entire Rate Schedule IT-1 is new, included in this revised tariff to address Deficiency Item 3 of the FERC OEMR Deficiency Letter dated January 19, 2023.
Section 1: Availability
1.1 Interruptible Transportation Service ("IT-1 Service") is available under this Rate Schedule IT-1 to any shipper (the "Shipper") that meets the creditworthiness requirements set forth in Section 11 of the General Terms and Conditions and that has executed a Service Agreement for IT-1 Service with Ridgeline Midstream Services LLC (the "Transporter").
1.2 IT-1 Service is provided on an interruptible, as-available basis. The Shipper receiving IT-1 Service does not reserve any capacity on the System. IT-1 Service is available only to the extent that System capacity is available after all firm transportation commitments under Rate Schedule FT-1 have been satisfied for the applicable Day.
1.3 IT-1 Service is available at the receipt and delivery points specified in the Shipper's Service Agreement, subject to the Transporter's operational capabilities and the availability of capacity at such receipt and delivery points.
1.4 IT-1 Service is subordinate to, and is subject to interruption in favor of, all FT-1 Service on the System. The Transporter does not guarantee the availability of capacity for IT-1 Service on any Day, and the Shipper acknowledges and accepts the risk that IT-1 Service may be curtailed or interrupted at any time, as more fully described in Section 5 of this Rate Schedule.
Section 2: Applicability and Character of Service
2.1 IT-1 Service is open-access interruptible transportation service provided under Part 284, Subpart G of the Commission's regulations, 18 C.F.R. § 284.221 et seq., pursuant to the Transporter's blanket certificates for open-access transportation.
2.2 IT-1 Service is interruptible in nature. The Shipper receiving IT-1 Service has no guaranteed right to capacity on the System and no right to reserved capacity. IT-1 Service is provided solely on the basis of capacity available after all firm service obligations have been met.
2.3 The scheduling priority of IT-1 Service is below that of all FT-1 Service. Among IT-1 Service Shippers, scheduling priority shall be determined on a pro rata basis based on confirmed quantities for the applicable Day, except as otherwise provided in Section 5 of this Rate Schedule.
2.4 IT-1 Service shall be provided in accordance with and subject to all applicable provisions of the General Terms and Conditions of this tariff, as such General Terms and Conditions may be amended, supplemented, or revised from time to time in accordance with the NGA and the Commission's regulations.
Section 3: Interruptible Transportation Rate
3.1 The maximum rate for IT-1 Service has been derived in accordance with the Commission's established methodology, as the 100% load factor equivalent of the maximum firm reservation rate under Rate Schedule FT-1, calculated on a per-Dth basis. Specifically:
IT Maximum Rate = FT-1 Maximum Reservation Rate + FT-1 Maximum Usage Rate
IT Maximum Rate = $0.2223/Dth + $0.0042/Dth = $0.2265/Dth
3.2 The rate derivation set forth in Section 3.1 above constitutes the IT rate derivation required by Deficiency Item 3 of the FERC OEMR Deficiency Letter dated January 19, 2023. The maximum IT rate is equal to the total maximum recourse rate for FT-1 Service on a per-Dth basis, consistent with Commission precedent requiring that IT rates be set at the 100% load factor equivalent of the firm rate.
3.3 The minimum rate for IT-1 Service shall be $0.00/Dth, representing the floor rate for negotiated rate transactions.
3.4 The IT-1 rate shall be assessed daily on actual volumes of natural gas transported under IT-1 Service. There is no reservation charge component for IT-1 Service. The Shipper's billing for IT-1 Service shall be based solely on the quantity of gas actually scheduled and transported on each Day, multiplied by the applicable per-Dth rate.
3.5 The Transporter and a Shipper may negotiate a rate for IT-1 Service at any rate between the minimum rate ($0.00/Dth) and the maximum rate set forth in Section 3.1, inclusive, in accordance with Commission policies governing negotiated rate arrangements.
Drafting Note: The IT-1 maximum rate is based on the currently filed FT-1 maximum recourse rate and is subject to revision in the second draft of this tariff upon completion of Braswell Energy Consulting Group LLC's updated cost-of-service model. The revised IT-1 maximum rate is expected to be approximately $0.3140/Dth.
Section 4: IT Revenue Crediting
4.1 Revenues received by the Transporter from IT-1 Service shall be credited to firm Shippers under Rate Schedule FT-1 in accordance with the methodology set forth in Section 30 of the General Terms and Conditions.
4.2 The IT revenue crediting mechanism addresses the Commission's policy requiring that interruptible transportation revenues be shared with firm Shippers who bear the fixed costs of the System through reservation charges.
Drafting Note: The specific mechanism for IT revenue crediting is a placeholder to be specified in a subsequent draft, pending completion of Braswell Energy Consulting Group LLC's analysis. The IT revenue crediting methodology also relates to Deficiency Item 10 (penalty revenue crediting), and the two crediting mechanisms will be coordinated in the second draft.
Section 5: Scheduling Priority
5.1 IT-1 Service nominations shall be scheduled only after all firm nominations under Rate Schedule FT-1 have been confirmed and scheduled for the applicable Day. The Transporter shall schedule IT-1 Service nominations only to the extent that System capacity remains available after the satisfaction of all firm service commitments.
5.2 IT-1 Service is subject to curtailment or interruption at any time and without prior notice when System capacity is required to accommodate firm service under Rate Schedule FT-1, or when the Transporter determines, in its reasonable operational judgment, that curtailment or interruption of IT-1 Service is necessary to maintain the operational integrity of the System, to comply with operational flow orders, or to address any emergency condition.
5.3 The priority of scheduling among multiple IT-1 Service Shippers on any given Day when available capacity is insufficient to accommodate all IT-1 nominations shall be determined on a pro rata basis, based on each IT-1 Shipper's confirmed nomination quantities relative to the total confirmed IT-1 nomination quantities for such Day.
5.4 In the event of an operational flow order ("OFO"), IT-1 Service shall be curtailed prior to any curtailment of FT-1 Service. Firm service under Rate Schedule FT-1 shall take absolute priority over IT-1 Service at all times.
5.5 The Transporter shall use commercially reasonable efforts to provide notice to IT-1 Shippers of curtailment or interruption of IT-1 Service, but the Transporter shall not be liable to any IT-1 Shipper for any failure to provide advance notice of curtailment or interruption, or for any damages, losses, or costs incurred by an IT-1 Shipper as a result of curtailment or interruption of IT-1 Service.
Section 6: FL&U Retainage for IT Service
6.1 IT-1 Service shall be subject to the same FL&U retainage percentage applicable to FT-1 Service, as established in Section 27 of the General Terms and Conditions and as set forth in Section 5 of Rate Schedule FT-1.
6.2 The FL&U retainage for IT-1 Service shall be applied in-kind on the actual volumes of natural gas tendered by the Shipper at the receipt point for transportation under IT-1 Service. The quantity of gas delivered at the delivery point shall be the quantity of gas tendered at the receipt point less the applicable FL&U retainage amount.
6.3 The FL&U retainage assessed under this Section 6 shall be separate from, and in addition to, the usage charge assessed under Section 3 of this Rate Schedule.
Section 7: Term of Service
7.1 The term of an IT-1 Service Agreement shall be as specified in the Shipper's Service Agreement, with a minimum term of one (1) day.
7.2 Unless terminated by either party, an IT-1 Service Agreement with a specified term shall remain in effect for the duration of such term. IT-1 Service Agreements may also be entered into on a month-to-month basis, continuing in effect until terminated by either party upon thirty (30) days' prior written notice.
7.3 Termination of an IT-1 Service Agreement shall be without prejudice to any rights, obligations, or liabilities accrued by either party prior to the effective date of such termination, including without limitation the Shipper's obligation to pay all accrued and unpaid charges.