A federal Administrative Law Judge has upheld the prudence of Transcontinental Gas Pipe Line Corp.'s plan to bill its customers for half of the cost of settling unprofitable contracts made with wellhead suppliers.
Although the Federal Energy Regulatory Commission's (FERC) Order No. 500 provides pipelines with alternative methods of settling these contracts, the judge found that Transcontinental was entitled to bill its customers for 50 percent of the settlement costs, including interest, through a demand charge assessed over five years.The decision of the ALJ is subject to review by the FERC.
The judge ruled that $377.5 million paid by Transcontinental to producers through April 1, 1987 was prudent. The payments were made to settle long-term contracts that Transcontinental signed with producers that required the pipeline to buy minimum amounts of gas at fixed prices.