FEDERAL ENERGY REGULATORY COMMISSION

WASHINGTON, D.C. 20426

April 27, 2006

In Reply Refer To:

Gulf South Pipeline Company, LP

Docket Nos. RP96-320-064, RP96-320-065, RP96-320-066, RP96-320-067 and
RP96-320-068

Gulf South Pipeline Company, LP

20 East Greenway Plaza, Suite 900

Houston, TX 77046-2002

Attention: Michael E. McMahon

Reference: Non-Conforming Negotiated Rate Agreements

Dear Mr. McMahon:

1.  In five separate, but related, filings on March 31, 2006, Gulf South
    Pipeline Company, LP (Gulf South) filed negotiated rate letter
    agreements to report negotiated rate transactions with Atmos Energy
    Corporation (Atmos) and Centerpoint Energy Resources Corp.
    (Centerpoint) for no notice service under Rate Schedule NNS. Gulf
    South states that the filed letter agreements disclose the legal
    names of the customers, the negotiated rates, the terms of the
    agreements, the receipt and delivery points applicable to the
    service, the volume of gas to be transported, and the applicable
    rate schedules for service. Gulf South also states that the letter
    agreements do not contain a material deviation from its tariff that
    goes beyond filling in the blank spaces or that affects the
    substantive rights of the parties. Gulf South requests waiver of the
    Commission's 30-day notice requirement to permit the agreements to
    become effective April 1, 2006, consistent with the effective date
    agreed to by the parties. The Commission grants Gulf South's request
    for waiver of the 30-day notice requirement, and accepts the
    agreements effective April 1, 2006, subject to conditions.

2.  Notices of Gulf South's filings were issued on April 6, 2006.
    Interventions and protests were due as provided in section 154.210
    of the Commission's regulations, 18 C.F.R. § 385.210 (2005).
    Pursuant to Rule 214, 18 C.F.R. § 385.214 (2005), all timely filed
    motions to intervene and any motions to intervene out-of-time filed
    before the issuance date of this order are granted. Granting late
    intervention at this stage of the proceeding will not disrupt this
    proceeding or place additional burdens on existing parties. No
    protests or adverse comments were filed.

3.  Gulf South's tariff includes not only a form of service agreement
    for no-notice service but also a separate Form of Letter Agreement
    for use in discounted rate agreements for no-notice service.[^1] The
    negotiated rate letter agreements filed in this proceeding are based
    on that form of letter agreement.

4.  The negotiated rates in each letter agreement include a revenue
    sharing mechanism. In essence, on April 1 of each year, Gulf South
    will reduce the negotiated rate for a one-year period, if Gulf
    South's return during the previous calendar year was greater than or
    equal to "12 percent FERC net income after tax," based on a formula
    set forth in the agreement. The adjustment, if any, is recalculated
    each year. Gulf South states that, as consideration for receiving
    the revenue-sharing mechanism, Atmos and Centerpoint have agreed to
    the following limited waiver of their rights:

> \(iv\) In consideration of the revenue sharing mechanism described
> above, during the term of this Agreement, \[Atmos or Centerpoint\]
> will not file, initiate, or support any action filed pursuant to
> section 5 of the Natural Gas Act against Gulf South that would have
> the effect of reducing Gulf South's NNS maximum Tariff rate or fuel
> charge established in this Agreement.[^2]

5.  Although Gulf South asserts that the instant letter agreements do
    not contain material deviations and it did not redline the provision
    concerning waiver of section 5 rights, the Commission finds that
    this provision does constitute a material deviation from the Form of
    Letter Agreement in Gulf South\'s tariff. The Commission has defined
    a material deviation as "any provision of a service agreement which
    goes beyond the filling in of the spaces in the Form of Service
    Agreement with the appropriate information provided for in the
    tariff and that affects the substantive rights of the parties."[^3]
    Neither Gulf South's Form of Service Agreement nor its tariff
    contains any similar provision limiting the section 5 rights of a
    shipper. While the section 5 waiver provision is related to the
    negotiated rate, it does not define the rate, and thus does not
    qualify for inclusion in a blank for filling in the rate. This
    provision accordingly goes beyond filling in blanks in

    the form of service agreement with appropriate information provided
    for in the tariff, and clearly affects the substantive rights of the
    parties. The Commission concludes that the instant provision is a
    material deviation.

6.  In *ANR Pipeline Company*, the Commission determined that material
    deviations fall into two general categories\--those that must be
    prohibited because they present a significant potential for
    discrimination among shippers and those that can be permitted
    without substantial risk of discrimination.[^4] The Commission
    determines that the negotiated limit in the instant case on the
    parties' section 5 rights is permissible. Similar to the provision
    accepted in *Gulf South Pipeline Co*., 98 FERC ¶ 61,318 at 62,345
    (2002), the instant provision is "simply a means of carrying out
    \[the customers'\] agreement to the negotiated rate" and is
    "unrelated to the quality of service that \[the customers\] or Gulf
    South's other customers are receiving." Here, the agreements include
    a provision for the negotiated rate to be adjusted if Gulf South
    earns a return above a certain level as calculated pursuant to a
    formula. The adjustment determined under that formula could be
    affected by a section 5 action brought by the shipper. Moreover, the
    provision only restricts the right of a shipper to seek a reduction
    in the maximum rate for the no-notice service it is receiving, and
    does not affect their section 5 rights with respect to other
    services.

7.  Section 154.112(b) requires that "non-conforming agreements must be
    referenced in FERC Volume 1" of the pipeline's tariff. Since the
    Commission has found that the instant agreements contain material
    deviations, pursuant to section 154.112(b) of the Commission\'s
    regulations, Gulf South must reference these agreements in FERC
    Volume 1 of its tariff. However, Gulf South has not included in this
    filing a tariff sheet listing the instant agreements as
    non-conforming. In fact, Gulf South's tariff does not contain any
    such a tariff sheet in its FERC Volume 1. Accordingly, Gulf South
    must, within 30 days, file a tariff sheet listing the instant
    agreements as non-conforming. In addition, it must include
    previously filed non-conforming agreements on the tariff sheet, in
    accordance with section 154.112(b) of the Commissions regulations.

8.  Finally, the Commission notes that the negotiated rate agreements
    contain seasonally varying contract demands (MDQs) which Gulf
    South's tariff permits. We also note that in some of these
    agreements, those seasonal MDQs change from year to year. Therefore,
    the Commission directs Gulf South to explain, in its compliance
    filing, whether it offers such annually varying MDQs to all its
    customers and, if not, explain why the inclusion of such annually
    varying MDQ provisions in these agreements

    is not an unduly discriminatory material deviation. Accordingly, the
    Commission accepts the negotiated rate agreements included in these
    filings effective April 1, 2006, subject to the above conditions.

By direction of the Commission.

Magalie R. Salas,

Secretary.

[^1]: *See* *Second Revised Sheet No. 4750 and First Revised Sheet No.
    4751*, accepted by unpublished letter order issued on May 4, 2004 in
    Docket No. RP04-256-000.

[^2]: The Commission approved a similar provision in Gulf South's Docket
    No. RP96-320-051, 98 FERC ¶ 61,318 (2002), but no further filing
    requirement was specified.

[^3]: *Columbia Gas Transmission Corp*., 97 FERC ¶ 61,221 at 62,002
    (2001).

[^4]: *ANR Pipeline Co.*, 97 FERC  61,222 (2001); 97 FERC  61,223
    (2001); 97 FERC  61,224 (2001).