124 FERC ¶ 61,122

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Joseph T. Kelliher, Chairman;

Suedeen G. Kelly, Marc Spitzer,

Philip D. Moeller, and Jon Wellinghoff.

Columbia Gas Transmission Corporation Docket Nos. RP07-340-001

RP07-340-002

RP07-340-003

Order On REHEARING AND COMPLIANCE FILING

(Issued July 31, 2008)

1.  On June 11, 2007, the Commission issued an order accepting and
    suspending revised tariff sheets filed by Columbia Gas Transmission
    Corporation (Columbia Gas) to be effective on the earlier of January
    1, 2008, or a date specified in a further order of the Commission,
    subject to refund and conditions and further review.[^1] Columbia
    Gas's revised tariff sheets were filed to implement daily delivery
    point scheduling penalties to coincide with the anticipated launch
    date of its new Electronic Bulletin Board (EBB) and gas management
    system, Navigates. Honeywell International, Inc. (Honeywell), and
    Piedmont Natural Gas Company, Inc. (Piedmont) filed requests for
    rehearing of the June 11 Order.[^2] For the reasons discussed below,
    the Commission denies the requests for rehearing by Honeywell and
    Piedmont.

2.  On June 26, 2007, Columbia Gas filed a revised tariff sheet[^3] and
    information and explanations to comply with the June 11 Order (June
    26 compliance filing). On July 3, 2007, Columbia Gas filed a revised
    substitute tariff sheet[^4] to correct a typographical error. The
    Commission accepts the revised tariff sheets, as corrected on July
    3, 2007, to be effective on the later of August 1, 2008,[^5] or the
    commencement of Navigates on the Columbia Gas system,[^6] and the
    June 26 filing, as in compliance with the June 11 Order, subject to
    conditions, as discussed below.

**I. [Background]{.underline}**

3.  On March 6, 2007, Columbia Gas filed to revise section 19 of its
    General Terms and Conditions (GT&C) to implement new daily delivery
    point scheduling penalties. The scheduling penalties would apply to
    the difference between a shipper's scheduled deliveries at a
    delivery point and gas quantities the shipper actually takes at the
    point each day. During non-critical periods, the penalty would be
    imposed on each Dth taken that varies by 5 percent or more either
    above or below the scheduled quantity, and would be equal to
    Columbia Gas's then effective ITS rate for Interruptible
    Transportation Service (IT). If Columbia Gas declares a Critical
    Day,[^7] the penalty was to be imposed on each Dth taken that varies
    by 2 percent or more above or below the scheduled quantity, and
    would be equal to three times the midpoint of the range of prices
    reported for "Columbia Gas, Appalachia" as published in *Platts Gas
    Daily* price survey. Columbia Gas would credit any revenues from
    these penalties to its non-offending shippers pursuant to its
    existing penalty revenue crediting mechanism. Columbia Gas
    originally proposed the filing to be effective June 1, 2007, but
    subsequently filed on several occasions to move the effective date
    later in time to reflect the delay in implementation of its new
    Navigates computer system. The filing was protested.

4.  In the June 11 Order, the Commission accepted and suspended the
    revised tariff sheets to be effective on the earlier of January 1,
    2008, or a date specified in a further order of the Commission,
    subject to refund and conditions and further review. The Commission
    found that the proposed scheduling penalties were generally
    consistent with Commission policy. However, the Commission directed
    Columbia Gas to file revised tariff sheets and provide information
    and explanations, including why its proposed Critical Day scheduling
    tolerance level of 2.0 percent should not be increased to 3.0
    percent or some higher level, as described in detail below.

    **II. [Discussion]{.underline}**

    **A. [Rehearing]{.underline}**

    **1. [Honeywell's Request for Rehearing]{.underline}**

    **a. [Consistency with Order No. 637 Penalty Policy]{.underline}**

5.  Honeywell contends that the Commission's acceptance of Columbia
    Gas's scheduling penalty proposal was contrary to *Order No.
    637*'s[^8] policies concerning penalties. Honeywell points out that
    *Order No.* *637* added section 284.12(b)(2)(iii)[^9] to the
    Commission's regulations, requiring that a pipeline must provide, to
    the extent operationally practicable, park and loan and other
    services that facilitate the ability of its shippers to manage
    transportation imbalances. Honeywell asserts that, while Columbia
    Gas proposed to exempt customers with no-notice service from the
    proposed scheduling penalties, the Commission failed to properly
    consider the situation of Honeywell and others who are without
    no-notice service and were not given an opportunity to purchase
    no-notice, firm storage, or firm imbalance service prior to the
    implementation of the daily scheduling penalties. Honeywell asserts
    that Columbia Gas's proposal is grossly inequitable to those without
    no-notice and firm storage service who are located in constrained
    areas of the Columbia Gas system. Honeywell further asserts that
    Columbia Gas appears to have no intention of pursuing other new
    innovative balancing services for shippers without no-notice
    service.

6.  Honeywell contends that the Commission has approved new penalties
    when pipelines provided new balancing services giving shippers the
    opportunity to manage imbalances, citing *Panhandle* *Eastern Pipe
    Line Co.*, 97 FERC ¶ 61,046, at 61,267-271 (2001) (*Panhandle*) and
    *El Paso Natural Gas Co*, 114 FERC ¶ 61,305 (2006) (*El Paso*).
    Honeywell further contends that the Commission should not have
    approved the scheduling penalties without Columbia Gas demonstrating
    that it had available services that shippers could purchase to
    manage the newly proposed scheduling penalties as in *Panhandle* and
    *El Paso*.

7.  Honeywell contends that the approved penalties will not deter
    misconduct but will merely provide penalty revenues to those who
    already have no-notice service, including some of Columbia Gas's
    affiliates. Honeywell states that it operates a complex
    manufacturing operation at its Hopewell plant. Honeywell asserts
    that production can be disrupted due to equipment and process
    problems throughout the day, which in turn dictate the amount of gas
    the plant will use. Honeywell further asserts that the current
    nomination times also do not allow it to adjust nominations for at
    least 16 hours of the gas day, i.e., after the Intraday 2 Nomination
    Cycle deadline (5 p.m. Central Clock Time) until 9:00 a.m. the
    following morning, and that it has variable gas load due to
    operating parameters that are impossible to predict. Thus, Honeywell
    contends that it is difficult to stay in scheduling balance,
    particularly on Critical Days. Honeywell further contends that it
    encounters nomination challenges because it does not receive
    real-time information about gas deliveries from Columbia Gas.
    Further, it asserts that use of current or future EBB data is
    insufficient for purposes of accurate scheduling. Honeywell asserts
    that, contrary to what Columbia Gas stated as noted by the
    Commission in the June 11 Order (at n.27), it is not possible that
    the availability of electronic metering will permit shippers to
    monitor their scheduling variances and adjust their nominations
    during later nomination cycles. Rather, Honeywell asserts that, as a
    24 hour, 7 days a week manufacturing facility, it cannot make such
    adjustment due to the limitations of the nominations cycles which
    provide no opportunities to make adjustments between 5:00 p.m. and
    9:00 a.m. the next morning.

8.  Honeywell asserts that the Commission is well aware that at least
    the eastern part of Columbia Gas's system is severely constrained
    during peak periods and that there is no new firm storage and
    premium no-notice service currently available in this area for those
    who need it. It states that for many years it has had SIT (Storage
    In Transit) service on Columbia Gas, but Columbia Gas and now the
    Commission has made it clear that such service is not designed for
    managing scheduling imbalances.[^10] Honeywell asserts that the
    Commission is allowing Columbia Gas to penalize Honeywell and others
    and subsidize those who have the privilege of having such services
    under contract. Honeywell further

    asserts that the Commission should have required Columbia Gas to
    make available no-notice, firm storage, firm balancing, or other
    balancing services to Honeywell and others before allowing the
    scheduling penalty regime to go forward.

    **[Discussion]{.underline}**

9.  The Commission finds that Columbia Gas's scheduling penalty proposal
    is generally consistent with the policies concerning penalties
    adopted in *Order No. 637*. In *Order No. 637*, the Commission
    modified its policy concerning penalties in several ways. Two of
    these modifications are relevant to addressing the issues raised by
    Honeywell's request for rehearing. First, *Order No. 637* found that
    "a general shift in Commission policy is warranted so that penalties
    are imposed only when needed to protect system integrity."[^11] By
    this policy, which is codified in section 284.12(b)(2)(v) of the
    Commission's regulations,[^12] the Commission sought to "increase
    pipeline efficiency by calibrating penalties to threats to system
    integrity."[^13] The Commission stated that such a calibration of
    penalties could "result in either no penalties for non-critical days
    or higher tolerances and lower penalties for non-critical as opposed
    to critical days."[^14] Second, *Order No. 637* found that "shippers
    need to be given tools that will enable them to reduce penalties
    without jeopardizing pipeline integrity, and shipper and pipeline
    incentives need to be properly structured to avoid the need to
    impose penalties."[^15] Accordingly, the Commission required
    pipelines to offer "imbalance management services, like parking and
    loaning service . . . to make it easier for shippers to remain in
    balance in the first instance."[^16] This aspect of the Commission's
    penalty policy is codified in section 284.12(b)(2)(iii) of the
    Commission's regulations.[^17]

10. In the June 11 Order, we found that Columbia Gas's proposed
    scheduling penalties are properly calibrated to potential threats to
    the system, consistent with the first aspect of the Commission's
    penalty policy described above. If Columbia Gas declares a Critical
    Day based on a finding that it faces a "threat to its system
    integrity and/or \[its\] ability to meet its firm service
    obligations,"[^18] Columbia Gas may impose a substantial scheduling
    penalty equal to three times the midpoint of the range of prices
    reported for "Columbia Gas, Appalachia" as published in *Platts Gas
    Daily* price survey.[^19] In non-critical periods, Columbia Gas will
    only impose a nominal penalty, equal to its maximum rate for
    interruptible transportation service, consistent with the policy
    developed in individual pipeline *Order No. 637* compliance
    proceedings. As the Commission explained in *Natural Gas Pipeline
    Co. of America, 103 FERC ¶ 61,174 (2003) (Natural)*:

> During non-critical periods, a scheduling variance will not have
> operational effects on the pipeline. Establishing a scheduling penalty
> at the IT \[Interruptible Transportation\] rate for non-critical
> periods is intended to provide an incentive for shippers to schedule
> accurately, and to compensate the pipeline for its lost opportunity
> costs.\[[^20]\]

11. Honeywell attacks the Commission's acceptance of Columbia Gas's
    scheduling penalty proposal primarily on the ground that, regardless
    of whether the penalty levels are properly calibrated to threats to
    system integrity, Columbia Gas does not offer all its shippers
    services which would enable them to avoid the scheduling penalties.
    As Honeywell recognizes, Columbia Gas proposes to exempt shippers
    who take no-notice services from the scheduling penalties. These
    services include any of three firm transportation services (SST with
    Rate Schedule FSS, NTS, and GTS service). [^21] However, Honeywell
    asserts that these services are fully subscribed on the eastern part
    of Columbia Gas's system and, therefore, are not available to
    shippers on that part of the system such as Honeywell, who have
    contracted only for firm transportation service under Rate Schedule
    FTS (Firm Transportation Service).[^22] Honeywell contends that, in
    these circumstances, approval of Columbia Gas's scheduling penalty
    proposal violates section 284.12(b)(2)(iii), requiring pipelines
    with imbalance penalty provisions to offer imbalance management
    services.

12. Honeywell's reliance on section 284.12(b)(2)(iii) as requiring
    Columbia Gas to offer services enabling all shippers to avoid
    scheduling penalties is misplaced. By its terms, that section only
    governs the services a pipeline must offer in order to include
    "imbalance penalty provisions in its tariff." As the Commission
    pointed out in the June 11 Order, an imbalance is the difference
    between the volumes a shipper puts on the system at the receipt
    point and the volumes the shipper takes off the system at the
    delivery point. Imbalance management services enable shippers to
    avoid or correct such imbalances by, for example, treating the
    excess amounts taken from, or left on, the system as a loan or a
    park under a park and loan service, or by trading a negative
    imbalance with a shipper who has a positive imbalance. Here,
    however, Columbia Gas is not proposing to penalize imbalances, but
    scheduling variances. In contrast to imbalances, scheduling
    variances reflect the difference between the volume the shipper
    nominated and scheduled for delivery and the volume which it
    actually shipped on the system and took delivery of.[^23] Thus, a
    scheduling variance does not result from the shipper either taking
    more gas from the system than it put on, or vice versa. Therefore,
    scheduling variances do not result in any imbalance to be addressed
    by an imbalance management service. The Commission accordingly
    concludes that the requirements of *Order No. 637* and section
    284.12(b)(2)(iii) concerning imbalance management services are
    inapplicable to scheduling penalty proposals, such as Columbia Gas's
    proposal.

13. Consistent with this interpretation of section 284.12(b)(2)(iii),
    the Commission carefully reviewed in the individual pipeline *Order
    No. 637* compliance proceedings each pipeline's imbalance management
    services, as part of deciding whether to approve the pipeline's
    proposed imbalance penalties, including tiered mechanisms for
    cashing out imbalances. However, the Commission reviewed the
    pipeline's scheduling penalties separately from any consideration of
    the pipeline's imbalance management services, and the Commission
    routinely approved scheduling penalty proposals similar to those
    Columbia Gas has proposed here,[^24] without ever suggesting that
    the approval of such scheduling penalties was contingent on the
    pipeline offering services which allowed its shippers to avoid the
    scheduling penalties.[^25]

14. Nevertheless, as the Commission stated in the June 11 Order,
    Columbia Gas does offer several year-round premium no-notice
    services which enable shippers to avoid scheduling penalties. As
    required by *Order No. 636-C*, Columbia Gas offers these services to
    all shippers on a not unduly discriminatory basis, to the extent
    capacity is available.[^26] Rate Schedule SST requires a firm
    storage contract under Rate Schedule FSS. Under Rate Schedule NTS,
    Columbia Gas establishes a Gas Supply Quantity (GSQ) which must be
    replenished by the shipper. Columbia Gas's right to draw on those
    supplies to serve the no-notice shippers enables Columbia Gas to
    provide firm service to those shippers up to their firm
    entitlements, even on days when the shippers fail to schedule such
    service. As a result, Columbia Gas has proposed to exempt its three
    no-notice services from any scheduling penalties.

15. Honeywell contends that the June 11 Order was incorrect and
    misleading in stating that no-notice service is available to all
    shippers on the Columbia Gas system.[^27] Honeywell points out that
    Columbia Gas's year-round no-notice service and its firm storage
    service are fully subscribed in certain areas of its system,
    including in Honeywell's location. In these circumstances, Honeywell
    asserts the Commission erred in finding that Columbia Gas need not
    offer any services other than no-notice service for the purpose of
    enabling shippers to avoid scheduling penalties. Honeywell argues
    that, by so holding, the Commission has retreated from *Order No.
    637*'s policy that pipelines must provide balancing services.
    Honeywell also contends that the Commission mistakenly relied upon
    *Order No. 636-C*'s holding that pipelines offering no-notice
    service need only do so to the extent the pipeline has the capacity
    available. Honeywell asserts that *Order No. 636-C* was issued prior
    to *Order No. 637* in an era when the Commission was changing from
    command and control policies to a service oriented policy that gives
    shippers options to obtain flexibility. Honeywell further asserts
    that the Commission did not consider whether it was practical for
    Columbia Gas to provide new imbalance services or no-notice
    transportation with or without the need to construct new facilities.
    Honeywell contends that, while no one is asserting that the
    Commission can force Columbia Gas to undertake new construction and
    operate new facilities to be able to provide more storage and
    no-notice transportation, the Commission has the option to refuse to
    allow Columbia Gas to implement its daily scheduling penalties.
    However, Honeywell asserts that the Commission never considered this
    option.

16. Honeywell's arguments that the Commission is retreating from its
    *Order No. 637* policy are in error. As previously discussed, the
    imbalance management services required by *Order No. 637* are
    intended to avoid imbalance penalties, not scheduling penalties. In
    any event, even if the requirements in section 284.12(b)(2)(iii)
    concerning imbalance management services were applicable to Columbia
    Gas's scheduling penalty proposal, that section only requires
    pipelines to offer imbalance management services "to the extent
    operationally feasible." Therefore, there is nothing in *Order No.
    637* to suggest a change in the policy finding in *Order No. 636-C*
    that:

    a pipeline offering no-notice transportation service must do so only
    to the extent the pipeline has capacity available (including the
    storage capacity that may be needed to perform no-notice
    service).\[[^28]\]

    Accordingly, Honeywell's argument that the Commission erred in not
    instituting an inquiry into the practicality of Columbia Gas
    providing Honeywell no-notice service ignores the Commission's
    policy of limiting the obligation of pipelines to provide no-notice
    service to available capacity.[^29] The Commission, nonetheless,
    also recognizes and encourages Columbia Gas's voluntary efforts to
    increase capacity that may be used to provide incremental no-notice
    or other service that Honeywell and others may obtain to avoid
    scheduling penalties, such as the expansion project in Docket No.
    CP07-367 that Honeywell cites.[^30]

17. The Commission also rejects Honeywell's contention that the
    Commission should refuse to allow Columbia Gas to implement
    scheduling penalties unless and until it is able to provide all its
    shippers with no-notice services that would enable them to avoid all
    scheduling penalties. As discussed above, Columbia Gas's proposed
    scheduling penalties are consistent with the general policy
    established in *Order No. 637* that a pipeline's penalties should be
    calibrated to the potential threats to system integrity. Columbia
    Gas will only impose its Critical Day penalties, when it faces a
    "threat to its system integrity and/or \[its\] ability to meet its
    firm service obligations." At such times, a non-no-notice shipper's
    takes of more, or less, deliveries than it scheduled can clearly
    complicate the pipeline's efforts to avoid operational problems and
    satisfy the firm service obligations of its other customers. By
    contrast, similar actions by a no-notice shipper do not threaten
    system operations in the same manner, because the no-notice service
    gives the pipeline the ability to use the no-notice shipper's
    storage capacity and inventory to address any operational problems
    caused by the no-notice shipper's scheduling variances. In these
    circumstances, it would not be reasonable for the Commission to
    refuse to permit a pipeline to implement Critical Day scheduling
    penalties, on the ground that the pipeline lacked the capacity to
    provide no-notice service to all who requested it. Honeywell's
    assertion that certain portions of Columbia Gas's facilities are
    subject to congestion during peak periods simply reinforces the fact
    that Columbia Gas needs the ability to impose Critical Day penalties
    in order to operate its system efficiently during periods when its
    system is under stress. Moreover, its argument for an "option" to
    reject scheduling penalties in the absence of the required capacity
    to provide no-notice service would only serve to penalize the
    pipeline for not doing what the Commission previously said it would
    not have to do, i.e., construct facilities to add capacity to
    provide additional no-notice service.[^31]

18. Similarly, as previously discussed, Columbia Gas's proposed
    scheduling penalties for non-critical periods are consistent with
    the Commission's policy permitting pipelines to impose nominal
    scheduling penalties during such periods in order to give shippers
    an incentive to schedule accurately. Regardless of the pipeline's
    ability to provide no-notice service to all its customers,
    scheduling variances during non-critical periods involve the same
    possibility of lost opportunity costs for the pipeline, and a denial
    of interruptible service to shippers who might otherwise have been
    able to obtain such service. Accordingly, the Commission finds it
    reasonable for the pipeline to penalize shippers who cause such
    losses.

19. While the Commission finds that Columbia Gas may implement
    scheduling penalties without providing every shipper a no-notice
    service enabling it to avoid the scheduling penalties, Columbia
    Gas's tariff does provide shippers a number of other methods of
    reducing their incurrence of such penalties. First, after the June
    11 Order in this proceeding, Columbia Gas proposed, in Docket No.
    RP08-110, a new summer no-notice service to be provided under Rate
    Schedule NTS-S. That service will permit shippers that require
    accelerated flow rates within the Gas Day during the summer period
    to take up to their Maximum Hourly Quantity (MHQ) and up to the
    Maximum Daily Quantity (MDQ) on a no-notice basis,[^32] and thereby
    avoid the scheduling penalties. On March 20, 2008, the Commission
    approved the proposed Rate Schedule NTS-S service.[^33]

20. Second, while the Commission stated in the June 11 Order (at P 42),
    that Columbia Gas's service under Rate Schedule of SIT is not a
    no-notice service which may be used to avoid scheduling penalties,
    the Commission has further reviewed the provisions of that rate
    schedule in response to Columbia Gas's March 31, 2008 filing in
    Docket No. RP08-295-000 to clarify how SIT service is scheduled.
    Among other things, Columbia Gas clarifies that section 4(a) of Rate
    Schedule SIT automatically deems that a shipper has scheduled any
    SIT storage injections or withdrawals necessary to equalize its
    actual receipts and deliveries under other designated transportation
    rate schedules. In a contemporaneous order accepting and suspending
    Columbia Gas's filing, the Commission directs Columbia Gas to file
    revised tariff sheets appropriately including such SIT service
    quantities in the determination of scheduling penalties or to
    explain why quantities deemed to scheduled pursuant to section 4 of
    the SIT Rate Schedule should not be included in the determination of
    scheduling penalties. In addition, the Commission explains how
    including the "deemed scheduled" volumes in the determination of
    scheduling penalties would help reduce Honeywell's incurrence of
    scheduling penalties.

21. Third, in the June 11 Order,[^34] the Commission found that the
    nomination cycles in Columbia Gas's tariff give shippers an
    opportunity to self-correct their scheduled volumes. The Commission
    stated that the four nomination cycles in Columbia Gas's tariff
    comply with the Commission's regulations and the North American
    Energy Standards Board (NAESB) Wholesale Gas Quadrant Standards and
    it is appropriate to require shippers to comply with the currently
    effective tariff's nomination cycles.[^35] Honeywell contends,
    however, that it lacks sufficiently accurate and real-time
    information to adjust scheduling and that the last nomination cycle
    for a Gas Day (the Intraday 2 nomination cycle), occurs 16 hours
    before the end of the Gas Day and therefore it is unable to make
    nominations changes during the last 16 hours of the Gas Day. The
    Commission recognizes that Honeywell is unable to adjust nominations
    for the current Gas Day after the Intraday 2 nomination cycle.
    However, that nomination cycle does give shippers an opportunity to
    adjust their scheduling to reflect events that have occurred up to
    that time. In addition, as Columbia Gas stated in its answer in
    Docket No. RP07-340-000 (at 22), its EBB system provides virtually
    instant feedback to shippers on actual takes, and therefore,
    shippers do have the information necessary to update their
    nominations during the four nomination cycles. Moreover, the
    proposed scheduling penalties do not apply at delivery points that
    lack electronic metering capability. Therefore, Honeywell's
    assertions that the information provided concerning scheduling
    variances is not sufficiently accurate or timely are rejected as
    vague and unsupported.

22. Fourth, as the Commission noted in the June 11 Order, existing
    section 19.5(d) of Columbia Gas's GT&C[^36] provides that Columbia
    Gas may waive its right to collect all or any portion of the
    penalties assessed against the shipper, provided that any such
    waiver is granted in a non-discriminatory manner. In its answer in
    Docket No. RP07-340-000, Columbia Gas expressed its willingness to
    provide waivers or reductions of the proposed scheduling variance
    penalties caused by events the shipper cannot control and determine
    such waivers on a case-by-case basis. However, Columbia Gas asserted
    that it is not possible to know the circumstances under which a
    scheduling variance is created in advance, and the Commission did
    not require Columbia Gas to provide the specific circumstances in
    this proceeding under which Columbia Gas will grant waiver when the
    scheduling penalties become effective.

23. Fifth, Columbia Gas proposed in this proceeding, to revise existing
    section 19.5(e) of its GT&C, proposed to be renumbered as section
    19.6(e), to state that:

    To the extent that any imbalance *or scheduling variance* directly
    results from Shipper's reliance on inaccurate data from Transporter,
    or is otherwise caused by Transporter, no penalty will be assessed
    for that portion of the imbalance *or scheduling variance* shown by
    Shipper to be attributable to such inaccurate data. \[Emphasis
    added.\]

    Therefore, Columbia Gas will not impose a scheduling penalty if the
    scheduling variance resulted from the shipper's reliance on
    inaccurate data from Columbia Gas. Columbia Gas did not propose a
    similar revision to existing section 19.5(b) of Columbia Gas's GT&C,
    proposed to be renumbered as section 19.6(b), in order to expressly
    exempt shippers from scheduling penalties determined to be caused by
    a bona fide force majeure event. That section currently states that:

    In the event Shipper seeks to avoid any penalty provided for in this
    section on the ground that such charge was incurred because of a
    force majeure event as defined at section 15 (Force Majeure) of the
    General Terms and Conditions, Shipper shall document such force
    majeure event to Transporter. Transporter shall waive penalties to
    the extent that it determines that the imbalance was caused by a
    bona fide force majeure event as defined at section 15. \[[^37]\]

    However, Columbia Gas is directed, as reasonable and consistent with
    its revision of proposed renumbered section 19.6(e), to file revised
    tariff sheets clarifying proposed renumbered section 19.6(b) to
    include scheduling variances by inserting the words "or scheduling
    variance" after the word "imbalance" within thirty days of the date
    this order issues. Therefore, shippers will also be exempt from the
    scheduling penalty, if the scheduling variance is caused by a force
    majeure event.

24. Finally, proposed section 19.7(b) erroneously refers to "this"
    section as section 19.6. Therefore, Columbia Gas is directed to file
    revised tariff sheets correcting this tariff language to refer to
    section 19.7 within thirty days of the date this order issues.

    **b. [Non-Critical Day Tolerance Level]{.underline}**

25. Honeywell contends that it was unreasonable for the Commission to
    approve a 5.0 percent tolerance for non-Critical Days on the mere
    basis that the Commission has approved similar tolerances for
    non-critical day penalties for two other pipelines: Guardian
    Pipeline, LLC and Equitrans, L.P.[^38] Honeywell contends that the
    Commission should have considered the circumstances of Columbia
    Gas's system more carefully and failed to explain why it chose these
    two smaller pipelines rather than Panhandle Eastern Pipe Line
    Company (Panhandle) which has a 10.0 percent tolerance level for
    non-critical periods. Honeywell argues that the 5.0 percent
    tolerance does not take into account the lack of Columbia Gas's
    ability to provide no-notice service. It concludes that a 5.0
    percent tolerance is unjust and unreasonable for customers without
    adequate imbalance management services or tools, and 10.0 percent is
    reasonable.

26. Under the statutory scheme in the Natural Gas Act (NGA), the
    pipeline has the initiative, through section 4 filings, to propose
    rates, terms, and conditions for the service it provides. If the
    pipeline's proposal is reasonable, the Commission will accept it,
    regardless of whether other rates, terms, and conditions may be
    reasonable.[^39] There is no single just and reasonable tolerance
    level for non-Critical Day scheduling penalties. Rather, the
    appropriate tolerance level is a matter for the exercise of judgment
    in light of the purpose and level of the non-Critical Day scheduling
    penalty. As previously discussed, the purpose of this penalty is to
    provide shippers an incentive to schedule accurately and thereby
    minimize the pipeline's lost opportunity costs. The penalty, which
    is equal to the pipeline's maximum interruptible transportation
    rate, is a reasonable measure of those lost opportunity costs,
    because over-scheduling by one shipper may prevent the pipeline from
    scheduling another shipper's interruptible service.

27. We find that Columbia Gas's proposed 5.0 percent tolerance level is
    reasonable, given the potential costs both to the pipeline and other
    shippers from inaccurate scheduling and the fact the penalty is
    relatively low.[^40] The 5.0 percent tolerance level gives shippers
    some scope for reasonable scheduling inaccuracies, while at the same
    time recognizing the costs of significantly inaccurate scheduling.
    Honeywell's argument, that the 5.0 percent tolerance level for
    non-Critical Days fails to take into consideration Columbia Gas's
    lack of ability to provide new no-notice and firm storage rights,
    but a 10.0 percent tolerance apparently is high enough in its view
    to generally avoid penalties altogether like a no-service service,
    misses the point: the scheduling penalty must provide an incentive
    to schedule accurately and the absence of capacity to provide
    additional no-notice service does not relieve the shipper of its
    obligation to schedule accurately. Thus, a claimed lack of capacity
    available for no-notice service does not support picking a higher
    tolerance over a lower one.

28. The fact we have approved proposals by other pipelines, such as
    Panhandle,[^41] for higher tolerance levels does not undercut our
    approval of Columbia Gas's proposed 5.0 percent tolerance level. As
    discussed above, there is a range of reasonable tolerance levels.
    Accordingly, we will accept the pipeline's proposed tolerance level
    so long as it is just and reasonable even if other higher tolerance
    levels might also be just and reasonable. As we pointed out in the
    June 11 Order, the Commission has approved similar 5.0 percent or
    lower tolerance levels for non-critical period scheduling penalties
    in other pipelines' tariffs.[^42] Moreover, the relative size of the
    pipeline is not directly related to the level of tolerance
    appropriate to discourage inaccurate scheduling by an individual
    shipper.

    **c. [Critical Day Tolerance Level]{.underline}**

29. Honeywell argues that, by finding that the Critical Day tolerance
    level should be stricter than that for non-Critical Days, which was
    set at 5.0 percent, the Commission set a ceiling or cap for the
    tolerance level applicable to Critical Days of less than 5.0
    percent. Reiterating its oft-repeated argument, Honeywell claims
    that this is grossly unreasonable and inequitable for Honeywell and
    others that need gas balancing and/or storage service or other tools
    to manage scheduling imbalances. Honeywell requests that we grant
    rehearing and order that the non-Critical Day tolerance level of 5.0
    percent be utilized as the tolerance level for Critical Days.

30. Honeywell contends that, in setting the tolerance level for critical
    periods, the Commission should consider the availability of
    imbalance management services, no-notice service, and firm storage
    service in congested areas, and the need for additional
    opportunities to make adjustments to nominations. Honeywell further
    contends that the non-Critical Day tolerance level should be
    proportional to the capability of shippers to comply with balancing
    requirements and consider the ability of shippers to avoid the
    scheduling penalties using their best efforts.

31. As discussed later in addressing Honeywell's protest to Columbia
    Gas's compliance filing, Honeywell has not demonstrated that a 5.0
    percent tolerance level for Critical Day scheduling penalties is
    just and reasonable or, most importantly, that the 3.0 percent level
    Columbia Gas has agreed to in its compliance filing is unjust and
    unreasonable. As the Commission noted, in the June 11 Order, a
    stricter tolerance level is permissible for critical periods in
    order to prevent threats to service reliability. Honeywell has not
    demonstrated otherwise.

32. As discussed later in this order, Columbia Gas has supported a
    Critical Day tolerance level of 3.0 percent as just and reasonable
    and that level is accepted for Critical Day scheduling penalties.
    The tolerance level for Critical Days must, in conjunction with the
    scheduling penalty level, be appropriate to deter the shipper
    misconduct which threatens service reliability during a critical
    period. Therefore, the Critical Day scheduling penalty tolerance
    level should be appropriate to deter the potential misconduct that
    may harm the system, and should not be eliminated or increased
    because of an individual shipper's inability to accurately schedule
    regardless of why the shipper does not have a no-notice service.

33. Honeywell asserts that since interruptible transportation generally
    does not flow on a Critical Day, the Commission's concern for loss
    of interruptible capacity due to shipper failure to communicate
    scheduling changes through the nomination cycle is not present on
    critical days. Honeywell has misinterpreted the June 11 Order. The
    Commission did not consider the potential loss of interruptible
    transportation in evaluating the Critical Day tolerance level.
    Instead, the Commission stated that the non-Critical Day penalty
    level was established at the IT rate in order to provide an
    incentive for shippers to schedule accurately and compensate the
    pipeline for its lost opportunity costs.[^43]

    **d. [Critical Day Penalty Level]{.underline}**

34. Honeywell contends, on a number of grounds, that the Commission
    erred in approving Columbia Gas's proposal to set the level of the
    Critical Day scheduling penalty at three times the index price for a
    Critical Day. Honeywell requests that the penalty level for Critical
    Days be set at a nominal level, the same level as scheduling penalty
    for non-Critical Days.

35. As the Commission has previously discussed, a pipeline's imposition
    of a substantial penalty during critical periods is consistent with
    Commission policy under *Order No. 637*. Columbia Gas's proposed
    Critical Day scheduling penalty will only be imposed on days when it
    has found that there is a "threat to its system integrity and/or
    \[its\] ability to meet its firm service obligations." At such
    times, a shipper's takes that vary from the amounts Columbia Gas
    scheduled reduce Columbia Gas's operational control over its system
    and, therefore, increase operational risk. For this reason, the
    Commission has consistently permitted pipelines to impose
    substantial penalties on scheduling variances that occur during
    critical periods. As the Commission explained on rehearing when it
    approved Columbia Gas's similar proposal to increase its critical
    period penalties for takes in excess of Total Firm Entitlement (TFE
    penalty) and failure to interrupt service (FTI penalty) or comply
    with Operational Flow Orders (OFO):

    The Commission's primary concern with respect to penalties which
    only apply to conduct that is harmful to the system is that the
    penalties be high enough to act as an effective deterrent to the
    harmful conduct. Since such conduct risks harm to other customers,
    as well as the pipeline, the Commission believes that significant
    penalties for such conduct are appropriate and consistent with
    *Order No. 637*.\[[^44]\]

    Therefore, Honeywell's request for the Commission to set the
    Critical Day scheduling penalties at the same level as non-Critical
    Day penalties is unsupported.

36. In the June 11 order, the Commission approved Columbia Gas's
    proposal to set the level of the Critical Day penalty at three times
    the commodity index price for that day based in part on the fact
    that it had approved the identical penalty level for the TFE, FTI,
    and OFO penalties in sections 19.1, 19.2, and 19.3, respectively, of
    the GT&C of its tariff.[^45] Honeywell asserts that those penalties
    are all related to physical imbalances. It argues that such physical
    imbalances are a greater threat to system integrity than scheduling
    variances, and, therefore, the approval of the TFE, FTI, and OFO
    penalty levels does not support setting the Critical Day scheduling
    penalty at the same level. Honeywell also asserts, in support of
    this contention, that the June 11 Order found that scheduling
    variances do not present the same problem as physical imbalances.

37. Honeywell's assertion that these other critical period penalties are
    imposed on physical imbalances is incorrect. As the Commission
    explained in the June 11 Order (at P 37), imbalances occur when a
    shipper takes off the system a different amount than it put on,
    whereas scheduling variances involve a difference between the amount
    of deliveries a shipper scheduled and its actual deliveries. The
    critical period penalties set forth in section 19 are not imposed on
    physical imbalances such as the Commission described in the June 11
    Order.[^46] For example, the penalty for a shipper taking deliveries
    in excess of its firm entitlement applies regardless of the amount
    of gas the shipper put on the system, just as the penalty for a
    shipper taking deliveries in excess of, or below, scheduled
    deliveries applies regardless of the amount of gas the shipper put
    on the system. Similarly, the penalty for failure to interrupt
    service or violating an OFO apply without regard to whether the
    penalized conduct involved a physical imbalance between the amount
    put on the system and the amount taken off the system. All these
    penalties have in common the fact that they penalize a shipper for
    taking actions contrary to what Columbia Gas ordered or authorized
    them to do during a critical period. All such actions by a shipper
    involve similar risks of operational harm, because they reduce
    Columbia Gas's operational control over its system.

38. Honeywell, in objecting to the Critical Day scheduling penalty,
    again asserts that the Commission overlooked the fact that during a
    Critical Day interruptible services do not flow on the Columbia Gas
    system. However, the Commission, similar to its consideration of
    Critical Day tolerance levels, did not rely on Columbia Gas's loss
    of the opportunity to sell interruptible transportation in accepting
    the scheduling penalty level for a Critical Day.

39. Honeywell argues that the Commission was incorrect in finding that
    the fact Columbia Gas must credit all penalty revenues means that
    its lacks an incentive to impose an unreasonably high penalty.
    Honeywell contends that the Commission failed to recognize that many
    of the local distribution companies (LDC) on the Columbia Gas system
    are its affiliates which have substantial no-notice service and will
    share penalty revenues since they are exempt from the scheduling
    penalty. However, since no-notice service is available to all
    shippers when there is sufficient capacity, Honeywell, in effect, is
    again arguing about the availability of no-notice service when
    capacity is not available. Further, all shippers which avoid the
    scheduling penalty due to no-notice transportation service pay a
    premium for such service and all non-offending shippers share in
    penalty revenues, not just Columbia Gas's affiliates. In addition,
    the penalty revenue crediting is not limited to scheduling penalties
    and non-offending shippers related to the scheduling penalties. The
    monthly revenues for all penalties are shared by shippers who were
    not assessed any penalty under Columbia Gas's tariff.[^47]

40. Finally, Honeywell argues that this penalty level or any higher
    level will not deter the undesirable conduct, since Honeywell and
    other shippers may encounter problems during the gas day beyond
    their control which will render them unable to avoid a scheduling
    variance. Honeywell states that it operates a complex manufacturing
    operation at its Hopewell plant and the plant consists of several
    process lines with miles of piping and hundreds of pieces of
    equipment. Honeywell further states that production can be disrupted
    due to equipment and process problems throughout the gas day which
    in turn dictate the amount of gas that the plant will use.

41. While there may be times when circumstances beyond a shipper's
    control make it impossible for it to take scheduled amounts, the
    Commission believes such situations are more appropriately dealt
    with through the waiver process provided for in existing section
    19.5(d) of Columbia Gas's GT&C.[^48] As previously discussed, that
    section permits Columbia Gas to waive penalties, provided that any
    such waiver is granted in a non-discriminatory manner, and Columbia
    Gas has expressed its willingness to provide waivers or reductions
    of the proposed scheduling variance penalties caused by events the
    shipper cannot control on a case-by-case basis. The Commission
    encourages Columbia Gas to seriously consider such waivers in
    circumstances where a shipper incurs a scheduling penalty due to
    circumstances beyond its reasonable control. In addition, as
    discussed above, the Commission is requiring Columbia Gas to include
    scheduling variances in proposed section 19.6(b) which concerns
    waivers for bona fide force majeure events.

    **2. [Piedmont's Request for Rehearing]{.underline}**

42. In its request for rehearing, Piedmont argues that Columbia Gas
    offered no credible evidence of operational impairment in support of
    the scheduling penalty proposal. Piedmont asserts that the data is
    limited to four months of actual operational experience (three
    during the summer) and a limited number of customers, several of
    whom are very small, and, therefore, is highly selective. Piedmont
    argues that the mere fact that imbalances can occur does not provide
    any useful information related to determining operational risk.
    Piedmont further argues that this showing does not support the
    existence of actual operational issues arising from current
    operations or the need for scheduling penalties in order to preserve
    reliable service. Piedmont contends that the net impact of
    variations in Columbia Gas's support is highly exaggerated by its
    use of the percentage of the difference between scheduled and actual
    quantities delivered rather than the actual quantitative difference.

43. However, as the Commission found in the June 11 Order, Columbia Gas
    is not required to show actual impairment of service, and pipelines
    may anticipate potential threats to reliable service during critical
    periods and take action to prevent them.[^49] As the Commission
    noted in the June 11 Order, when a Critical Day has been declared
    and a shipper schedules quantities of gas greater than the actual
    takes, or schedules quantities of gas less than actual takes,
    Columbia Gas has less operational control over its system and may
    experience increased operational risk. Therefore, Columbia Gas has
    shown that scheduling variances have the potential to cause
    operational problems which may threaten the system's integrity and
    reliability of service during critical periods. Columbia Gas is not
    required to demonstrate particular examples of shipper violations or
    general shipper behavior causing operational stress on its system.
    Further, Commission policy permits a nominal scheduling penalty at
    the IT rate level for non-Critical Days when scheduling variances
    will not have operational effects on the pipeline to provide an
    incentive to schedule accurately and to compensate the pipeline for
    its lost opportunity costs.[^50] Therefore, there is no need to
    further address Piedmont's arguments related to the sufficiency of
    Columbia Gas's support.

44. Piedmont further contends that Columbia Gas's assertion that
    scheduling variances make it difficult to predict and post capacity
    on a daily basis indicates that its motives are more economic than
    operational since it can not sell capacity if it is being used by
    its customers. Piedmont asserts that Columbia Gas will make
    additional capacity available for sale through its Auto Pal service
    accepted in Docket No. RP07-479[^51] and this is patently unjust
    when shippers are penalized for operating within their contract
    demands for which they are compelled to pay fully compensatory
    charges. Piedmont argues that Columbia Gas is compensated for its
    costs of service to provide up to maximum daily quantities to its
    shippers but is able to recapture capacity through variance
    restrictions and penalty structures.

45. However, consistent with Commission policy, a shipper does not have
    a right to scheduling flexibility within its contractual
    entitlements to create scheduling variances which could threaten the
    reliability of service to all customers. Columbia Gas does not have
    the asserted economic motive since penalty revenues are credited to
    non-offending shippers and not retained by Columbia Gas. Further,
    the scheduling penalties are not imposed at the pooling points where
    Auto PAL service is applicable.[^52]

46. Piedmont also argues that Columbia Gas's Auto PAL service filing in
    Docket No. RP07-479 contradicts its argument that system reliability
    requires daily scheduling penalties. Piedmont asserts that offering
    the Auto PAL service means that Columbia Gas's system is capable of
    handling the difference between scheduled and delivered volumes.
    Piedmont further asserts that the Auto PAL service, with its
    retained incremental revenues, is being proposed in order for
    customers to avoid the scheduling penalties. Piedmont argues that to
    the extent that Columbia Gas is able to offer Auto PAL at a given
    pooling point on a given day, there is no justification for allowing
    scheduling penalties at that point on that date.

47. However, as explained above, the scheduling penalties are not
    imposed at the pooling points where the Auto PAL service is
    applicable and, accordingly, a shipper need not subscribe to the
    Auto PAL service in order to avoid the scheduling penalties.
    Therefore, Piedmont's arguments concerning the Auto PAL service are
    without merit.

    **B. [The Compliance Filing]{.underline}**

    **1. [Details of the Filing]{.underline}**

48. In the June 11 Order, the Commission directed Columbia Gas to file
    revised tariff sheets eliminating the final sentence of proposed
    section 19.5 and stating that the

    scheduling penalties do not apply at delivery points covered by
    no-notice services. [^53] In its June 26 compliance filing, Columbia
    Gas filed a revised tariff sheet that revised the last sentence of
    section 19.5 (c) to state that: "Scheduling penalties will not be
    imposed at delivery points covered by no-notice services (i.e.,
    primary delivery points designated in a shipper\'s SST, NTS or GTS
    contract(s))."

49. In the June 11 Order, the Commission also directed Columbia Gas to
    respond to NiSource Distribution Companies' (NiSource) request for
    clarification that shippers contracting for FSS and SST services are
    not subject to scheduling penalties at primary points listed on
    their SST contracts when using service other than SST.[^54] In
    response to NiSource, Columbia Gas clarifies that a shipper that has
    contracted for SST and FSS service will not be subject to the
    scheduling penalty at any primary delivery point listed on that
    shipper\'s SST contract(s), even when using service other than SST,
    with a supporting example.

50. Columbia Gas also was required to respond to certain specific
    hypothetical examples posed by Baltimore Gas and Electric Company
    (BGE) concerning the applicability of the scheduling penalty to
    no-notice services. In response to BGE, Columbia Gas provides
    answers to the hypothetical examples clarifying, among other things,
    that BGE would not incur a scheduling penalty in certain
    circumstances.

51. The Commission directed Columbia Gas to explain why its Critical Day
    scheduling tolerance should not be increased from 2.0 percent to 3.0
    percent or some higher level.[^55] Columbia Gas states that it
    submitted a revised tariff sheet increasing the tolerance level in
    proposed GT&C section 19.5 to 3.0 percent for the Critical Day
    scheduling penalty. Columbia Gas asserts that the 3.0 percent level
    is fully consistent with its existing critical period penalties, the
    TFE[^56] and FTI penalties[^57] in GT&C sections 19.1 and 19.2,
    respectively.

52. In response to Columbia Gas's statement in its answer, that it was
    receptive to including an absolute "safe harbor" tolerance to ensure
    that small shippers are not negatively affected, the Commission
    directed Columbia Gas to revise the scheduling penalty to provide an
    absolute "safe harbor" of 1,000 Dth.[^58] Columbia Gas revises
    proposed section 19.5 to include an absolute tolerance level for the
    scheduling penalties with a level of the higher of 1,000 Dth or 5
    percent for non-Critical Days or 3 percent for Critical Days.

53. The Commission held that Columbia Gas cannot impose a non-Critical
    Day scheduling penalty for the same conduct for which it imposes a
    Critical Day scheduling penalty, and cannot impose either a Critical
    Day or non-Critical Day scheduling penalty for the same conduct that
    is also subject to a TFE, FTI, or OFO[^59] penalty.[^60] Columbia
    Gas revises proposed section 19.5 to prohibit the imposition of
    penalties under these circumstances. In addition, Columbia Gas
    revises proposed section 19.5 to clarify that the non-Critical Day
    penalty based on the Rate Schedule ITS rate will only apply when a
    Critical Day has not been declared.[^61] Columbia Gas also separates
    the scheduling penalty under proposed section 19.5 into two separate
    subsections to recognize that Critical Day and non-Critical Day
    penalty levels are different to comply with the June 11 Order.

54. In the June 11 Order, the Commission directed Columbia Gas to
    explain with adequate support how the proposed penalties will be
    implemented at Operational Balancing Agreement (OBA) points.[^62]
    Columbia Gas clarifies that variances between actual gas flows and
    confirmed nominations at each point covered by an OBA will be
    handled based on the terms of the specific OBA, and shippers at
    pipeline interconnects will deemed to be always in balance with
    Columbia Gas.

55. On July 3, 2007, Columbia Gas submitted a substitute revised tariff
    sheet to correct a typographical error in the June 26 compliance
    filing. Columbia Gas states that the final sentence to proposed
    section 19.5(b) continued to refer to a \"2%\" Critical Day
    scheduling penalty, even though Columbia Gas had intended to
    increase the tolerance percentage for the Critical Day scheduling
    penalty from 2 percent to 3 percent.

    **2. [Notice, Protests, and Answer]{.underline}**

56. Public notice of Columbia Gas's filings in Docket Nos. RP07-340-001
    and RP07-340-002 was issued on June 29, 2007 and July 9, 2007,
    respectively. Protests were due as provided in section 154.210 of
    the Commission's regulations.[^63] Indicated Shippers and Honeywell
    filed protests to the June 26 compliance filing in Docket No.
    RP07-340-001. No protests were filed to the corrected tariff sheet
    filed in Docket No. RP07-340-002. Columbia Gas filed an answer to
    the protests.[^64] The protests and answer will be discussed in
    detail below.

    **3. [Discussion of the Compliance Filing]{.underline}**

57. Columbia Gas's compliance filing, as corrected on July 3, 2007, will
    be conditionally accepted as in compliance with the June 11 Order.
    The protests by Indicated Shippers and Honeywell are denied, as
    discussed below. Further, the Commission will conditionally accept
    the Substitute Sixth Revised Sheet No. 390, the corrected revised
    tariff sheet, as in compliance with the June 11 Order. Accordingly,
    Sixth Revised Sheet No. 390 is rejected as moot.

    **a. [Indicated Shippers' Protest]{.underline}**

58. The Commission directed Columbia Gas, in the June 11 Order, in
    response to a request by Chesapeake Appalachia, L.L.C. (Chesapeake),
    to explain with adequate support how the proposed penalties will be
    implemented at OBA points.[^65] In its protest (at 5), Chesapeake
    sought clarification that Columbia Gas will continue to honor OBA
    agreements entered into in accordance with GT&C section 8.3.

59. Columbia Gas clarifies in its compliance filing (at 4) that:

> variances between actual gas flows and confirmed nominations at each
> point covered by an OBA will be handled based on the terms of the
> specific OBA. Shippers at pipeline interconnects will be deemed to be
> always in balance with Columbia \[Gas\].

Columbia Gas also includes, in its revised tariff sheets, section
19.5(e) which expressly states that the scheduling penalties "will not
apply at points of interconnection for which an OBA exists between
\[Columbia Gas\] and the Shipper."

60. Indicated Shippers argues that Columbia Gas's compliance filing
    fails to provide

the information required by the June 11 Order and necessary for the
Commission to make a determination regarding the proposal, including how
Columbia Gas's OBAs would handle scheduling variances, or whether OBAs
provide for scheduling penalties. Indicated Shippers asserts that the
information provided does not indicate the extent to which Columbia
Gas's deliveries are covered by OBAs. Indicated Shippers further asserts
that Columbia Gas's tariff includes a *pro forma* OBA, and, therefore,
Columbia Gas must provide information regarding the terms of its OBAs.
Indicated Shippers asserts that Columbia Gas does not indicate whether
shippers at OBA points are subject to any penalties. Indicated Shippers
argues that shippers may not control whether their delivery point has
OBA coverage and, therefore, imposing the penalty on these similarly
situated shippers based on a circumstance beyond their control would be
unduly discriminatory. Indicated Shippers further argues that, if the
facts show that a substantial amount of gas is delivered to points
covered by OBAs, whether Columbia Gas's penalty proposal has any
meaningful relationship to the protection of system integrity is called
into question.

61. In its answer, Columbia Gas states that, in addition to its direct
    response, it also provided in the June 26 compliance filing (at 3)
    the following answer to a hypothetical posed by BGE:

> If the amount BGE nominates is confirmed by the Interconnecting
> Operator, but the Interconnecting Operator takes in a lesser volume
> and does not have no-notice service at that point, is BGE subject to a
> scheduling penalty.
>
> **Answer:** In the hypothetical posed by BGE, if BGE\'s SST contract
> includes the interconnecting point as a primary delivery point, then
> no scheduling penalty will be incurred. *If the point in BGE\'s
> hypothetical is at a point covered by an OBA, then no scheduling
> penalty will apply, as at these points shippers are kept whole by the
> OBA and receive volumes equal to what they have scheduled.* However,
> if the volume of gas ultimately delivered by BGE at a point does not
> equal its scheduled volumes, and that point is not covered by an OBA,
> nor is a point designated as a primary delivery point under its rate
> schedule SST, then a scheduling penalty may be incurred. \[Emphasis
> added.\]

62. Columbia Gas argues that it has more than adequately answered the
    Commission\'s request for clarification by stating that scheduling
    penalties will not be implemented at OBA points. Columbia Gas
    asserts that, while Indicated Shippers claims that it did not
    provide adequate support showing how scheduling penalties will be
    handled at OBA points, such support is simply not necessary to prove
    the negative that scheduling penalties will not be implemented at
    OBA points.

63. There is no need for the information requested by Indicated
    Shippers. The Commission requested information regarding the
    imposition of the proposed scheduling penalty by Columbia Gas and
    not how or the extent to which the parties to the OBA would resolve
    scheduling variances based on the terms of their OBA
    agreements.[^66] Columbia Gas adequately responded that it will not
    impose the scheduling penalty at OBA points. In any case, Columbia
    Gas, in its answer, responds to Indicated Shippers\' contention that
    it did not indicate whether the shippers at OBA points or the point
    operators are subject to penalties, by stating that the OBAs that
    are currently in effect at Columbia Gas' interconnects with other
    pipelines do not impose scheduling penalties. Columbia Gas further
    responded that the OBAs provide terms and conditions for the
    reconciliation of operational imbalances[^67] through physical flow
    adjustments, but do not set forth penalties for imbalances.

64. With respect to the request for information regarding the assertion
    of undue discrimination related to shippers not covered by OBAs, the
    exemption from scheduling penalties applies to all shippers at a
    delivery point covered by an OBA and the scheduling variances at
    such points are governed by the terms of the OBA. The Commission has
    encouraged pipelines to enter these types of arrangements where
    appropriate and directed that the OBAs be implemented on a
    non-discriminatory basis.[^68] Further, the Commission's regulations
    require pipelines to have OBAs at all pipeline interconnects. [^69]
    Accordingly, the Commission allows pipelines to permit OBAs to
    govern the resolution of the scheduling variances.[^70] Consistent
    with that policy, Columbia Gas states that the OBAs on its system
    provide terms and conditions for the reconciliation of operational
    imbalances through physical flow adjustments to which the parties
    have agreed. Therefore, it is appropriate that Columbia Gas does not
    implement its scheduling penalty at points subject to OBA
    agreements. Indicated Shippers also requests information concerning
    the extent of coverage of OBAs related to the protection of system
    integrity. However, as the Commission pointed out in the June 11
    Order, the possibility that only a small number of shippers will be
    subject to the penalties has no relevance to the need for penalties
    to potentially deter conduct by any shipper.[^71]

65. In addition, Indicated Shippers did not raise these issues related
    to OBAs in its comments or request rehearing of the June 11 Order.
    Therefore, the information requested by Indicated Shippers is
    outside the scope of this compliance proceeding, and Indicated
    Shippers' request for further information is denied.

66. Finally, Columbia Gas includes revised language in section 19.5(e)
    which states that the scheduling penalties "will not apply at points
    of interconnection for which an OBA exists between \[Columbia Gas\]
    and the Shipper." Columbia Gas is directed to file, within thirty
    days of the date this order issues, revised tariff sheets
    eliminating the portion of the above-quoted tariff language
    following the word "exists." The Shipper may or may not be a party
    to the OBA. This language is unclear and unnecessary.

    **b. [Honeywell's Protest]{.underline}**

67. In the June 11 Order, the Commission noted that the existing penalty
    provisions for Columbia Gas's TFE and FTI penalties provide for the
    same penalty level but with a 3.0 percent tolerance. Accordingly,
    Columbia Gas was directed to explain why its Critical Day scheduling
    penalty tolerance should not be increased to 3.0 percent or some
    higher level. Columbia Gas submits a revised tariff sheet increasing
    the tolerance level in GTC section 19.5 from the proposed 2.0
    percent to 3.0 percent for the Critical Day scheduling penalty.
    Columbia Gas asserts that the 3.0 percent level is fully consistent
    with existing critical period penalties approved by the Commission
    for Columbia Gas's Tariff, citing the existing tolerances for the
    TFE and FTI penalties.

68. In its protest, Honeywell argues that Columbia Gas has failed to
    explain why its Critical Day scheduling tolerance should not be
    increased to 3.0 or some higher level. Honeywell contends that
    Columbia Gas simply refers to other penalties in its tariff without
    showing their relevance to its new scheduling penalty or addressing
    why a higher level is not appropriate. Honeywell asserts that
    Columbia Gas refers to tolerances levels for TFE and FTI are
    penalties for actual takes of gas, and, in contrast, the scheduling
    penalty is for takes of gas above or below a nominated quantity.
    Honeywell further asserts that, as pointed out by the Commission, in
    the June 11 Order, the scheduling variances are not the same as
    physical imbalances.[^72] Honeywell contends that when physical
    imbalances occur or deliveries exceed Total Firm Entitlements during
    Critical Days above a certain tolerance, system reliability may be
    threatened, but it is much less likely that system reliability will
    be threatened when a scheduling imbalance occurs, because physical
    receipts and deliveries may be in balance or within acceptable
    tolerance levels. Honeywell argues that, therefore, the scheduling
    imbalance does not pose as severe a situation as the TFE or FTI
    situation. Honeywell asserts that a scheduling imbalance does not
    deal with a physical imbalance, which is a different problem and is
    addressed by the TFE and FTI provisions.

69. Honeywell argues, as it did in its request for rehearing, that when
    a Critical Day is declared, interruptible transportation on Columbia
    Gas's system does not flow and the concern of Columbia Gas for the
    loss of interruptible business is not present. Honeywell asserts
    that a 5.0 percent tolerance level for Critical Days is strict
    enough to induce shippers to use the nominating and scheduling
    processes in Columbia Gas's tariff. Honeywell argues again that the
    Commission failed to consider that it and others have not been given
    the opportunity to contract for no-notice service, firm storage
    service or other firm imbalance services to avoid the scheduling
    penalties. Honeywell asserts that it is very difficult for an
    industrial user of gas like Honeywell to manage scheduling
    imbalances when it operates 24 hours a day and seven days a week
    without such services and those that already have no-notice service
    have a significant advantage over Honeywell and others. Honeywell
    argues that this is a grossly unfair, inequitable, and unduly
    discriminatory situation. Honeywell further argues those that do not
    have no-notice service will be subsidizing those that do have such
    premium exempt service through the distribution of penalty revenues.
    Honeywell contends that a tolerance level of 5.0 percent or higher
    is reasonable under these circumstances and has been used on the
    Panhandle system, which is a large interstate pipeline like Columbia
    Gas, citing *Panhandle*.

70. Columbia Gas answers that, since the Commission approved a 5.0
    percent tolerance level for non-Critical Day scheduling penalties on
    Columbia Gas's system,

Honeywell's assertion that the tolerance level for Critical Day
penalties should be

5.0 percent or higher is devoid of logic. Columbia Gas further argues
that the three percent tolerance level is also consistent with other
penalty provisions its tariff and there is precedent for the approval of
a 3.0 percent tolerance for scheduling penalties.

71. Columbia Gas has adequately supported the revised 3.0 percent
    tolerance level. Honeywell complains that Columbia Gas relied on
    other penalties imposed during critical periods in its own tariff.
    However, the Commission, in the June 11 Order, noted that these
    existing TFE and FTI critical period penalties provide for the same
    penalty level but with a three percent tolerance level.[^73] The
    scheduling penalties are imposed at this penalty and tolerance level
    only during critical periods to deter shipper misconduct consistent
    with other penalty and tolerance levels approved for critical period
    penalties on the Columbia Gas's system. The Commission did
    distinguish actual physical imbalances from the scheduling variances
    on which the scheduling penalties are imposed in the June 11 Order.
    However, contrary to Honeywell's attempted distinction, as discussed
    above, the TFE and FTI penalties are not imposed on physical
    imbalances. These penalties are imposed during critical periods for
    takes in excess of Total Firm Entitlement and the failure to
    interrupt service without regard to physical imbalances. Therefore,
    consistent with the Commission's finding above, Honeywell's
    contention concerning the relative threat to the system of
    scheduling variances and physical imbalances is inapplicable and
    unsupported.

72. Honeywell's assertions, in its protest, regarding the lack of
    interruptible transportation on Critical Days, the availability of
    no-notice service resulting in a grossly unfair, inequitable, and
    unduly discriminatory situation, the requirement of an absolute
    tolerance level (at 3, n.4), and subsidization of shippers with
    no-notice service by those shippers without no-notice service
    through the distribution of penalty revenue (at 3, n.5) are
    addressed and rejected above in the discussion on Honeywell's
    request for rehearing in response to similar assertions. Therefore,
    Columbia Gas's reliance on the tolerance level of its other existing
    critical period penalties in support of a 3.0 percent tolerance is
    in compliance with the Commission's directive.

73. Finally, Honeywell's request for a 5.0 percent or higher tolerance
    level for Critical Day scheduling penalties is in conflict with the
    Commission's acceptance of a 3.0 percent tolerance level in this
    order. Honeywell mistakenly relies on the *Panhandle* decision. In
    *Panhandle*, the Commission accepted a tolerance of 5.0 percent for
    periods when an OFO is issued in conjunction with a different
    scheduling penalty as consistent with *Order No. 637* in the context
    of an *Order No. 637* settlement.[^74] In this case, the Commission
    has accepted a 3.0 percent Critical Day tolerance level consistent
    with other existing critical period penalties on Columbia Gas'
    system and in the reasonable judgment of the pipeline necessary to
    preserve operational integrity on its system during critical
    periods. As noted above, the relative size of the pipeline is not
    directly related to the appropriate tolerance level. Further, the
    Commission accepted a 5.0 percent tolerance level for non-Critical
    Days in the June 11 Order. As the June 11 Order noted, a stricter
    tolerance level is permitted for Critical Days than the tolerance
    level for non-Critical Days.[^75]

[The Commission orders:]{.underline}

\(A\) Columbia Gas's revised tariff sheets conditionally accepted in the
June 11 Order, except Fifth Revised Sheet No. 390, are accepted to
become effective on the later of August 1, 2008, or the commencement of
Navigates on the Columbia Gas system, subject to conditions, as
discussed in the body of this order and the ordering paragraphs below.

\(B\) The June 26 compliance filing, as corrected on July 3, 2007, is
accepted as in compliance with the June 11 Order, subject to conditions,
as discussed in the body of this order and the ordering paragraphs
below.

\(C\) Substitute Sixth Revised Sheet No. 390 is accepted subject to
conditions, as discussed in the body of this order and the ordering
paragraphs below. Sixth Revised Sheet No. 390 is rejected as moot.

\(D\) The requests for rehearing of Honeywell and Piedmont are denied,
as discussed in the body of this order.

\(E\) Columbia Gas is directed to file revised tariff sheets (1)
including scheduling variances in proposed section 19.6(b) of its GT&C,
(2) correcting language in proposed section 19.7(b) of its GT&C, and (3)
eliminating revised tariff language in proposed section 19.5(e) of its
GT&C, consistent with the Commission's discussion in the body of this
order, within thirty days of the date this order issues.

By the Commission.

( S E A L )

> Nathaniel J. Davis, Sr.,
>
> Deputy Secretary.

[^1]: *Columbia Gas Transmission Corp.*, 119 FERC ¶ 61,267 (2007) (June
    11 Order).

[^2]: Columbia Gas filed, on August 22, 2007, a notice of withdrawal of
    its request for rehearing of the June 11 Order.

[^3]: Sixth Revised Sheet No. 390, FERC Gas Tariff, second Revised
    Volume No. 1.

[^4]: Substitute Sixth Revised Sheet No. 390, FERC Gas Tariff, Second
    Revised Volume No. 1.

[^5]: On March 26, 2008, Columbia Gas filed, in Docket No. RP07-340-005,
    to change the requested effective date of the revised tariff sheets
    from May 1, 2008 to June 1, 2008, to coincide with the revised
    launch date of Navigates. On April 18, 2008, Columbia Gas's request
    to change the effective date to June 1, 2008, was granted in an
    unreported delegated letter order. On May 20, 2008, as corrected on
    May 21, 2008, and June 16, 2008, Columbia Gas filed notification
    that the launch date of Navigates would be delayed, and the affected
    tariff sheets would not be placed into effect until the launch date
    of Navigates. On July 21, 2008, as corrected on July 22, 2008,
    Columbia Gas notified the Commission that Navigates would be
    launched on August 1, 2008.

[^6]: If Navigates commences on a date later than August 1, 2008,
    Columbia Gas is directed to file a letter at least thirty days prior
    to that commencement stating the revised commencement date.

[^7]: Existing section 19.7, now proposed to be renumbered as section
    19.8, provides in part, that a "Critical Day" will be declared if
    Columbia Gas determines, based on criteria such as weather
    forecasts, line pack, storage conditions, pipeline pressures,
    horsepower availability, system supply and demand, and other
    operational circumstances that operating conditions are such that it
    faces a "threat to its system integrity and/or \[its\] ability to
    meet its firm service obligations."

[^8]: *Regulation of Short-Term Natural Gas Transportation Services, and
    Regulation of Interstate Natural Gas Transportation Services*, Order
    No. 637, FERC Stats. & Regs. ¶ 31,091 (*Order No. 637*),
    *clarified*, Order No. 637-A, FERC Stats. & Regs. ¶ 31,099 (*Order
    No. 637-A*), *reh'g denied*, Order No. 637-B, 92 FERC ¶ 61,062
    (2000), *aff'd in part and remanded in part sub nom*. *Interstate
    Natural Gas Ass'n of America v. FERC*, 285 F.3d 18 (D.C. Cir. 2002),
    *order on remand*, 101 FERC ¶ 61,127 (2002), *order on reh'g*, 106
    FERC ¶ 61,088 (2004), *aff'd sub nom. American Gas Ass'n v. FERC*,
    428 F.3d 255 (D.C. Cir. 2005).

[^9]: 18 C.F.R. § 284.12(b)(2)(iii) (2008).

[^10]: *Citing* June 11 Order at P 42.

[^11]: *Order No. 637*, at 31,308.

[^12]: 18 C.F.R. § 284.12(b)(2)(v) (2008). That section provides, "A
    pipeline may include in its tariff transportation penalties only to
    the extent necessary to prevent the impairment of reliable service."

[^13]: *Chevron Natural Gas Co. v. FERC*, Case No. 04-1347 (memo.), 199
    Fed. Appx. 2, 4 (D.C. Cir. 2006), affirming *Tennessee Gas Pipeline
    Co.*, 99 FERC ¶ 61,017 (2002).

[^14]: *Order No. 637* at 31,317. In *Order No. 637-A*, the Commission
    clarified, "The question whether penalties may be imposed during
    non-critical periods needs to be determined in the pipelines'
    compliance filing proceedings and cannot be decided in the
    abstract." *Order No. 637-A* at 31,608.

[^15]: *Order No. 637* at 31,308.

[^16]: *Order No. 637* at 31,309.

[^17]: **^?^** 18 C.F.R. §284.12(b)(2)(iii) (2008). Section
    284.12(b)(2)(iii) provides:

    > *Imbalance management.* A pipeline with imbalance penalty
    > provisions in its tariff must provide, to the extent operationally
    > practicable, parking and lending or other services that facilitate
    > the ability of its shippers to manage transportation imbalances. A
    > pipeline also must provide its shippers the opportunity to obtain
    > similar imbalance management services from other providers and
    > shall provide those shippers using other providers access to
    > transportation and other pipeline services without undue
    > discrimination or preference.

[^18]: Section 19.7 of Columbia Gas's GT&C proposed to be renumbered
    section 19.8. *See* n.7 of this order.

[^19]: As discussed below, Columbia Gas has agreed to increase the
    tolerance level for its Critical Day scheduling penalties to 3
    percent, so that the penalties will only be imposed on each Dth
    taken that varies by 3 percent or more above or below the scheduled
    quantity.

[^20]: *Natural*, 103 FERC ¶ 61,174 at P 63. The Commission explained
    that if a shipper schedules 200 Dth, but takes delivery of only 100
    Dth, the pipeline may have lost the opportunity to sell the
    remaining 100 Dth as interruptible service. 103 FERC ¶ 61,174, at P
    63, n.48. While a shipper's scheduling of less service than it
    actually takes may not involve a similar lost opportunity cost for
    the pipeline, it is reasonable for the penalty for under-scheduling
    to be the same as for over-scheduling. Otherwise, there would be an
    incentive for shippers to schedule significantly less service than
    they expect to take, so as to avoid the penalty for over-scheduling.

[^21]: In *Columbia Gas Transmission Corp.*, 64 FERC ¶ 61,060, at
    61,513-15 (1993), the Commission noted that Firm Storage Service
    (FSS) with Storage Service Transportation (SST), No-Notice
    Transportation Service (NTS), and General Transportation Service
    (GTS) are services provided on a no-notice basis on Columbia Gas's
    system.

[^22]: In its rehearing request, Honeywell states that it has a contract
    demand of 50,050 Dth per day under Rate Schedule FTS service.

[^23]: June 11 Order at P 37.

[^24]: *See*, *e.g.*, *Panhandle*, 97 FERC ¶ 61,046 at 61,271; *MIGC,
    Inc.*, 96 FERC ¶ 61,042, at 61,107 (2001); *Gulf South Pipeline
    Company, LP*, 98 FERC ¶ 61,278, at 62,172-173 (2002); PG&E Gas
    Transmission, Northwest Corporation, 98 FERC ¶ 61,365, at 62,569
    (2002); *Southern Natural Gas Co*., 99 FERC 61,042, at 61,163
    (2002); *Maritimes & Northeast Pipeline, L.L.C.*, 100 FERC ¶ 61,030,
    at P 83 (2002); and *Northern Natural Gas Co.*, 101 FERC ¶ 61,203,
    at P 168-70 (2002).

[^25]: In *Panhandle* and *El Paso*, the Commission separately
    considered scheduling penalties and imbalance services provided to
    avoid imbalances without any requirement that the pipeline provide
    imbalance services in order for the scheduling penalties to be
    approved. In any event, in Columbia Gas's *Order No. 637* compliance
    proceeding, the Commission found that Columbia Gas offered adequate
    imbalance management services and was in compliance with section
    284.12(b)(2)(iii) since it offered Parking and Lending Service
    (PAL), SIT, other storage services, NTS, and a new Firm Balancing
    Service (FBS). *Columbia Gas Transmission Corp.*, 100 FERC ¶ 61,084,
    at P 112-47 (2002), *order on reh'g*, 104 FERC ¶ 61,168 (2003).

[^26]: June 11 Order at P 44, citing 18 C.F.R. § 284.7(a)(4) (2008) and
    *Pipeline Service Obligations and Revisions to Regulations Governing
    Self-Implementing Transportation Under Part 284 of the Commission's
    Regulations*, *Order No. 636-C*, 78 FERC ¶ 61,186, at 61,769-72
    (1997) (*Order No. 636-C*).

[^27]: *Citing* June 11 Order at P 44.

[^28]: *Order No. 636-C*, 78 FERC ¶ 61,186 at 61,772.

[^29]: **^?^** The Commission also rejects Honeywell's contention that
    Columbia Gas's proposed scheduling penalties are unduly
    discriminatory, unreasonable, and inequitable because Columbia Gas
    did not make no-notice service available to all customers and a
    windfall and subsidy through the distribution of penalty revenues to
    those customers with no-notice service. *Order No 636-C* held that,
    if a pipeline offers no-notice service, it must offer that service
    on a non-discriminatory basis to all customers that request it, and
    Honeywell has not requested relief pursuant to that requirement. In
    addition, those no-notice shippers pay for premium no-notice service
    after contracting for such service when sufficient facilities and
    transportation and storage capacity are available. Rate Schedule FTS
    shippers pay a Base Reservation Charge of \$ 5.636. In contrast,
    no-notice shippers under Rate Schedules NTS and SST with FSS service
    are charged higher Base Reservation Charges of \$ 7.152 and \$ 6.973
    (5.466 for SST and 1.507 for FSS), respectively. Therefore, there is
    no windfall and/or subsidization of the no-notice shippers.

[^30]: Honeywell Request for Rehearing, at 15. *See* *Order Issuing
    Certificates and Abandonment*, 122 FERC ¶ 61,021 (2008), issued on
    January 14, 2008, in Docket No. CP07-367-000, *et al*.

[^31]: Honeywell observes that the Commission stated in *Order No.
    636-C* that "to the extent there are shippers who desire no-notice
    service and cannot obtain it for any reason, such cases are
    appropriately resolved on an individual basis, rather than in a
    generic rule making proceeding.\" Honeywell Request for Rehearing at
    13, n.20 (citing *Order No. 636-C* at 61,772). However, the
    Commission's statement was related to making no-notice service
    available on a non-discriminatory basis to all customers and did not
    suggest that it would consider denying or modifying proposed daily
    scheduling penalties when capacity is unavailable for no-notice
    transportation. In fact, Honeywell states that, in this case, it is
    not suggesting that the Commission can force Columbia Gas to
    construct and operate substantial new facilities to provide for more
    storage and no-notice transportation. Thus, we encourage Honeywell
    and Columbia Gas to enter into a discourse on potential construction
    projects, acquisition of off-system capacity, or the provision of
    new services, that may enhance Columbia Gas's ability to provide
    Honeywell and others no-notice or other services that permit them to
    avoid scheduling penalties.

[^32]: An NTS-S shipper's MHQ cannot exceed 100 percent on a daily basis
    or be less than 4.17 percent of its MDQ.

[^33]: *Columbia Gas Transmission Corp.*, 122 FERC ¶ 61,239 (2008).

[^34]: June 11 Order at P 47.

[^35]: *Id.*

[^36]: Proposed to be renumbered as section 19.6(d).

[^37]: Section 15 states, in part, that:

    > 15.1 Defined. Neither Transporter nor Shipper shall be liable to
    > the other for any damages occurring because of force majeure. The
    > term force majeure means an event that creates an inability to
    > serve that could not be prevented or overcome by the due diligence
    > of the party claiming force majeure. Such events include, but are
    > not defined by or limited to, acts of God, strikes, lockouts, acts
    > of a public enemy, acts of sabotage, wars, blockades,
    > insurrections, riots, epidemics, landslides, earthquakes, fires,
    > hurricanes, storms, tornadoes, floods, washouts, civil
    > disturbances, explosions, accidents, freezing of wells or
    > pipelines, partial or entire electronic failure (including the
    > failure of the EBB and the EBB backup plan, or the failure of
    > SCADA or electronic measurement equipment), mechanical or physical
    > failure that affects the ability to transport gas or operate
    > storage facilities, or the binding order of any court, legislative
    > body, or governmental authority which has been resisted in good
    > faith by all reasonable legal means. Failure to prevent or settle
    > any strike or strikes shall not be considered to be a matter
    > within the control of the party claiming suspension.

[^38]: Honeywell also asserts that the Commission required an absolute
    tolerance level of 1000 Dth for small shippers yet failed to grant
    relief to it and certain other shippers. Columbia Gas stated, in its
    answer in Docket No. RP07-340-000, it was receptive to including an
    absolute tolerance "safe harbor" of 1,000 Dth to ensure that small
    volume shippers are not negatively affected, and, therefore, the
    Commission directed Columbia Gas to provide tolerance levels at the
    greater of an absolute tolerance level of 1,000 Dth or the proposed
    tolerance levels. However, this minor adjustment to the tolerance
    level agreed to by Columbia Gas applies to all shippers.

[^39]: *Western Resources, Inc. v. FERC*, 9 F.3d 1568, 1578 (D.C. Cir.
    1993); *Consolidated Edison Co. v. FERC*, 165 F.3d 992 (D.C. Cir.
    1999).

[^40]: Consistent with Columbia Gas's currently effective ITS rate,
    Columbia Gas's proposed non-Critical Day scheduling penalty is 19.57
    cents per Dth in the winter and 13.39 cents per Dth in the summer.
    In its rehearing request (at 20), Honeywell concedes that these
    penalty levels are "nominal."

[^41]: *Panhandle*, 97 FERC ¶ 61,046 at 61,271 ("The Commission accepts
    Panhandle's existing scheduling penalties during non-critical
    periods, particularly as it \[sic\] is part of an overall
    settlement.").

[^42]: June 11 Order at P 56, noting that Columbia Gas cited, e.g.,
    Guardian Pipeline, LLC, FERC Gas Tariff, Original Vol. No. 1,
    General Terms and Conditions, section 14.1, Third Revised Sheet No.
    162 (5.0 percent tolerance level) and Equitrans, L.P., FERC Gas
    Tariff, Original Vol. No. 1, General Terms and Conditions, section
    8.9, First Revised Sheet No. 230 (4.0 percent tolerance level).

[^43]: June 11 Order at P 29-30.

[^44]: *Columbia Gas Transmission Corp.*, 115 FERC ¶ 61,134, at P 12
    (2006)\
    (*Columbia Gas*).

[^45]: June 11 Order at P 51 and P 51, n.34, citing, *e.g.*, *Columbia
    Gas Transmission Corp.*, 113 FERC ¶ 61,191 (2005), *order on reh'g*,
    115 FERC ¶ 61,134, where the Commission accepted an increase in
    penalties to prevent impairment of reliable service, reflected in
    section 19 of Columbia Gas's tariff, to equal three times the
    midpoint of the range of prices reported for "Columbia Gas,
    Appalachia" published in *Platts Gas Daily* price survey as proposed
    in this case.

[^46]: A penalty for monthly imbalances of \$0.25 per Dth for the
    difference in actual receipts and deliveries is set forth in section
    19.4 of Columbia Gas's GT&C.

[^47]: Existing section 19.6(c), proposed to be renumbered as section
    19.7(c), of Columbia Gas's GT&C.

[^48]: Proposed to be renumbered as section 19.6(d).

[^49]: June 11 Order at P 27 citing *Columbia Gas*, 115 FERC ¶ 61,134,
    at P 15 and *Columbia Gas Transmission Corp.*, 64 FERC ¶ 61, 365, at
    63,550-51 (1993).

[^50]: *Natural*, 103 FERC ¶ 61,174 at P 63.

[^51]: *Columbia Gas Transmission Corp.*, 121 FERC ¶ 61,148 (2007);
    unpublished delegated letter order issued March 7, 2008 accepting
    compliance filing.

[^52]: 121 FERC ¶ 61,148 at P 12.

[^53]: June 11 Order at P 35. On March 15, 2007, Columbia Gas filed a
    letter with the Commission addressing the last sentence of proposed
    section 19.5, to clarify that the historical method of handling
    no-notice services would not be altered by its March 6, 2007
    proposal. Columbia Gas stated that it would make a subsequent
    compliance filing deleting the last sentence of proposed section
    19.5 and substituting the following language: "The scheduling
    penalty does not apply at delivery points covered by no-notice
    services."

[^54]: June 11 Order at P 38.

[^55]: June 11 Order at P 56.

[^56]: Section 19.1 of Columbia Gas's tariff provides that, if a shipper
    takes gas in excess of 103 percent of its Total Firm Entitlement on
    any Day Columbia Gas shall assess a penalty. Section 19.7, proposed
    to be renumbered as section 19.8, provides that these penalties will
    only be imposed if a Critical Day has been declared and is in
    effect.

[^57]: Section 19.2 of the GT&C of Columbia Gas' tariff provides, in
    part, that if a shipper fails to interrupt service as directed by
    Columbia Gas pursuant to GT&C section 16 and thereby delivers or
    takes gas in excess of 103 percent of the lowered Scheduled Daily
    Receipt Quantity or Scheduled Daily Delivery Quantity under all
    applicable Rate Schedules as set by the interruption order Columbia
    Gas shall impose a penalty.

    Section 16.1(a) provides, in part, that:

    > If due to force majeure, other unforeseen conditions on
    > Transporter\'s system, or operating conditions (such as, but not
    > limited to, performing routine maintenance, making modifications,
    > tests or repairs to Transporter\'s pipeline system or protection
    > of the integrity and performance capability of its storage and
    > transmission facilities), the gas available for delivery from
    > Transporter\'s system or portion thereof is temporarily
    > insufficient to meet all of Transporter\'s authorized firm
    > services on any day, then Transporter, upon providing as much
    > notice as possible, shall interrupt all such services in
    > accordance with the priorities set forth at section 16.4 below.

[^58]: June 11 Order at P 58.

[^59]: **^?^** Section 17.1(a) of the GT&C of Columbia Gas' tariff
    provides, in part, that:

    > Transporter, in its reasonable discretion, shall have the right to
    > issue Operational Flow Orders (OFO) as specified in this section
    > upon determination by Transporter that action is required in order
    > to alleviate conditions which threaten the integrity of
    > Transporter\'s system, to maintain pipeline operations at the
    > pressures required to provide reliable firm services, to have
    > adequate supplies in the system to deliver on demand (including
    > injection of gas into the mainline, providing line pack, and
    > injecting gas into storage at the right place and time), to
    > maintain and protect the integrity and performance capability of
    > Transporter\'s storage fields, to maintain firm service to all
    > Shippers and for all firm services, and to maintain the system in
    > balance for the foregoing purposes.

[^60]: June 11 Order at P 69.

[^61]: June 11 Order at P 70.

[^62]: June 11 Order at P 78.

[^63]: Virginia Natural Gas, Inc. and Pivotal Utility Holdings, Inc.(VGN
    and Pivotal, and Equitable Production Company (Equitable) filed
    untimely motions to intervene. Pursuant to rule 214(d) of the
    Commission's Rules of Practice and Procedure (18 C.F.R.

    § 385.214(d) (2008)), the Commission will grant the late
    interventions by VNG and Pivotal and Equitable. Except as otherwise
    ordered, a late intervenor must accept the record of the proceeding
    as the record developed prior to the late intervention.

[^64]: The Commission's Rules of Practice and Procedure do not permit
    answers to protests (18 C.F.R. § 385.213(a)(2) (2008)). However, the
    Commission finds good cause to admit Columbia Gas's answer since it
    will not delay the proceeding, may assist the Commission in
    understanding the issues raised, and will ensure a complete record.
    Therefore, for good cause shown, Columbia Gas's answer is accepted.

[^65]: June 11 Order at P 78.

[^66]: While OBAs are a jurisdictional activity, the Commission does not
    require pipelines to file OBAs if copies of executed agreements and
    detailed records are made available by the pipeline.
    *Transcontinental Gas Pipe Line Corp.*, 65 FERC ¶ 61,315, at 62,437
    (1993) (*Transco*).

[^67]: The term operational imbalance as used in the *pro forma* OBA in
    Columbia Gas's tariff refers to the inadvertent overdelivery or
    underdelivery of gas by one party to the other party relative to the
    shipper's nominated quantities.

[^68]: *Transco*, 65 FERC ¶ 61,315 at 62,436.

[^69]: 18 C.F.R. § 284.12(b)(2)(i) (2008).

[^70]: *See, e.g., Iroquois Gas Transmission System, L.P.*, 63 FERC ¶
    61,285, at 62,913 (1993); *Viking Transmission Co.*, 63 FERC ¶
    61,104, at 61,659 (1993). *See also* NAESB Standards 2.13, *Business
    Practice Standards Book 1*; 2.2.1, 18 C.F.R. § 284.12(a)(iii)
    (2008); and 2.3.64, 18 C.F.R. § 284.12(a)(iv) (2008).

[^71]: June 11 Order at P 40.

[^72]: *Citing* June 11 Order at P 64.

[^73]: June 11 Order at P 56.

[^74]: *Panhandle*, 97 FERC ¶ 61,046 at 61,271-72.

[^75]: June 11 Order at P 56.