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TRANSCO FILES INCENTIVE RATE PROPOSAL, GENERAL RATE CASE

      TRANSCO FILES INCENTIVE RATE PROPOSAL, GENERAL RATE CASE
    HOUSTON, March 3 /PRNewswire/ -- Transcontinental Gas Pipe Line Corporation (TGPL), a subsidiary of Transco Energy Company (NYSE: E), has filed with the Federal Energy Regulatory Commission (FERC) a certificate application to implement an incentive ratemaking program. TGPL also filed a general rate case.
    The goals of the incentive rate proposal are consistent with recent FERC decisions to move toward market-driven rate structures and away from cost-based rate design.  Benefits for TGPL and its customers would include reducing the cost and complexity of the rate-setting process on the TGPL system, providing TGPL the opportunity to share cost savings with customers, and fostering the creation of innovative service options for TGPL customers.  Filed as a Section 7(c) certificate application, the incentive proposal will allow FERC ample time to review the merits of the request in light of other regulatory developments and comments from others.
    The general rate filing is along traditional lines and proposes an annual increase in revenues of $234 million, based primarily on increases in operating and maintenance costs associated with additional services provided to TGPL's markets since its last general rate filing and increased cost of capital.  The rates, which are expected to become effective, subject to refund, in September 1992, are designed using the straight fixed-variable method, which follows the FERC's objectives expressed in its Notice of Proposed Rulemaking known as the Mega-NOPR. TGPL has asked the FERC to consolidate the incentive proposal with the general rate case, however, and consider both filings simultaneously.
    Together, these proposals would establish:
    --  Straight fixed-variable rate design, which TGPL believes is consistent with the Mega-NOPR.
    --  Incentive ratemaking program on the TGPL system based on a "yardstick competition" approach, which sets rates based on an average cost of service for the industry.  TGPL would be allowed to recover in its transportation rates industry average costs for certain major cost categories.  This approach, using the costs of other pipelines to set rates, creates incentives for TGPL to lower costs and improve services.  A "fail-safe" mechanism would help ensure that the new program does not result in either excessive or deficient revenues by establishing a "zone of reasonableness" for operating income around a target rate of return.  If actual operating income falls outside the zone of reasonableness, the excess or deficit would be shared with customers.  Rates would be adjusted annually to reflect changes in industry average costs.
    --  A secondary market created through programs to handle assignment and release of firm capacity.  Under the capacity assignment program, market-area firm transportation (FT) capacity holders could trade or price-deregulated secondary market.  Under the capacity release program, TGPL could negotiate with FT capacity holders to purchase that space and resell it at unregulated rates under a proposed negotiated transportation services rate schedule.  Robert W. Best, president and chief operating officer of TGPL, said, "We view this incentive rate proposal as a framework from which we hope to structure, working with the FERC staff and our customers, an incentive ratemaking program that will increase incentives to operate efficiently and allow us to share with our customers the benefits of our improved efficiencies."
    Transco Energy Company, through its interstate gas pipeline systems and other gas service companies, transports and sells natural gas, predominantly to markets in the eastern and midwestern United States. Transco also develops independent power generation facilities and new energy technologies and has investments in oil and natural gas exploration and production operations as well as coal mining and marketing.
    -0-                           3/3/92
    /CONTACT:  Katherine K. Putnam, media, 713-439-2455, or Donato J. Eassey, analyst, 713-439-4176, both of Transco Energy Company/
    (E) CO:  Transcontinental Gas Pipe Line Corporation ST:  Texas IN:  OIL SU: AH -- NY085 -- 4674 03/03/92 17:07 EST
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Publication:PR Newswire
Date:Mar 3, 1992
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