Tennessee Gas Pipeline Company Proposes Modifications to Cashout Reconciliation Mechanism

Strategic Insights -

The Tennessee Gas Pipeline Company, L.L.C. has submitted a filing to the Federal Energy Regulatory Commission (FERC) proposing modifications to its cashout reconciliation mechanism. The proposed changes aim to improve system reliability by reducing shipper incentives to create large imbalances on the Tennessee system. The modifications include expanding the number of operational regions from two to eight to better align with Tennessee's operational areas and reduce the need for Operational Flow Orders (OFOs).

Key Takeaways:

  • Tennessee proposes to expand the number of operational regions from two to eight to determine regional net pipeline positions (NPPs), which factor into daily imbalance charges.
  • The proposed changes aim to reduce shipper incentives to create large imbalances on the Tennessee system by increasing the effectiveness of the daily imbalance charges mechanism.
  • The current two operational regions are too broad and hinder Tennessee's ability to effectively manage daily imbalance activity on its system.
  • By increasing the number of operational regions, the daily imbalance charges mechanism will better align with Tennessee's operational areas and reduce incentives for Balancing Parties to create large daily imbalances.
  • The proposed changes also aim to reduce the need for Tennessee to issue OFOs, particularly in light of higher loads and increased maintenance activity across its system.
  • The modifications include splitting Zone 1 and Zone 4 into separate operational areas by leg, as high utilization rates and system constraints in these segments support the need for separate operational areas.

Statistics:

  • For the 24-month period ending March 2025, the Supply Region NPP was triggered only 10 days (or 1.4% of the time), while the Market Region NPP was triggered only 24 days (or 3.3% of the time).
  • Even on days where the NPPs in each of these two broad regions exceeded the 5% operational threshold, only 25% of Daily Imbalances were subject to daily imbalance charges.
  • During the same period, Tennessee experienced daily imbalance levels as high as 18.2%, with the number of days exceeding the 5% operational threshold ranging from 71 to 162 days.

Sources:

  • Tennessee Gas Pipeline Company, L.L.C. (2025). Modifications to Cashout Reconciliation Mechanism. Docket No. RP25-000. Federal Energy Regulatory Commission.
  • Tennessee Gas Pipeline Company, L.L.C. (2022). Tennessee Gas Pipeline Co. v. FERC, 99 FERC P 61,017 at P179 (2002).