Atmos Energy to Pay $6.4 Million for Flipping, Shipper-Must-Have-Title Violations

Atmos Energy Corporation will pay a civil penalty of $6.4 million under a consent agreement approved by FERC addressing various flipping and shipper-must-have-title violations by subsidiaries Atmos Energy Marketing, Inc. (AEM) and Trans Louisiana Gas Pipeline, Inc. (Trans La).

Atmos will also disgorge $5.6 million, plus interest.

FERC Enforcement Staff concluded that the total contractual capacity either released or acquired by AEM and Trans La through flipping was 26.1 Bcf. Enforcement Staff also concluded that AEM, as asset manager, violated the shipper-must-have-title requirement by shipping 297.8 Bcf of gas titled in its name using the capacity rights of other parties, including its affiliated utilities.

"The civil penalty assessment reflects the nature and extent of high level personnel involvement at both AEM and Trans La who knew or had access to information that WMI [Woodward Marketing, Inc] and LGSN [LGS Natural Gas Company] were not Atmos companies and should not have been used by schedulers in flipping transactions. The evidence establishes that AEM high-level personnel understood the requirements of the Commission's prohibition on rollovers, but nonetheless elected to engage in a strategy of alternating releases of Atmos capacity to multiple Atmos affiliates, a strategy specifically designed to avoid posting the capacity for competitive bidding as required by the Commission's capacity release regulations. Similarly, AEM high-level personnel were aware as far back as 2004 of shipper-must-have-title problems on some of the pipelines on which the AEM managed the capacity rights of other parties, including its affiliated utilities; still, AEM failed to resolve the problems until Enforcement staff in 2008 advised Atmos that it was being investigated for shipper-must-have-title violations," FERC said.

FERC noted, however, that, "[w]hile the flipping and shipper-must-have-title violations were serious, under the unique circumstances of this case, the conduct did not appear to result in pecuniary harm to AEM's and Trans La's competitors, since all of the capacity utilized in the violations was effectively contractually committed to AEM and/or Trans La pursuant to the various AMA-like arrangements. The customers of AEM and Trans La whose capacity was being managed would not in any case have placed their capacity on the market for bidding to third parties. Therefore, it is unlikely that a third party would have received any benefit from the capacity or been harmed by a denial of access to the capacity. There was no competitive advantage gained by AEM or Trans La from their actions."