May 21, 2010 VIA ELECTRONIC MAIL. Kimberly D. Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C

Transcription

1 1350 I Street, NW Suite 1100 Washington, DC Phone Fax andrewskurth.com Mark F. Sundback (202) Direct (202) Fax msundback@andrewskurth.com May 21, 2010 VIA ELECTRONIC MAIL Kimberly D. Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C Re: Great Lakes Gas Transmission Limited Partnership, Docket No. RP Dear Secretary Bose: Pursuant to Rule 602 of the Commission s Rules of Practice and Procedure, 18 C.F.R (2009), Great Lakes Gas Transmission Limited Partnership ( Great Lakes ) hereby files the attached Stipulation and Agreement and related materials ( Settlement ) to resolve all issues in the captioned docket. The referenced proceeding is presently pending before Presiding Administrative Law Judge David H. Coffman, and therefore Great Lakes respectfully requests that the attached materials be forwarded to the Honorable Judge Coffman. The Settlement represents the product of extensive settlement negotiations over the course of the last few months. The Supporting/Non-Contesting Participants (as defined in the Settlement) have engaged in difficult discussions regarding the contentious issues at issue in this proceeding. The Settlement would resolve a wide array of such issues without recourse to rounds of testimony, followed by discovery and hearing. One of the benefits of the Settlement is that participants may save substantial amounts of time and resources and avoid the costs of such efforts. The Settlement is broadly supported, or not opposed, by Great Lakes, Commission Trial Staff and numerous participants that actively participated throughout the negotiation and drafting of the Settlement. Great Lakes and the Supporting/Non-Contesting Participants are not aware of any participant s opposition to the instant Settlement. Great Lakes believes that the Commission should evaluate the Settlement in light of the foregoing.

2 Kimberly D Bose May 21, 2010 Page 2 This submission includes the following documents: 1. a Motion for Certification and Approval of the Settlement and Shortened Comment Periods; 2. a Stipulation and Agreement and appendices thereto, including copies of revised tariff sheets setting forth the changes proposed to the currently effective tariff sheets of Great Lakes (Appendix B of the Settlement); 3. a draft Notice of Filing of Settlement and Dates for Comments and Initial and Reply Comments; 4. a separate Explanatory Statement; 5. a Statement of References to testimony, exhibits, decisions and other matters relevant to the Stipulation and Agreement; 6. a draft order for possible use by the Presiding Administrative Law Judge that would establish May 28, 2010 as the deadline for initial comments regarding the Settlement; 7. a draft order for possible use by the Presiding Administrative Law Judge certifying the Settlement; 8. a draft order for consideration and possible use by the Commission approving the Settlement; 9. a disc containing the Volume No. 1 Tariff Sheets in ASCII format; and 10. a disc containing the Notice of Filing and draft Commission letter order approving the Settlement in Microsoft Word format. Such materials are being served on all participants on the service list in this proceeding and on all other persons required to be served by operation of Rule 602(d) of the Commission s Rules of Practice and Procedure. Great Lakes respectfully requests that initial comments be filed on May 28, The tariff sheets contained in Appendix B are proposed to be placed into effect on the dates reflected on such tariff sheets, pursuant to the terms of the Settlement. Great Lakes respectfully requests waiver of the notice requirement regarding such tariff sheets. Great Lakes respectfully requests that the Commission (1) implement a nominal suspension period for the IT Settlement Rates (as defined in the Settlement) and (2) waive suspension for the FT Settlement Rates (as defined in the Settlement).

3 Kimberly D Bose May 21, 2010 Page 3 Please provide copies of initial or reply comments and any other communications regarding the foregoing to: M. Catharine Davis Associate General Counsel Great Lakes Gas Transmission Limited Partnership 717 Texas Street Houston, TX Mark F. Sundback Kenneth L. Wiseman Jennifer L. Spina Lisa M. Purdy Andrews Kurth LLP 1350 I Street, NW; Suite 1100 Washington, DC Very truly yours, M. Catharine Davis Associate General Counsel Great Lakes Gas Transmission Limited Partnership 717 Texas Street Houston, TX /s/ Mark F. Sundback Mark F. Sundback Kenneth L. Wiseman Jennifer L. Spina Lisa M. Purdy Andrews Kurth LLP 1350 I Street, NW; Suite 1100 Washington, DC ATTORNEYS FOR GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP cc: Honorable David H. Coffman Presiding Administrative Law Judge Dated: May 21, 2010

4 OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) Great Lakes Gas Transmission Limited Partnership ) Docket No. RP ) MOTION OF GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP FOR CERTIFICATION AND APPROVAL OF SETTLEMENT AND SHORTENED INITIAL AND REPLY COMMENT PERIODS To: Honorable David H. Coffman, Presiding Administrative Law Judge Pursuant to Rules 212 and 602 of the Commission s Rules of Practice and Procedure, 18 C.F.R and (2009), Great Lakes Gas Transmission Limited Partnership ( Great Lakes ) respectfully requests the following: (1) Transmittal of this motion and attached materials to Presiding Judge David H. Coffman in the captioned docket; (2) the deadline for initial comments be set for May 28, 2010 and the deadline for reply comments be set for June 7, 2010; (3) Certification by the Presiding Judge of the attached Offer of Settlement ( Settlement ) to the Commission; and (4) Approval of the Settlement by the Commission without condition or modification. I. Participants in the Section 5 investigation initiated by the Commission on November 19, 2009 entered into settlement negotiations during April and May 2010 to resolve their differences regarding issues in the captioned docket. The result of such negotiations is the attached Settlement. Through the Settlement, participants have successfully resolved a wide array of issues in dispute in this case in a practical and carefully constructed fashion, eliminating the need for testimony, further discovery, hearing and briefing of the matters resolved. The avoidance of

5 litigation and resultant better use of resources is a valuable outcome, benefiting the participants, the Commission and the public interest. The Settlement, inter alia, reduces firm transmission rates on Great Lakes by approximately eight percent (8%). The Settlement also imposes a moratorium on Great Lakes and other participants from bringing a NGA Section 4 general rate case and NGA Section 5 actions, and establishes a deadline by which Great Lakes must file a new Section 4 general rate case. II. Negotiations of the key terms of the Settlement occurred over the course of several weeks. On April 5, 2010, and as modified on April 13, 2010, a summary of they key terms of the Settlement was sent to all participants on the official service list. Furthermore, all participants were invited to participate in settlement negotiations, and settlement conferences were publicly noticed on March 11, 2010, April 5, 2010, and April 12, Since the procedural schedule was suspended on April 16, 2010, 1 active participants have exchanged numerous drafts of the Settlement and input from many different participants has been incorporated therein to craft the language embodied in the attached Stipulation. Therefore, Great Lakes respectfully requests that the Presiding Judge establish May 28, 2010 (seven days following the filing of the Settlement), as the deadline for filing initial comments, and June 7, 2010 (ten days following the filing of initial comments), as the deadline for filing reply comments (if necessary). In the event that the Settlement is uncontested, Great Lakes 1 Order of Chief Judge Suspending Procedural Schedule, Great Lakes Gas Transmission Limited Partnership, Docket No. RP (issued April 16, 2010); Order of Chief Judge Continuing Suspension of Procedural Schedule, Great Lakes Gas Transmission Limited Partnership, Docket No. RP (issued May 19, 2010). 2

6 respectfully requests that the Settlement be certified to the Commission once initial comments have been received without awaiting reply comments. If certified to the Commission, Great Lakes respectfully requests approval of the Settlement without modification or condition. The negotiations and collaborative efforts that produced the attached Settlement transpired over the course of approximately two months. Active participants made concessions that, in isolation, they would have been unlikely to accept, but to which they were willing to consent as part of the entire Settlement. Given that all participants participating in the negotiations producing the Settlement support or do not oppose the Settlement (to the best of the undersigned s information, knowledge and belief), prompt certification and Commission approval are warranted and desirable to give all participants the benefit of their bargain. Prompt approval will enhance certainty in the marketplace concerning service on Great Lakes. Industry participants will be able to rely upon the terms of the Settlement in negotiation of, and entering into, transactions involving transportation on Great Lakes. III. WHEREFORE, for the foregoing reasons, Great Lakes respectfully requests that: (1) this Motion and attached materials be forwarded by the Secretary of the Commission to the Presiding Judge in the captioned docket; (2) the deadline for initial comments be set for May 28, 2010 and the deadline for reply comments be set for June 7, 2010; (3) the Presiding Judge certify the Settlement promptly following the deadline for initial comments to the extent such comments disclose that no participant opposes the Settlement; and (4) if certified by the Presiding Judge, the Settlement be approved without modification or condition by the Commission. 3

7 Respectfully submitted, M. Catharine Davis Associate General Counsel Great Lakes Gas Transmission Limited Partnership 717 Texas Street Houston, TX /s/ Mark F. Sundback Mark F. Sundback Kenneth L. Wiseman Jennifer L. Spina Lisa M. Purdy Andrews Kurth LLP 1350 I Street, NW Suite 1100 Washington, DC ATTORNEYS FOR GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP Dated: May 21,

8 CERTIFICATE OF SERVICE I, Lisa M. Purdy, an attorney for Great Lakes Gas Transmission Limited Partnership, hereby certify that a true and correct copy of the foregoing was served on all parties of record in this proceeding on this twenty-first day of May, /s/ Lisa M. Purdy Lisa M. Purdy

9 OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) Great Lakes Gas Transmission Limited Partnership ) Docket No. RP ) EXPLANATORY STATEMENT Pursuant to Rule 602(c)(1)(ii) of the Federal Energy Regulatory Commission s (the Commission ) Rules of Practice and Procedure, 18 C.F.R (c)(1)(ii) (2009), Great Lakes Gas Transmission Limited Partnership ( Great Lakes ) hereby submits this Explanatory Statement Regarding the Stipulation and Agreement ( Settlement ) filed simultaneously herewith. In the event of a conflict between the contents of this Explanatory Statement and the Settlement, the terms of the Settlement govern. Pursuant to Rule 602(c)(2), where the Settlement proposes tariff changes, those changes have been placed in an appropriate form, attached to the Settlement, and are cross-referenced therein. I. PROCEDURAL HISTORY On November 19, 2009, the Commission instituted an investigation, pursuant to Section 5 of the Natural Gas Act ( NGA ), to determine whether the rates charged by Great Lakes were just and reasonable. Great Lakes Gas Transmission Limited Partnership, 129 FERC 61,160 (2009). The Commission set the matter for hearing under a Track II hearing timeline. The Commission also directed Great Lakes to file a cost and revenue study within 45 days of the issuance of the order initiating the investigation. On November 20, 2009, the Chief Administrative Law Judge designated Administrative Law Judge ( Presiding Judge ) David H. Coffman to preside at hearing. On November 23, 2009, Chief Judge extended the deadline for

10 the cost and revenue study to February 4, On December 17, 2009, the Chief Judge granted a 30-day extension of the procedural schedule, as requested by Staff. On January 14, 2010, a prehearing conference was held, during which the participants proposed a procedural schedule, discovery procedures and protective order. On January 15, 2010, the Presiding Judge issued an order establishing the procedural schedule. On January 19, 2010, the Presiding Judge issued an order adopting rules for the conduct of the hearing. On January 20, 2010, the Presiding Judge adopted the protective order. Great Lakes filed its cost and revenue study on February 4, Discovery commenced thereafter. On February 24, 2010, the Commission issued an order denying a request by Great Lakes for reconsideration and a limited stay. Subsequently, a settlement conference was duly noticed to the service list to take place on March 25, Thereafter, participants engaged in negotiations and exchanged settlement offers, eventually culminating in settlement terms that were not opposed. A draft of the uncontested terms proposed to resolve all issues in this docket was circulated to all participants on the service list. No participant indicated opposition to the proposed terms of the settlement at that time. The Settlement implements the terms agreed to and/or not-opposed by a broad cross-section of participants, including those listed in Appendix A to the Settlement. On April 16, 2010, Great Lakes filed a motion to suspend the procedural schedule. That same day, the Chief Judge suspended the procedural schedule. On May 17, Great Lakes filed a Status Report. On May 19, the Chief Judge issued an order continuing suspension of the procedural schedule. II. EXPLANATION OF THE SETTLEMENT This Settlement resolves all issues in the captioned docket. The Settlement is the result of extensive negotiations and represents a delicate compromise of numerous complex, 2

11 interrelated issues. The resolution of these issues as manifested in the Settlement cannot be altered in part without jeopardizing the whole. The Settlement, if implemented as to all shippers, will provide for rate certainty, will reduce rates for firm transportation service on the Great Lakes system, will institute the Section 4 and Section 5 moratoria as described therein, and will impose a rate refiling obligation upon Great Lakes. A wide array of participants, including Trial Staff, either support or do not oppose this Settlement. To the best of Great Lake s information, knowledge and belief, no participant opposes the Settlement. The Settlement provides the following: ARTICLE I Article I provides an overview of the purpose and scope of the Settlement. The Settlement resolves all issues in the captioned docket and will provide for rate certainty, reduce rates for firm transportation service on the Great Lakes system, institute a general rate case moratorium and impose a rate refiling obligation upon Great Lakes. The Settlement is an indivisible package that comprehensively resolves all matters in Docket No. RP , et seq. No particular issue can be severed from, or modification made to, this package without disturbing the balance of interests represented in the Settlement. It represents a consensus among a wide array of participants, including Trial Staff, and produces an overall result that is fair and reasonable and in the public interest. The Settlement need not be found to be just and reasonable unless it is contested. ARTICLE II Article II provides the background and procedural history in this proceeding. ARTICLE III Article III describes the rate modifications and depreciation terms that serve as part of the consideration for entering into the Settlement. The tariff sheets resulting from the Settlement are 3

12 set forth in Appendix B and are to be implemented in accordance with the effective dates shown thereon. Appendix B tariff sheets include the Settlement Rates that shall supersede the rates previously in effect on Great Lakes ( pre-settlement Rates ), with the exception of the rates paid by Disputing Participants, as described in Article IX. Rates for Disputing Participants are set forth in Original Sheet No. 4B. Article III also provides for the roll-in of the Sithe and RG&E Expansion facilities and a table reflecting the agreed-to depreciation rates, both to be effective May 1, Furthermore, Article III provides that any rate or billing adjustment implemented pursuant to the Settlement is subject to subsequent billing adjustment or reversal in the event the Settlement is altered, modified or rejected, in whole or in part. ARTICLE IV Article IV describes the revenue subject to sharing and the qualifying shippers eligible for such revenue. Great Lakes will share with qualifying shippers fifty percent (50%) of the reservation and utilization revenue, both firm and interruptible, in excess of $500 million, that Great Lakes receives between November 1, 2010 and October 31, 2012 for jurisdictional service performed during such period. RSS that will be paid to each Qualifying Shipper, subject to Article IV.D, shall equal the product of (1) the percentage of that Qualifying Shipper s payments (for jurisdictional services received by that Qualifying Shipper during the RSS Period) as compared to the jurisdictional revenues received by Great Lakes from all Qualifying Shippers during the RSS Period, and (2) RSS. Each of (1) and (2) in the foregoing sentence shall be net of any pass-through or surcharge amounts (e.g., Annual Charges Adjustment, ACA ) received by Great Lakes during the RSS Period and subject to any Commission-required adjustment to the True-Up Report filed by Great Lakes. Qualifying Shippers are only those shippers that both (1) are not deemed to be Disputing Participants, and are therefore bound by the Settlement, and (2) have paid or are paying rates for jurisdictional service at some time between November 1,

13 and October 31, Article IV also provides for the procedures Great Lakes will abide by when calculating and distributing the revenue subject to sharing, and provides for the contingency that a new Section 4 general rate case is filed while revenue is still being shared under Article IV. ARTICLE V Article V describes the Section 4 and Section 5 rate moratoria. Great Lakes right to file a Section 4 general rate case or otherwise attempt to modify the Settlement Rates prior to June 1, 2011 is circumscribed as described in Article V; the Settlement Rates will remain in effect through at least November 30, With the exception of any governmental agency that by law cannot bind itself or a future Commission to the Settlement, the participants will not initiate or participate in a Section 5 proceeding, or otherwise attempt to modify any terms of the Settlement, prior to November 1, Article V also describes permissible actions for Great Lakes and/or the other participants during the rate moratoria. Following approval of the Settlement, Article V also provides that, with certain exceptions, any modification to the terms of the Settlement considered by the Commission shall be reviewed under the public interest standard. Participants shall not support any modification to the Settlement that is proposed to be made effective during the moratorium period. Article V also discusses the accelerated termination of the moratorium periods, which will occur in the event Great Lakes is subject to a proceeding in which materially adverse Section 5 relief, or a materially adverse change, is proposed to be implemented prior to November 1, Article V describes the obligations of Great Lakes and the participants in such an event, and provides Great Lakes and the participants with additional rights if certain defined events cause the rate moratoria to cease. 5

14 ARTICLE VI Article VI provides for the refiling requirement. Great Lakes shall file a new Section 4 general rate case no later than November 1, ARTICLE VII Article VII describes the design of interruptible and overrun rates and the treatment of interruptible and overrun rates and revenue. Effective June 1, 2010, rates for IT and firm overrun service will be derived on a 100% load factor basis of FT rates established in the Settlement. The Settlement also eliminates the IT and firm overrun service revenue sharing mechanism, effective May 1, Article VII also describes the process by which Great Lakes will calculate and pay the any portion of IT and firm overrun service revenue accrued prior to May 1, 2010 that is to be shared. ARTICLE VIII Article VIII describes the roll-in of both the Sithe Expansion and the RG&E Expansion. Effective May 1, 2010, the Sithe Expansion and the RG&E Expansion will be rolled-in to system-wide rates. The Settlement Rates are based upon the rolled-in rate treatment of such facilities. Article VIII also describes steps that effectuate roll-in of the costs and billing determinants of the Sithe Expansion and the RG&E Expansion for shippers (as defined in Article VIII). ARTICLE IX Article IX describes the (i) Settlement Rates; (ii) rates subject to repayment; and (iii) treatment of Disputing Parties. The Settlement Rates will be paid by all participants that are not Disputing Parties. Article IX also states that application of the Settlement Rates is provisional and provides that the Settlement Rates may be subject to adjustment or recollection if the Settlement is not approved by the Commission. Article IX also discusses how a party may 6

15 become a Disputing Participant, and the consequences in the event a participant becomes a Disputing Participant. This article also discusses the possibility of a party being severed from the Settlement, the effect of such severing, and the rights of the Disputing Participant and other participants that would arise under these circumstances. Article IX further establishes the applicable refund floors for those shippers paying Settlement Rates and the Disputing Participants, respectively. ARTICLE X Article X provides for the reservations in this Settlement. Article X also restricts certain actions of participants once the Settlement becomes effective, and details the effect of Commission approval. ARTICLE XI Article XI defines the Approval Date of the Settlement and describes the rights of the participants under the Settlement if the Settlement is not approved. ARTICLE XII Article XII describes the effect of Commission approval of the Settlement. III. INFORMATION TO BE INCLUDED WITH SETTLEMENT By order issued October 23, 2003, the Chief Administrative Law Judge requires that the following five questions be answered as part of every Explanatory Statement that is submitted in support of a proposed settlement agreement. The questions and the responses are as follows: (a) What are the issues underlying the settlement and what are the major implications? The Settlement resolves all issues in the captioned docket. The Settlement, if implemented as to all shippers, will provide for rate certainty, will reduce rates for firm 7

16 transportation service on the Great Lakes system, institute the Section 4 and Section 5 moratoria as described therein, and impose a rate refiling obligation upon Great Lakes. (b) Whether any of the issues raise policy implications? The resolution in the Settlement of issues in the indicated proceeding does not implicate new policy considerations. (c) Whether other pending cases may be affected? The Settlement resolves issues in this proceeding, and is the product of negotiations between various participants. The Settlement will affect future rate proceedings as described by its terms. The Settlement does not address pending cases aside from the captioned docket. (d) Whether the settlement involves issues of first impression, or if there are any previous reversals on the issues involved? The Settlement addresses no issues of first impression. There have been no known previous reversals on the issues involved in the Settlement. The Settlement addresses elements of prior settlements entered into regarding Great Lakes. The Settlement is not contrary to precedent. See response to subpart (b), supra. (e) Whether the proceeding is subject to the just and reasonable standard or whether there is Mobile-Sierra language making it standard? The Settlement may be evaluated under the fair and reasonable standard. It represents a consensus among all active participants and Trial Staff and produces an overall result that is fair and reasonable and in the public interest. In the event the Settlement is contested, it may be evaluated under the just and reasonable standard. To the extent that the Commission may consider any change to any then-effective provision(s) of the Settlement following approval and implementation, the standard for review for any such proposed change shall be the public interest Mobile Sierra standard, or the most rigorous standard in accordance with Commission 8

17 precedent. 1 Participants would not support any such proposed change to the provision(s) of the Settlement. 1 See Standard of Review for Modifications to Jurisdictional Agreements, 113 FERC 61,317 (2005) (Notice of Proposed Rulemaking); Standard of Review for Modifications to Jurisdictional Agreements, 125 FERC 61,310 (2008) (Withdrawal of Notice of Proposed Rulemaking and Termination of Rulemaking Proceeding); Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1 of Snohomish County, 128 S. Ct (2008); NRG Power Marketing LLC v. Maine Public Utilities Commission, 130 S. Ct. 693 (2010). 9

18 OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) Great Lakes Gas Transmission Limited Partnership ) Docket No. RP ) STATEMENT OF REFERENCES Pursuant to Rule 602(c)(1)(iii) of the Federal Energy Regulatory Commission s ( Commission ) Rules of Practice and Procedure, 18 C.F.R (c)(1)(iii) (2009), Great Lakes Gas Transmission Limited Partnership ( Great Lakes ) hereby submits in summary form this Statement of References to documents, testimony, and exhibits relevant to the Stipulation and Agreement filed simultaneously herewith. The filing, the record compiled (including the cost and revenue study provided by Great Lakes), Appendices to the Stipulation and Agreement and pleadings of the participants are relevant to the Stipulation and Agreement.

19 OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) Great Lakes Gas Transmission Limited Partnership ) Docket No. RP ) STIPULATION AND AGREEMENT (Dated May 21, 2010) Pursuant to Rule 602 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission ( FERC or Commission ), 18 C.F.R (2009), Great Lakes Gas Transmission Limited Partnership ( GLGT ), Commission Trial Staff ( Staff ) and the participants identified in Appendix A hereto (who, along with participants that qualify hereafter under Article IX.C.5, constitute the Supporting/Non-Contesting Participants ) (collectively Participants ) submit this Stipulation and Agreement ( Stipulation ) along with appendices, attachments, tariff sheets and related materials (collectively, the Settlement ) to resolve all issues in the captioned proceeding for the Docket No. RP Rate Period as defined below in Article III.E. GLGT respectfully requests that the Commission grant any necessary authorizations under the Natural Gas Act ( NGA ) and any waivers of its regulations, rules, orders or any currently effective tariff sheet(s) necessary to effectuate the Settlement. Staff and the Supporting/Non-Contesting Participants either support or do not oppose GLGT s request. ARTICLE I Purpose and Scope of the Settlement A. This Settlement resolves all issues within the scope of the captioned docket during the Docket No. RP Rate Period. The Settlement will, if implemented, reduce rates for firm transportation service on the GLGT system, provides for rate certainty, institute a

20 general rate case moratorium and impose a rate refiling obligation upon GLGT as described herein. B. The Settlement is an indivisible package that comprehensively resolves all matters in Docket No. RP , et seq. No particular issue can be severed from, or modification made to, this package without disturbing the balance of interests represented in the Settlement. Approval of this Settlement shall constitute approval of the tariff sheets referenced in Appendix B and waiver of such Commission regulations and orders as necessary to fully effectuate the terms of the Settlement. The Settlement produces an overall result that is fair and reasonable and in the public interest which, if contested, can be determined to be just and reasonable. However, no such finding is necessary since the Settlement represents, at the time of filing to the best of the information, knowledge and belief of GLGT, Staff, and the Supporting/Non-Contesting Participants, an uncontested resolution of all the issues herein. ARTICLE II Background A. On November 19, 2009, the Commission instituted an investigation, pursuant to Section 5 of the NGA, to determine whether the rates charged by GLGT are just and reasonable. Great Lakes Gas Transmission Limited Partnership, 129 FERC 61,160 (2009). The Commission set the matter for hearing under a Track II hearing timeline. The Commission also directed GLGT to file a cost and revenue study within 45 days of the issuance of the order initiating the investigation. On November 20, 2009, the Chief Administrative Law Judge designated Administrative Law Judge David H. Coffman to preside at hearing. On November 23, 2009, the Chief Judge extended the deadline for the cost and revenue study to February 4, On December 17, 2009, the Chief Judge granted a 30-day extension of the procedural schedule, as requested by Staff. 2

21 B. On January 14, 2010, a prehearing conference was held during which the participants proposed a procedural schedule, discovery procedures and protective order. On January 15, 2010, the ALJ issued an order establishing the procedural schedule. On January 19, 2010, the ALJ issued an order adopting rules for the conduct of the hearing. On January 20, 2010, the ALJ adopted the protective order. C. GLGT filed its cost and revenue study on February 4, Discovery commenced thereafter. On February 24, 2010, the Commission issued an order denying a request by Great Lakes for reconsideration and a limited stay. Great Lakes Gas Transmission Limited Partnership, 130 FERC 61,132 (2010). Subsequently, a settlement conference was duly noticed to the service list to take place on March 25, Thereafter, participants engaged in negotiations and exchanged settlement offers, eventually culminating in possible settlement. A draft of the uncontested terms proposed to resolve all issues in this docket was circulated to all participants on the service list. 1 Following much deliberation, no participant indicated opposition to settlement based on the proposed terms. On April 16, 2010, GLGT filed a motion to suspend the procedural schedule. That same day, the Chief Judge suspended the procedural schedule. On May 17, Great Lakes filed a Status Report. On May 19, the Chief Judge issued an order continuing suspension of the procedural schedule. ARTICLE III Rate Modifications and Depreciation A. Rates established pursuant to this Settlement are set out in tariff sheets contained in Appendix B hereto. The first page of Appendix B lists the tariff sheets resulting from the Settlement to be implemented in accordance with the effective dates shown thereon. These tariff sheets reflect the agreed-upon rates for GLGT s services, including firm transportation service 1 A copy of the Commission s official service list in this docket is attached hereto as Appendix D. 3

22 ( FT ), interruptible transportation service ( IT ), Park and Loan services, and the revised surcharges applicable to certain contracts for capacity associated with the Sithe Expansion certificated in Docket No. CP and the RG&E Expansion certificated in Docket No. CP (all agreed-upon rates and surcharges together, Settlement Rates ). These agreed-upon rates supersede the rates previously in effect on GLGT for customers ( pre-settlement Rates ), except that Disputing Parties, 2 as defined in Article IX.C.2(b), shall pay the rates set out on Original Sheet No. 4B. The roll-in of the Sithe and RG&E Expansion Facilities is to be implemented effective May 1, 2010 prospectively as discussed in Article VIII, and is reflected in the Settlement Rates. B. GLGT shall apply the depreciation rates set forth in this Article III, Paragraph B to be effective May 1, A final and non-appealable Commission Order (as defined in Article IX.B.1) approving the Settlement shall constitute all necessary authority, including under Section 9 of the NGA, for GLGT to apply the following depreciation rates effective May 1, 2010: Function Docket No. RP Settlement Pre-Settlement Depreciation Rates Transmission Plant 1.48 % 2.75% Intangible Plant Organization 2.33% 2.75% Environmental 2.33% 2.75% Franchises and Consents 2.33% 2.75% Geographic Information System GIS 2.33% 2.75% General Plant Computer Software 0.00% 20.00% 2 Disputing Party is a defined term of this Settlement Agreement and is not synonymous or coextensive with Contesting Party as that term is used in the Commission s rules and regulations. 4

23 390.1 Structures & Improvements 4.00% 4.00% Office Equipment 6.67% 6.67% Office Furniture 6.67% 6.67% High-Tech Equipment 20.00% 20.00% Automobiles 0.00% 24.00% Trucks 15.00% 15.00% Trailers 9.00% 9.00% Aircraft 0.00% 10.00% Tools, Shop & Garage Equip Power Operated Equipment Communications Equipment 6.67% 6.67% 6.00% 6.00% 10.00% 10.00% Negative Salvage 0.00 % 0.00% C. Upon filing of this Settlement, and before its approval, rejection or withdrawal, the proposed tariff sheets set forth in Appendix B shall be implemented pursuant to the terms of the Settlement and effective as of the dates reflected on the tariff sheets ( Implementation Dates ). D. Any rate or billing adjustment ( initial adjustment ) implemented pursuant to this Settlement (see Articles III, IV and IX.B) is subject to subsequent billing adjustment or reversal ( subsequent billing adjustment ) in the event of a disposition on appeal, reconsideration or rehearing that alters, modifies, rejects or eliminates the terms of this Settlement in whole or in part. The Participants agree that under such circumstances, GLGT can make a subsequent billing adjustment consistent with the order or to effect a reversal of the initial adjustment; that a subsequent billing adjustment procedure is proper; and that the subsequent adjustment is not prohibited by the filed rate doctrine, does not constitute retroactive 5

24 ratemaking, and is not in any way procedurally objectionable, infirm or unlawful. Consistent with the rights of the participants as contained in Article IX, the Supporting/Non-Contesting Participants do not in any way waive their right to object to the computation of any such subsequent billing reversal filed by GLGT. Notwithstanding the foregoing provisions of Article III.D, if the Commission approves the Settlement with conditions or modifications that materially and adversely affect a Supporting/Non-Contesting Participant, and that Participant seeks rehearing solely to reinstate the prior terms of the Settlement, then such Participant may challenge any billing adjustment, caused or claimed to be caused, by such change, as inconsistent with the terms of the Settlement (see Article IX.C.2(b)(iii)). E. The Docket No. RP Rate Period begins on the day the Commission approves this Settlement, consistent with Article XI.A, and ends October 31, 2012, unless in accordance with Article V.B.1, GLGT files an NGA Section 4 general rate case on or after June 1, 2011, in which case the Docket No. RP Rate Period will terminate upon the date rates in such NGA Section 4 general rate case are placed into effect, which the Participants agree will not be prior to December 1, ARTICLE IV Revenue Sharing A. GLGT will share with Qualifying Shippers fifty percent (50%) of the Revenue Subject to Sharing ( RSS ), both as defined herein. RSS shall consist of the reservation and utilization revenue, both firm and interruptible, in excess of $500 million that GLGT receives between November 1, 2010 and October 31, 2012 (the RSS Period ) for jurisdictional service during that period. 6

25 B. Qualifying Shippers are those shippers who are eligible to receive RSS under this Article IV. Only those shippers that (i) are Supporting/Non-Contesting Participants and are therefore bound by this Settlement and (ii) have paid or are paying rates for jurisdictional service at some time during the RSS Period may qualify for revenue sharing. C. GLGT will file a True-Up Report ( Report ) with the Commission, and post the Report on GLGT s website no later than January 15, 2013, in which GLGT will identify any resulting RSS payments to be made to the Qualifying Shippers in accordance with this Article IV. Participants may file objections to, protests to and other pleadings regarding the Report no later than 20 days after the Report is filed, but in no event shall they contest, and the Participants hereby agree, that the portion of RSS that will be paid to each Qualifying Shipper, subject to Article IV.D, shall equal the product of (1) the percentage of that Qualifying Shipper s payments (for jurisdictional services received by that Qualifying Shipper during the RSS Period) as compared to the jurisdictional revenues received by GLGT from all Qualifying Shippers during the RSS Period, and (2) RSS, net of any pass-through or surcharge amounts (e.g., Annual Charges Adjustment, ACA ) received by GLGT during the RSS Period, and subject to any adjustment to the Report required by the Commission. Qualifying Shippers will receive their respective RSS payments within 45 days of an order rejecting any protests, objections or other pleading adverse to the Report, or accepting the Report without modification, qualification or condition after the Report has been filed ( Payment Date ). Payment will be made in the form of either a check or a credit to Qualifying Shippers invoices for jurisdictional service, at GLGT s election. If an order of the Commission rejects, modifies, qualifies or imposes conditions upon the Report ( Rejection Order ), such that GLGT or a Supporting/Non-Contesting Party files a pleading in opposition to the order, GLGT 7

26 may retain the RSS until the Commission issues a Final Commission Order that resolves the matter, provided, however that interest at a rate equal to the Federal funds (effective) monthly rate published in the Federal Reserve Statistical Report H.15 shall accrue on the RSS beginning on the 45th day following the Rejection Order. D. If GLGT files a Section 4 general rate case and places (subject to refund) into effect new rates which are not subject to a final and non-appealable Commission Order (as defined in Article IX.B.1) prior to the end of the RSS Period, any resulting jurisdictional revenue collected based upon the portion of proposed rates equal to the refund floor (see Article IX.C.9) will be included in the calculation of RSS as specified in Article IV.C; jurisdictional revenue collected during the RSS Period based upon the portion of proposed rates that is in excess of the refund floor will not be included in the calculation of RSS as provided for in Article IV.C. Jurisdictional revenue collected during the RSS Period based upon the portion of proposed rates in excess of the refund floor only will be included in the calculation of RSS once the rates resulting from the Section 4 filing referenced in the first sentence of Article IV.D have been established by a final and non-appealable Commission Order. No later than forty-five (45) days following issuance of the final and non-appealable Commission Order, GLGT will file a Second True-Up Report with the Commission and will issue any applicable payments, determined in accordance with the methodology set forth in Article IV.C, to Qualifying Shippers within thirty (30) days of filing the Second True-Up Report. Payments associated with the Second True-Up Report will accrue interest at a rate equal to that applicable based on the Federal funds (effective) monthly rate published in the Federal Reserve Statistical Report H.15. 8

27 bargain. ARTICLE V NGA Section 4 and Section 5 Moratorium A. The Participants recognize that each of them seeks to maintain the benefit of their B. Moratorium 1. Except in accordance with Article V.C, GLGT will not file a NGA Section 4 general rate case or otherwise make any effort before FERC to increase, change or modify the Settlement Rates (established in Article III) or to otherwise modify the terms of the Settlement prior to June 1, 2011 except as otherwise authorized herein. It is the agreement of the Participants that the Settlement Rates will remain in effect through at least November 30, 2011 (assuming a five-month suspension period) ( GLGT Rate Moratorium Period ) and thus any NGA Section 4 general rate case filed by GLGT on or after June 1, 2011, shall not request an effective date prior to December 1, With the exception of any governmental agency that by law cannot bind itself or a future Commission to this Settlement and except in accordance with Article V.C and V.D, GLGT s customers, participants herein, and any successor, assignee or affiliate of any of the foregoing (collectively, Customers 3 /Participants ), will not initiate, undertake, pursue, seek, advocate, support, aid or abet any effort, whether individually or with others, under NGA Section 5, or otherwise, at the Commission or with any other governmental authority, tribunal or regulatory body having jurisdiction over GLGT, to modify, restrict, encumber, reduce or otherwise change in any way, with respect to GLGT, the Settlement Rates or to otherwise modify the terms of the Settlement to be effective before November 1, 2012 (a Restricted 3 Customers means entities that have taken, are taking or will take service on Great Lakes, their successors, assignees or affiliates. 9

28 Proceeding ). The Customers/Participants hereby waive and relinquish their rights under NGA Section 5, including advocating (unilaterally or otherwise) any changes or adjustments to the Settlement with respect to GLGT, or accepting any reduction in Settlement Rates, to be effective before November 1, 2012 ( Customer/Participant Rate Moratorium Period ). Nothing in this Article V.B.2 shall limit the right of any Customer/Participant to make any claims or assertions governed by NGA Section 5 in an NGA Section 4 proceeding filed by GLGT, provided any changes in rates resulting from any such claims or assertions shall not be effective prior to the end of the Customer/Participant Moratorium Period. C. Permissible Actions During the Moratorium 1. Neither GLGT nor any Customer/Participant shall be precluded by this Article from (a) seeking enforcement of the terms of this Settlement, (b) challenging the implementation of any term of the Settlement on the basis that it has been improperly or incorrectly implemented or applied under the terms of the Settlement, (c) participating in a Restricted Proceeding when in any such Restricted Proceeding they expressly support continuation of the effectiveness of this Settlement and do not oppose implementation or continuation of any portion of this Settlement, or (d) participating in a proceeding other than a Restricted Proceeding, as defined in Article V.B.2. Neither GLGT nor any Customer/Participant will take a position or make an argument in a Restricted Proceeding during either the GLGT Rate Moratorium Period, or the Customer/Participant Rate Moratorium Period, respectively, which would advocate that the Commission or other governmental authority or regulatory body having jurisdiction should find cause to require, or should direct, a change in this Settlement in violation of either Rate Moratorium Period. During the Customer/Participant Rate Moratorium Period, no Customer/Participant shall advocate that GLGT cannot seek to collect from, or the Commission 10

29 cannot impose upon, a Disputing Party as defined in Article IX.C.2(b), the rates set forth in Original Sheet No. 4B. 2. The GLGT Rate Moratorium Period and Customer/Participant Rate Moratorium Period shall not prevent GLGT or Supporting/Non-Contesting Participants from (i) petitioning to initiate rulemaking proceedings of general industry-wide applicability; (ii) actively participating in any rulemaking, notice of inquiry, or similar proceeding of general applicability before the Commission ( Commission Rulemaking ); (iii) petitioning for and actively participating in judicial appeals of Commission Rulemaking proceedings; (iv) participating in any other Commission proceeding consistent with the terms of Article V of this Stipulation; or (v) pursuing or opposing any legislative change of general applicability to the natural gas or interstate natural gas pipeline industries. In addition, during the GLGT Rate Moratorium Period, GLGT may file tariff provisions to comply with the terms of any order resulting from such Commission Rulemaking proceedings provided that GLGT shall use reasonable efforts to comply with such order in a manner consistent with the Settlement, and shall affirmatively seek a waiver of any requirement that would conflict with the Settlement while complying with any binding Commission order. Notwithstanding the foregoing provisions of this Article V, during the GLGT Rate Moratorium Period and Customer/Participant Rate Moratorium Period, neither GLGT nor Customers/Participants may argue for or advocate a change in the terms of this Settlement to be effective during the GLGT Rate Moratorium Period or Customer/Participant Rate Moratorium Period as part of any otherwise generic action taken, and this Settlement may be cited to demonstrate that either GLGT or any such Customer/Participant supports continued application of the terms of the Settlement during the GLGT Rate Moratorium Period or Customer/Participant Rate Moratorium Period, rather than imposition of any change inconsistent 11

30 with the terms of this Settlement, whether rendered directly or indirectly, individually or through a generic change, or otherwise. 3. Nothing in this Article V shall preclude GLGT, during the GLGT Rate Moratorium Period, from filing pursuant to Sections 4 or 7 of the NGA for incremental or other rates, for service through facilities or under rate schedules not included in the Settlement Rates (e.g., for new facilities or services placed into service after the filing of this Settlement) and/or from filing for changes in the General Terms and Conditions of service provided by GLGT under its FERC Gas Tariff, Second Revised Volume No. 1 and Original Volume No. 2, that are not part of the Settlement, provided that such filings do not propose to alter the Settlement Rates, or substantially and negatively impact the existing tariff provisions addressed to firm services or other terms of the Settlement. Nor shall this Settlement preclude the Customers/Participants from taking any position in such Section 4 or Section 7 proceeding filed by GLGT, provided that such position does not advocate changes to be implemented in the Settlement Rates or any other terms of this Settlement during the GLGT Rate Moratorium Period or Customer/Participant Rate Moratorium Period. 4. During the GLGT Rate Moratorium Period and notwithstanding any other provision of this Settlement: (a) GLGT will not be prohibited from filing and collecting surcharges to which GLGT is currently entitled as a matter of Commission policy, order, tariff or contractual right, or that GLGT is required to implement during the RP Rate Period by Commission order; (b) its customers will not be prohibited from paying surcharges to which GLGT is currently entitled as a matter of Commission policy, order, 12

31 tariff or contractual right, or that GLGT is required to implement during the RP Rate Period by Commission order, unless otherwise provided by contract; and (c) the Commission will not be prohibited from placing into effect new tariff provisions, or changes, successors or replacements to existing tariff provisions in order to implement surcharges to which GLGT is entitled as a matter of Commission policy, order, tariff or contractual right. Provided such filing meets the foregoing requirements, and consistent with Article V.C.2, neither (a) periodic filings as provided for under the ACA or any successor thereto and any other generic fees or surcharges imposed by the Commission; nor (b) other generic surcharges for amounts owed by GLGT, but not recovered through its existing rates, shall be considered to be modifications to this Settlement. As such, Customers/Participants shall have the right to (i) challenge whether such filing falls within the eligibility provisions of this paragraph; (ii) challenge the eligibility or prudence of any item that is included in the surcharge(s) referenced in the immediately preceding sentence; (iii) take the position that GLGT has incorrectly or improperly calculated such surcharge(s) pursuant to the provisions thereof, including, but not limited to, that such surcharge(s) recover(s) costs already included in its existing rates, or that they recover other surcharges set forth in the Settlement or its existing tariffs; or (iv) with respect to future surcharges not currently in effect or not placed into effect as part of the Settlement, challenge the implementation thereof on any grounds. 5. After approval of this Settlement, to the extent the Commission considers (notwithstanding the terms of the Settlement) any change to the terms of the Settlement to be effective during the Customer/Participant Rate Moratorium Period, except those changes 13

32 initiated by GLGT pursuant to a Section 4 proceeding that are consistent with Article V.B.1, the standard for review for any such proposed change shall be the public interest standard for review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp. 4 and Federal Power Commission v. Sierra Pacific Power Co. 5 ( Mobile-Sierra Doctrine ) to the full extent legally permissible. 6 In any such proceeding, Supporting/Non-Contesting Participants shall not support any change to be made effective during the Customer/Participant Rate Moratorium Period to the provisions of the Settlement. D. Accelerated Termination of Rate Moratorium Period 1. Should GLGT, during the GLGT Rate Moratorium Period or Customer/Participant Rate Moratorium Period, be subject to a proceeding in which materially adverse NGA Section 5 relief, or a materially adverse change, is proposed to be implemented prior to November 1, 2012 (a Triggering Action ) with regard to Resolved Matters as defined in Article X.D.1, GLGT and each of the Supporting/Non-Contesting Participants, with the exception of any governmental entity that by law cannot bind itself or a future Commission to this Settlement under the Customer/Participant Rate Moratorium Period, shall have an affirmative obligation to support the continued application of the terms of the Settlement in such proceeding, provided that the Supporting/Non-Contesting Participants shall not be required to intervene, protest, file comments, or otherwise actively participate in the proceeding so long as the existence of the Settlement, and the terms of this Article V.D may be cited as evidence that each of the foregoing supports the continued application of the terms of the Settlement U.S. 332 (1956). 350 U.S. 348 (1956). Morgan Stanley Capital Group Inc. v. Public Utility District No. 1, 128 S. Ct (2008); NRG Power Marketing LLC v. Maine Public Utilities Commission, 130 S. Ct. 693 (2010); Dominion Transmission Inc. v. FERC, 533 F.3d 845 (2008). 14

33 However, if a Supporting/Non-Contesting Participant does elect to take a position on the merits (e.g., plain intervention would not trigger this clause) in the referenced NGA Section 5 proceeding, it must explicitly inform the Commission of its continued willingness to be bound by, or non-opposition to, the terms of the Settlement. 2. During the GLGT Rate Moratorium Period: (a) should GLGT be subject to either an investigation initiated by the Commission under NGA Section 5, or to a proceeding initiated by another entity or person under Section 5 which seeks to reduce GLGT rates or increase GLGT s costs, then GLGT will have the right to file one or more new Section 4 general rate case(s) to become effective no earlier than the date of any relief to be implemented under Section 5 (or December 1, 2011, whichever is sooner) to change any rate charged in connection with a contract with regard to which implementation of requested Section 5 relief would affect the attribution or allocation of costs or revenues or modify the rate collected in connection with providing service under such contract; (b) should the level of Settlement Rates established in Article III be materially reduced by any relief implemented as a result of a Triggering Action, then GLGT will have the right to file one or more new Section 4 general rate case(s); and (c) should the level of Settlement Rates established in Article III be materially increased, each Supporting/Non-Contesting Participant shall have the right to contest any such increase in the rate(s). 15

34 The exercise of any of the rights described in Article V.D.2(a)-(c) shall constitute a Moratorium Cessation Action. Upon the occurrence of (a) above, each of the Supporting/Non-Contesting Participants will have the right to protest the filing, or to file one or more new Section 5 complaint(s) but only insofar as the attribution or allocation of costs or revenues to, or modification of the rate collected in connection with, a contract referenced in Article V.D.2(a) is concerned. Upon the occurrence of (b) above, each of the Supporting/Non- Contesting Participants will have the right to protest the filing, or file one or more new Section 5 complaints. Prior to any party making any filing permitted in this Article V.D.2, GLGT and Supporting/Non-Contesting Participants herein shall promptly hold a conference for the purpose of discussing matters related to such filing(s). No change proposed in a Moratorium Cessation Action or any responsive filings thereto as permitted in this Article V.D.2 shall take effect prior to the date when any change or relief arising from the Triggering Action would take effect. GLGT shall have the right to request that any NGA Section 4 general rate case be subject to a shortened suspension period so as to take effect on the same date as NGA Section 5 relief, and shall request a waiver of Section of the Commission s regulations, as necessary; Supporting/Non-Contesting Participants shall have the right to file a response to such a request. GLGT and every other Supporting/Non-Contesting Participant making a filing pursuant to this Article V.D.2 shall clearly state therein that its preferred outcome during the GLGT Rate Moratorium Period or Customer/Participant Rate Moratorium Period, respectively, is retention of the benefit of the bargain struck in the Settlement, and that any alternative thereto should be implemented only if the Commission otherwise would modify the terms of the Settlement. GLGT and every other Supporting/Non-Contesting Participant may respond to any such filing as 16

35 it sees fit, provided that it complies with the fourth and fifth sentences of this paragraph of Article V.D.2. 1, ARTICLE VI Refiling Requirement A. GLGT shall file a new NGA Section 4 general rate case no later than November ARTICLE VII Interruptible and Overrun Rates and Revenue A. Effective June 1, 2010, rates for IT and firm overrun service ( I/O ) will be derived on a 100% load factor basis of FT rates established in this Settlement, as reflected in the Appendix B tariff sheets. B. 1. Effective May 1, 2010, revenue from IT and I/O will be shared, if at all, only through RSS as specified in Article IV.A. 2. Effective May 1, 2010, this Settlement eliminates any obligation of GLGT to share I/O revenue under the sharing mechanism ( I/O Revenue Sharing Mechanism ) provided for in the September 24, 1992 Stipulation and Agreement in Partial Settlement of Rate Proceedings in FERC Docket No. RP , et seq. (the 1992 Stipulation ) (which mechanism is hereby eliminated), or under any other revenue sharing mechanism except as specified in Article VII.B By July 1, 2010, GLGT will prepare and serve upon all customers and affected state commissions a final report concerning I/O Revenue Sharing through and concluding April 30, GLGT will issue applicable I/O Revenue Sharing payments at that time. Consistent with the previous paragraph, the report and payments shall be calculated consistent with GLGT s I/O revenue sharing mechanism (e.g., net of fixed costs allocated to I/O 17

36 service of $463,762.00, 7 ACA surcharges, variable costs), and based upon services provided from November 1, 2009 through April 30, 2010 inclusive. The report and payments shall not include results from any other period or service. ARTICLE VIII Rates for Sithe Expansion and RG&E Expansion A. Effective May 1, 2010, the costs of the Sithe Expansion and RG&E Expansion will be rolled-in. The Settlement Rates are based upon the rolled-in rate treatment of such facilities. The Sithe Expansion consists of those facilities certificated in Docket No. CP The RG&E Expansion consists of those facilities certificated in Docket No. CP No Customer/Participant shall challenge, support a challenge, or cause to be challenged, the rolling in of the following to derive GLGT s future System Rates: 1. for purposes of calculating depreciation expenses, gross plant costs associated with each of the Sithe Expansion and RG&E Expansion facilities; 2. for purposes of establishing a rolled-in rate base, net plant costs associated with each of the Sithe Expansion and RG&E Expansion facilities; and RG&E Expansion facilities. 3. billing determinants associated with each of the Sithe Expansion and Such rolled-in rate treatment shall be applicable for the Sithe Expansion and RG&E Expansion facilities for their remaining service lives, unless such facilities are no longer used to provide service on GLGT s system. B. Proposed Tariff Sheet No. 4A, contained in Appendix B hereto, provides for revised Reservation and Maximum Volumetric Rate Surcharges ( Settlement Surcharges ) that 7 This calculation is based on the rates accepted by Commission order. Letter Order, Great Lakes Gas Transmission Limited Partnership, Docket No. RP (issued May 15, 1997). 18

37 will apply to each contract for transportation service currently subject to reservation and utilization surcharges (including discounts where applicable), related to the Sithe and RG&E Expansions ( Surcharged Contracts ). C. Shippers under Surcharged Contracts as listed on Sheet No. 4A or shippers receiving service pursuant to temporary capacity releases related to the Surcharged Contracts agree to execute revised firm transportation service agreements, to be effective May 1, 2010, to implement changes to each pre-settlement Surcharged Contract whereby (a) the maximum applicable Settlement Rates will be applied to the service provided under such Surcharged Contract, and (b) the Settlement Surcharges listed on Sheet No. 4A, and as contained in Appendix B hereto, will be applied to the maximum applicable Settlement Rate, with the result that each Surcharged Contract will be billed the same charges as would have been billed for the same service under the pre-settlement rates, inclusive of the surcharges paid by such shipper for such service prior to May 1, D. In its next NGA Section 4 rate proceeding, GLGT will file to remove the Settlement Surcharges and Sheet No. 4A, both to be effective on the same date that the new Section 4 rates are placed into effect, consistent with Article V.B herein, and the provisions of such tariff sheets shall be null and void as of the date when rates pursuant to the next NGA Section 4 rate proceeding take effect. Supporting/Non-Contesting Participants shall not oppose the removal of Sheet No. 4A and the Settlement Surcharges from GLGT s tariff. E. The Settlement Surcharges listed on Sheet No. 4A, and as contained in Appendix B hereto, shall apply until either (1) the end of the initial term of post-settlement Surcharged Contracts or (2) the effective date of new rates resulting from GLGT s filing of a Section 4 rate case, whichever occurs first. The maximum applicable Settlement Rates shall apply to any 19

38 subsequent renewal, extension, permanent release, or turn back of the capacity under the Surcharged Contracts unless GLGT otherwise agrees in a signed written document. F. In conjunction with, and only until either (1) the end of the initial term of any Surcharged Contract or (2) the effective date of new rates resulting from GLGT s filing of a Section 4 rate case, whichever occurs first, GLGT also agrees to provide a Contractual Right of First Refusal ( Contractual ROFR ) as provided for under Section 16 of the GT&C of GLGT s FERC approved tariff, as such rights, obligations and procedures may be modified from time to time. G. In the event that GLGT agrees to provide a subsequent discount for the capacity covered by a contract listed on Sheet No. 4A, it is expressly agreed that this Settlement does not confer a right to Contractual ROFR, or any other right of first refusal, for any such subsequent discount, whether such discount is agreed to in the ROFR process or otherwise. A. Settlement Rates ARTICLE IX Dates When Settlement Rates Become Effective 1. The Settlement Rates reflected in the tariff sheets of Appendix B shall become effective on the dates reflected on such tariff sheets. The bills for service received by Supporting/Non-Contesting Participants, including participants or shippers that do not contest the Settlement and thereby become Supporting/Non-Contesting Participants pursuant to Article IX.C.5, shall reflect the application of the Settlement Rates. Original Sheet No. 4B rates shall apply only to Disputing Parties in accordance with this Article IX and shall not apply if a participant remains a Supporting/Non-Contesting Participant or upon such time as a participant becomes a Supporting/Non-Contesting Participant. 20

39 2. GLGT and the Supporting/Non-Contesting Participants respectfully request that the Commission waive the notice period for the Settlement Rates. All participants in this docket have received notice of the terms of the Settlement. Therefore good cause exists and the public interest supports waiver of the notice requirement. GLGT and the Supporting/Non- Contesting Participants respectfully request that the Commission implement a nominal suspension period for the IT Settlement Rates and waive suspension for the FT Settlement Rates. Such requests are warranted given the intent of GLGT and the Supporting/Non-Contesting Participants to put the Settlement Rates into effect on the Implementation Dates pursuant to Article III.C. See City of Piqua, Ohio v. FERC 8 (the Commission may set an effective date that falls before the filing date when the parties have agreed to such a date). B. Rates Subject to Adjustment/Recollection 1. Application of the Settlement Rates is provisional unless and until a Commission order approving the Settlement in accordance with Article XI.A, becomes final and non-appealable. 9 If the Settlement is conditioned or modified adversely to a party to the proceeding other than GLGT, such party may determine that it wishes to become a Disputing Party, as defined below. If the Settlement is not ultimately approved in accordance with Article XI then any rate or revenue differences resulting from the application of the Settlement terms, as compared to the pre-settlement terms, will be subject to repayment to or by GLGT as described in Article IX.B In the event that the Settlement is not approved in accordance with Article XI, the Participants agree that: F.2d 950, (D.C. Cir. 1979). The term final and non-appealable, as used herein, means an order for which no pending appeal, petition for certiorari, or motion for rehearing or reconsideration is pending and for which the time period within which to seek appeal, certiorari, rehearing or reconsideration has expired. 21

40 (a) GLGT will be entitled to retrieve revenues for services for which rate(s) had been decreased under the Settlement, in such amount(s) representing the difference between the Settlement Rates and pre- Settlement Rates plus interest at the Federal funds (effective) monthly rate published in the Federal Reserve Statistical Report H.15; (b) GLGT will be required to credit to Customers revenues collected for services for which rate(s) had been increased under the Settlement, in such amount(s) representing the difference between the Settlement Rates and pre-settlement rates plus interest at the Federal funds (effective) monthly rate published in the Federal Reserve Statistical Report H.15; and (c) GLGT will be required to credit to Customers any credits (e.g., I/O Revenue Sharing) to which the Customers would have been entitled absent the Settlement, with interest at the Federal funds (effective) monthly rate published in the Federal Reserve Statistical Report H.15. (d) GLGT shall have the right to re-bill each Customer, and each Customer hereby agrees that it will not challenge the lawfulness of such re-billing, in order to recover or credit the difference between (i) the Settlement Rates with respect to the services rendered to such Customer, and (ii) the pre-settlement Rates with respect to the services rendered to such Customer, together with any revenue to which that Customer would have been entitled under the I/O Revenue Sharing Mechanism absent the Settlement, and any other credits to which the Customers would have been 22

41 entitled absent the Settlement. Such re-billing may be achieved by a surcharge or credit to current service. C. Treatment of Disputing Parties 1. The exchange of consideration in the Settlement is intended for those participants that will observe and be bound by the terms of the Settlement. The Settlement shall become effective in accordance with Articles III, IX.A and XI, for Supporting/Non-Contesting Participants. 2. Entitlement to pay Settlement Rates. (a) Except as provided under Article IX.C.2(b), GLGT customers shall be entitled to pay the Settlement Rates set forth in the Appendix B tariff sheets, or the rates provided for in Article VIII, as applicable, and to receive any other Settlement benefit for which they qualify (e.g., receive RSS), until the effective date of rates in GLGT s next NGA Section 4 general rate case. (b) An entity or participant shall become a Disputing Party (a Disputing Party ), not entitled to the benefits identified in Article IX.C.2(a), and shall be entitled to pay rates specified on Original Sheet No. 4B for firm service, upon its engagement in any of the following conduct: (i) subsequent to the approval of the Settlement without modification by the Commission the entity or participant states in a submission to the Commission or by written notice to GLGT that it does not intend to be bound by the Settlement or to pay the 23

42 Settlement Rates for service, or pursues rehearing, reconsideration or appeal of such Commission Order; (ii) prior to the Commission s approval of the Settlement, it states in a filing in Docket No. RP its desire to be severed from the Settlement and/or asserts the existence of genuine issues of material fact that prevent the Commission from imposing the terms of the Settlement on such entity, or (iii) upon an order by the Commission approving the Settlement and imposing the Settlement terms on such entity, such entity chooses to pursue rehearing, reconsideration or appeal or otherwise continue to challenge such Order, except insofar as that entity seeks to have the original terms of this Settlement reinstated and applied to it; or (iv) except to the extent permitted in Article IX.C.2(b)(iii), advance directly and indirectly any claim of right contrary to the express provisions of this Settlement, whether or not modified, once it has become effective. 3. Notwithstanding Article IX.C.2 during the period prior to an order on the merits concerning this Settlement ( Commission Implementation Order ), a Participant is not a Disputing Party unless it states in comments filed in this Settlement Docket No. RP that it cannot be bound by the Settlement after the Commission s Implementation Order. 4. A Disputing Party shall be deemed to contest this Settlement as to each and every one of its service agreements with GLGT. If a Supporting/Non-Contesting Participant 24

43 receives services at the Settlement Rates, yet at any time during the Docket No. RP Rate Period engages in action consistent with the definition of a Disputing Party, GLGT shall have the authority to retrieve revenues, or issue a credit or billing adjustment, as applicable, representing the difference between the pre-settlement Rates and Settlement Rates, as of the date the Disputing Party originally began paying the Settlement Rates, as well as interest thereon at a rate equal to the Federal funds (effective) monthly rate published in the Federal Reserve Statistical Report H.15., all in accordance with Article IX.B Any commenter, participant, or GLGT shipper who does not meet the definition of a Disputing Party as set forth in Articles IX.C.2 and 3, shall be deemed to be a Supporting/Non-Contesting Participant for purposes of this Settlement, including, inter alia, for purposes of refraining from action as required under Article V hereof. Nothing in this Article IX.C or Article V shall prevent a commenter or participant from filing (or cause such commenter or participant s status to change from that of one of the Supporting/Non-Contesting Participants to a Disputing Party in the event they file) (i) comments or other pleadings in this proceeding supporting the Settlement without modification or condition; or (ii) a request for rehearing to the extent rehearing is sought regarding any modifications or conditions to the Settlement adopted by the Commission. 6. Should a Disputing Party desire, it may become one of the Supporting/Non-Contesting Participants subsequent to the filing of comments or a request for rehearing on the Settlement or subsequent to the issuance of a Commission order regarding this Settlement by withdrawing pleadings it has filed that make it a Disputing Party pursuant to Article IX.C.2(b) and giving written notice that it wishes to be a Supporting Non-Contesting Participant; however, the Settlement Rates and entitlements, including RSS entitlements, shall 25

44 take effect for that formerly Disputing Party prospective from the latter of (1) the Approval Date of the Settlement or (2) the date of the change in the status of the commenter, participant or GLGT shipper to Supporting/Non-Contesting Participant. 7. If the Commission finds that a Disputing Party cannot be bound by the Settlement, GLGT and the Supporting/Non-Contesting Participants request the Commission sever the Disputing Party or Parties and not make any provision of this Settlement, other than this Article IX.C, effective as to the Disputing Party or Parties. The severed Disputing Parties will be allowed to litigate their issues in accordance with applicable law, and GLGT will be free without jeopardizing the Settlement to litigate on all issues with regard to severed Disputing Parties. Following a final and non-appealable Commission Order approving the Settlement, the only issues remaining before the Commission in Docket No. RP will be those (if any) pursued by parties severed from this Settlement. Severance of parties is a last resort, if possible, to avoid modification of the bargains memorialized in the Settlement to the extent allowed under Rule 602 of the Commission s Rules of Practice and Procedure. 8. As to any party severed from the terms of this Settlement pursuant to this Article IX.C, GLGT and any Supporting/Non-Contesting Participant shall have the same rights with regard to said Disputing Party that it would have had if this Settlement did not exist. 9. Except as identified in Article IX.C.10 immediately following, the Settlement Rates as stated herein, or, as adjusted under Article IX.B, and the rates identified in Article VIII, shall constitute the refund floor in the earlier of proceedings under Articles V and VI. 10. The maximum base tariff rates for services to parties (if any) severed from this Settlement shall be the maximum base tariff rates reflected in GLGT s tariff in effect April 26

45 30, 2010 for such service. Severed parties will also be liable for applicable surcharges (e.g., ACA). In GLGT s next general NGA Section 4 rate filing following Docket No. RP10-149, in which refunds are at issue, the refund floor for parties, if any, severed from this Settlement shall be the firm maximum rates either established in the Commission s ultimate disposition of rates pursuant to procedures implemented for parties severed (if any) from this Settlement, or as reflected in GLGT s Tariff in effect April 30, 2010, and any other rates on file, not challenged by any party severed from this Settlement. ARTICLE X Reservations A. Neither GLGT, nor any Supporting/Non-Contesting Participant, shall be bound or prejudiced by any part of this Settlement, unless it becomes effective in accordance with the provisions hereof, except as to Articles III.D and IX.B. B. Neither GLGT nor any Supporting/Non-Contesting Participant may: 1. with respect to an order which approves this Settlement without condition or modification, seek rehearing or judicial review; or 2. seek to set aside this Settlement or challenge its applicability to such party once it has become effective in accordance with this Article; or 3. advance any claim of right contrary to the express provisions of this Settlement, once it has become effective in accordance with this Article. C. Subject to the disposition of the matters identified herein, if this Settlement shall become effective, the rate and billing adjustments for which provision is made herein and the other considerations set forth in this Settlement shall constitute the entirety of GLGT s financial obligations to any shipper, existing or potential, for refunds, remittances, credits, billing adjustments or any other form of compensation with respect to rates and charges collected, 27

46 provided that, corrections of billing errors may be sought by the affected Customer (see Sections 9.2 and 9.5 of the GT&C of GLGT s tariff). D. 1. The Settlement embodied herein is submitted pursuant to the terms of Rule 602 of the Rules of Practice and Procedure of the Commission, 18 C.F.R (2009). The Commission s approval of this Settlement shall not constitute precedent nor be used to prejudice any otherwise available rights or arguments of any participant in a future proceeding, other than to enforce the terms of the Settlement or collect rates due for service provided during the RP Rate Period, and shall not be used as evidence that a particular method is a longstanding practice as that term is used in Columbia Gas Transmission Corp. v. FERC, 628 F.2d 578 (D.C. Cir. 1975), or a settled practice as that term is used in Public Service Commission of New York v. FERC, 642 F.2d 1335 (D.C. Cir. 1980), cert. denied, 454 U.S. 880 (1981). Notwithstanding any provision of this Settlement and in particular the prior sentence, roll-in of the RG&E and Sithe Expansions as described in Article VIII shall take effect May 1, 2010, and shall continue thereafter permanently. Except insofar as necessary to recover contingent rate or billing adjustments provided pursuant to Articles III and IX, unless and until this Settlement is approved and becomes effective in accordance with the provisions set forth herein, (i) this Settlement, (ii) any of the proposed tariff sheets attached hereto, and (iii) the content of any settlement negotiations resulting therein: (a) may not be employed or cited to in any manner in any proceeding before the Commission or in any other forum, except as necessary to enforce the terms of this Settlement, and; (b) shall not be deemed an admission by any party of any principle contained herein. 28

47 It is further agreed that upon issuance of an order referenced in Article XI, which becomes final and non-appealable and that is acceptable to GLGT, all issues in this docket relating to rates, practices, or tariff language are thereby resolved for the GLGT Moratorium Period ( Resolved Matters ). E. No party shall be deemed the drafter of this Settlement, and this Settlement shall not be construed against any party as the drafter. In the event of conflict between terms contained in the Settlement and those of the attached Explanatory Statement, the terms of the Settlement control. ARTICLE XI Settlement Effectiveness A. This Settlement shall become effective on the date it is filed and shall be implemented from that date. The date on which this Settlement is approved (the Approval Date ) is the first day which follows either (1) the day on which an order approving this Settlement without modification or condition has become final and non-appealable, or (2) if an order has modified or conditioned the Settlement in a manner that adversely affects GLGT, the conclusion of a twenty-five (25) day period, commencing on the date such order was issued, within which GLGT has not withdrawn this Settlement by providing written notice to the Commission and all Participants of the same, which withdrawal would cause this Settlement to be not effective and a nullity for any and all purposes except that GLGT shall be entitled to retrieve refunds and/or provide billing adjustments in accordance with Articles III and IX.B. Nothing in this Article precludes any of the Participants from waiving (by specific reference in writing to the relevant language of this Settlement) rights they may otherwise possess under this Settlement. 29

48 B. If the Commission s approval of this Settlement is conditioned or the Settlement is modified in a manner that materially and adversely affects a Supporting/Non-Contesting Participant, such Participant shall be deemed to have accepted the condition or modification unless, within a period of twenty (20) days from the date of the order conditioning the Commission s approval or modifying the Settlement, written notice of objection to the Settlement, as modified or conditioned, is filed with the Commission and served on the other Participants, in which event, such Participant shall not be a Supporting/Non-Contesting Participant and will have full rights, consistent with Commission rules and precedent, to litigate issues resolved by this Settlement. C. If the Settlement is conditioned or modified as a result of Commission action on an application for rehearing or reconsideration, or by a court on appeal, GLGT and the other Participants shall have the same rights as they would have if the initial order had conditioned or modified this Settlement (e.g., under Article XI.A and XI.B). ARTICLE XII Effect of Commission Approval The Participants to this Settlement respectfully request the Commission s approval of this Settlement as follows: A. Commission authorization and approval for GLGT to make the rate and tariff changes set forth in Appendix B to this Settlement, and implement the attached tariff sheets on their proposed effective dates, all of the foregoing effective as of the time provided for herein without suspension (if so requested herein), without conditions other than those specified herein and granting any waiver of Section 154 of the Commission s regulations necessary to implement such tariff sheets in accordance with this Settlement; and 30

49 B. Commission waiver of compliance, to the extent necessary, by GLGT with the requirements of the Commission s rules and regulations under the Natural Gas Act and Natural Gas Policy Act including, but not limited to, Parts 154, 157, 201 and 284, as necessary to carry out any provision of this Settlement. End of Stipulation and Agreement 31

50 APPENDICES Appendix A - Supporting/Non-Contesting Participants Appendix B - Appendix B Settlement Tariff Sheets Appendix C - Tariff Sheet Worksheets Appendix D - Official Service List

51 APPENDIX A

52 Supporting/Non-Contesting Participants American Forest & Paper Association American Public Gas Association ANR Pipeline Company BP Canada Energy Marketing Corp. Canadian Association of Petroleum Producers CenterPoint Energy Resources Corp., dba CenterPoint Energy Minnesota Gas City Gas Company ConocoPhillips Company Constellation Energy Commodities Group, Inc. Consumers Energy Company DTE Energy Trading, Inc. Dynegy Marketing and Trade, LLC Enbridge Marketing (US) L.P. Encana Marketing (USA) Inc. Great Lakes Local Distribution Company Group Iberdrola Renewables, Inc. JP Morgan Ventures Energy Company Madison Gas & Electric Company Michigan Consolidated Gas Company Michigan Public Service Commission Nexen Marketing U.S.A. Inc. Process Gas Consumers Group A - 1

53 SEMCO Energy Gas Company Shell Energy North America (US), L.P. Tenaska Marketing Ventures Tidal Energy Marketing (U.S.) LLC TransCanada PipeLines Limited TransCanada US Pipelines United States Gypsum Corporation Virginia Power Energy Marketing, Inc. Wisconsin Distributor Group Wisconsin Gas LLC and Wisconsin Electric Power Company (collectively, We Energies ) Wisconsin Power & Light Company Wisconsin Public Service Corporation XTO Energy Inc. A - 2

54 APPENDIX B

55 APPENDIX B PROPOSED TARIFF SHEETS Second Revised Volume No. 1 Tenth Revised Sheet No. 4 Eleventh Revised Sheet No. 4 Eighth Revised Sheet No. 4A Original Sheet No. 4B Sixth Revised Sheet No. 5 Third Revised Sheet No. 5A Sixth Revised Sheet No. 50B Original Volume No. 2 Seventeenth Revised Sheet No. 223 Eighteenth Revised Sheet No. 245 Eleventh Revised Sheet No. 269 B - 1

56 B - 2

57 B - 3

58 B - 4

59 B - 5

60 B - 6

61 B - 7

62 B - 8

63 B - 9

64 B - 10

65 B - 11

66 APPENDIX B MARKED VERSION OF PROPOSED TARIFF SHEETS Second Revised Volume No. 1 Tenth Revised Sheet No. 4 Eleventh Revised Sheet No. 4 Eighth Revised Sheet No. 4A Original Sheet No. 4B Sixth Revised Sheet No. 5 Third Revised Sheet No. 5A Sixth Revised Sheet No. 50B Original Volume No. 2 Seventeenth Revised Sheet No. 223 Eighteenth Revised Sheet No. 245 Eleventh Revised Sheet No. 269 B - 12

67 B - 13

68 B - 14

69 B - 15

70 B - 16

71 B - 17

72 B - 18

73 B - 19

74 B - 20

75 B - 21

76 B - 22

77 B - 23