Algonquin Gas Transmission, LLC

Fifth Revised Volume No. 1

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Effective Date: 03/01/2009, Docket: RP07-139-006, Status: Effective

Original Sheet No. 513A Original Sheet No. 513A

 

GENERAL TERMS AND CONDITIONS

(continued)

 

2. REQUEST FOR TRANSPORTATION SERVICE (continued)

 

existing unsubscribed capacity and shall not be applied to any bidders that have a

credit rating at or above those credit ratings listed in Section 2.5(e)(1) below,

or whose parent company or guarantor has such a credit rating, provided that such

parent company or guarantor has provided a guarantee for all of the obligations

under the specific service agreement at issue pursuant to Section 2.5(e)(3)(a).

The application of the Risk of Default Factor is governed by the following:

 

(1) A bidder with a credit rating below (a) an S&P rating of BBB-, (b) a Moody's

rating of Baa3, (c) a Fitch rating of BBB-, or (d) a Dominion Bond Rating

Service rating of BBB (Low), and who does not have a parent company or

guarantor with a credit rating at or above those credit ratings just listed,

provided that such parent company or guarantor provides a guarantee for all

of the obligations under the specific service agreement at issue pursuant to

Section 2.5(e)(3)(a), shall have a probability of default of zero for bidding

purposes if such bidder indicates on its bid form that it will post

sufficient collateral to equal the difference between (i) the net present

value of the revenue in the bid, adjusted by the bidder's Risk Default Factor

(assuming that it would be applied), and (ii) the net present value of a bid

from a bidder with a minimum rating(s) equal to the above rating(s) herein

with the same term, and such bidder does subsequently post such collateral as

specified in Section 2.5(e)(7). For these bid evaluation purposes,

collateral is defined as a letter of credit from a financial institution with

at least an A- rating, or a cash deposit. Collateral will be capped, for

purposes of the bid evaluation, at 50% of the revenue for the term included

in the bidder's bid.

 

(2) For a bidder described in Section 2.5(e)(1) that does not indicate on its bid

form that it will post such collateral, Algonquin will adjust the bid by

applying the Risk of Default Factor derived from the S&P Table, as set forth

in Section 2.5(e). Although a bidder under this Section 2.5(e)(2) is not

posting sufficient collateral to satisfy the requirement set forth in Section

2.5(e)(1)above, such a bidder nevertheless may increase the net present value

of its bid by posting some collateral but less than the amount described

above in Section 2.5(e)(1) which must be in a form allowed under Section

2.5(e)(1) contemporaneously with submitting its bid in the open season,

provided that such bidder cannot increase the net present value of the bid to

greater than the net present value of the same bid if the bidder had posted

the collateral as described in Section 2.5(e)(1).

 

(3) The following rules will apply to ratings for purposes of evaluating multiple

bids as part of the NPV bid evaluation process:

(a) Substitute Ratings. Algonquin will substitute the credit rating of a

bidder's guarantor, or parent company, whichever is higher, provided

that such guarantor or parent company has provided a guarantee for all

of the obligations under the specific service agreement at issue and

satisfies the requirements of Section 3.2(d).

(b) Equivalent Ratings. For any bidder that does not have, or whose parent

company or guarantor does not have, a credit rating from one or more of

the credit rating agencies noted above, Algonquin will assign an

equivalent rating using a credit scoring methodology, applied on a non-

discriminatory basis, provided such parent company or guarantor has

provided a guarantee for all of the obligations under the specific

service agreement at issue.

 

(4) Releasing shippers who propose to release capacity for a term of more than

one year will have the option of specifying, pursuant to the capacity release

procedures in Section 14.4, that the same NPV and Risk of Default processes

as set forth herein will be used by Algonquin when evaluating bids by

replacement customers for such released capacity. If a releasing shipper

makes such an election, Algonquin will follow the time line for non-standard

capacity release bid evaluation.