East Tennessee Natural Gas, LLC

Third Revised Volume No. 1

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Effective Date: 03/01/2009, Docket: RP08-487-002, Status: Effective

Substitute Original Sheet No. 315B.03 Substitute Original Sheet No. 315B.03

 

GENERAL TERMS AND CONDITIONS (Continued)

 

5.8 Allocation of Firm Capacity (continued)

 

(a) Existing Capacity (continued)

 

Default Factor shall only be applied to 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 5.8(a)(8)(i) 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 5.8(a)(8)(iii)(1). The application of the

Risk of Default Factor is governed by the following:

 

(i) 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 5.8(a)(8)(iii)(1),

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 of 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 5.8(a)(8)(vii). 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.

 

(ii) For a bidder described in Section 5.8(a)(8)(i)

that does not indicate on its bid form that it

will post such collateral, Transporter will

adjust the bid by applying the Risk of Default

Factor derived from the S&P Table, as set forth

in Section 5.8(a)(8). Although a bidder under

this Section 5.8(a)(8)(ii) is not posting

sufficient collateral to satisfy the requirement

set forth in Section 5.8(a)(8)(i) 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

5.8(a)(8)(i) which must be in a form allowed

under Section 5.8(a)(8)(i) contemporaneously

with submitting its bid in the open season,