Saltville Gas Storage Company L.L.C.

Original Volume No. 1

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Effective Date: 03/01/2009, Docket: RP08-479-002, Status: Pending

Sub Original Sheet No. 111C.01 Sub Original Sheet No. 111C.01

 

GENERAL TERMS AND CONDITIONS

(Continued)

 

3. CONTRACTING FOR SERVICE (continued)

 

3.8 Allocation of Available Firm Storage Capacity. (continued)

 

(i) The Risk of Default Factor shall be one (1) minus the

differential between (i) the bidder's probability of default

which is calculated by extrapolating to the maximum bid term

to be used for bid evaluation purposes, using Standard &

Poor's ("S&P") most recent "Cumulative Average Default Rates

by Rating Modifier" table ("S&P Table"), and (ii) the

indicated probability of default for a bidder with a credit

rating at or above the credit ratings listed in Section

3.8(i)(1) for a like term. In addition, the Risk of 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 3.8(i)(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 3.8(i)(3)(i). 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 3.8(i)(3)(i),

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 3.8(i)(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 3.8(i)(1) that does

not indicate on its bid form that it will post such

collateral, Saltville will adjust the bid by applying

the Risk of Default Factor derived from the S&P Table,

as set forth in Section 3.8(i). Although a bidder

under this Section 3.8(i)(2) is not posting sufficient

collateral to satisfy the requirement set forth in

Section 3.8(i)(1), 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 3.8(i)(1) which must be in a form

allowed under Section 3.8(i)(1)