Northern Natural Gas Company

Fifth Revised Volume No. 1

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Effective Date: 02/25/2006, Docket: RP06-185-000, Status: Effective

Fifth Revised Sheet No. 299 Fifth Revised Sheet No. 299 : Effective

Superseding: Fourth Revised Sheet No. 299







4) Best Offer



Northern will determine which bid constitutes the best offer by determining

the highest economic unit value (per dekatherm of capacity) to Northern. A

calculation based on rate, term and quantity will be used to determine the

highest economic unit value, utilizing the FERC interest rate. The

comparative economic unit value of each bid will be determined by

calculating the Net Present Value (NPV) of the incremental revenues of each

offer over either the term of the offer or five (5) years, whichever is

less, and then dividing by the quantity of the respective bid. However, if

the bid is at maximum rate and the term is more than five (5) years, the

entire term will be considered in determining the economic unit value. The

best bid will be the bid with the highest net present value (NPV). The NPV

is the discounted cash flow of incremental revenues per dekatherm to

Northern for service. Incremental revenues are those revenues above and

beyond the current revenues which Northern already receives from

reservation charges being paid prior to the bid period. Northern will

utilize the NPV calculation based on rate, term and quantity to determine

the highest incremental revenues per dekatherm. The NPV calculation shall

include only revenues generated by the reservation rate or a guaranteed

throughput volume. In those cases where one or more bidders is willing to

pay the maximum recourse reservation rate, the NPV used in such cases is

capped at, and may not exceed, the NPV equal to the maximum reservation

rate available to recourse shippers.


For purposes of determining the best bid and allocating capacity, shippers

willing to pay more than the maximum tariff rate will be considered to be

paying the maximum tariff rate.


In the event equivalent offers are submitted, the capacity will be made

available on a pro rata basis to the equal bidders. Should any one of the

equal bidders veto their pro rata allocation of the capacity, Northern will

then conduct a lottery to select the winning bidder, who will then, if the

bid is not matched under Section 5) below, be allotted its requested

capacity. The remainder of said capacity, if any, will be available to

the other equal bidder(s) on a pro rata basis, which will again trigger the

veto/lottery selection process.


In the event that Northern is conducting an open season for generally

available FDD capacity at the same time as the FDD Right of First Refusal

process, Northern will allocate bids at maximum rates first to generally

available FDD capacity and then on a pro rata basis to FDD Right of First

Refusal capacity. Northern will include in the posting the allocation

parameters for bids at less than maximum rates. In no event will Northern

be required to enter into an Agreement at less than maximum rates.


Northern will post the name of the winning bidder on the website for a

period of no less than five (5) work days. The winning bidder must execute

a Service Agreement within fifteen (15) days of Northern's tender thereof.