Initial brief of High Island Offshore System, LLC under RP03-221.

Jnofflclal FERC-Generated PDF of 20040203-0146 Received by FERC OSEC 01/30/2004 in D o c k e t # : R P 0 3 - 2 2 1 - 0 0 0 UNITED STATES OF A M E R I C A BEFORE T H E F E D E R A L ENERGY R E G U L A T O R Y C O M M I S S I O N High Island Offshore System, L.L.C. ) Docket No. RP03-221-000 INITIAL BRIEF r~ HIGH ISLAND O F F S H O R E SYSTEM, L.L.C. I """-~ ta~, " ~ :'e"~ -~- '~t'~,..2 t. ,j :x3t.r~i_. " " t " C:~ ..-~m -,~. 3.,..-rl O ~. ,<.~ ,o ;,...< To: The Honorable K a r e n V. J o h n s o n Presiding Administrative Law Judge Kenneth M. Minesinger Howard L. Nelson Edward J. Twomey El Paso Corporation Matthew C. Schruers 555 1 lth Street, N.W. Morrison & Foerster LLP Washington, DC 20005 Suite 5500 (202) 637-3500 2000 Pennsylvania Avenue, N.W. Washington, DC 20006 (202) 887-1500 C O U N S E L F O R H I G H ISLAND O F F S H O R E SYSTEM, L.L.C. January 30, 2004 Jnofflclal FERC-Generated PDF of 20040203-0146 Received by FERC OSEC 01/30/2004 in D o c k e t # : R P 0 3 - 2 2 1 - 0 0 0 TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................................ 1 STATEMENT OF THE CASE ........................................................................................... 8 ARGUMENT ...................................................................................................................... 9 1. The Record Demonstrates That HIOS's Cost of Service Is Approximately $36.5 Million ..................................................................................................... 9 A. HIOS's Operating Expenses Are Fully Supported................................... 10 1. Overview ............................................................................................. 10 2. Staff's Proposed Adjustment to HIOS's Regulatory Expenses Is Unsupported........................................................................................ 11 3. Indicated Shippers' Proposed Adjustment to HIOS's Operating Expenses Should Be Rejected ............................................................. 12 a. Indicated Shippers' Study of Cost Trends of Other Pipelines Is Fatally Flawed ............................................................................... 12 b. The Record Rebuts Indicated Shippers' Conclusory Charge That HIOS's Operating Expenses Are Unsupported............................. 16 i. Invoices Support HIOS's Operating Costs ............................. 16 ii. The Fixed Fee Is Reasonable, Efficient and Fully Supported. 16 B. The Record Supports HIOS's Proposed Depreciation Expense Allowance of Approximately $1.6 Million, Which Is Based on an Economic Life Ending June 30, 2013 ................................................................................ 20 . HIOS Witness Jenkins Correctly Determined HIOS's Economic Life By Examining Specific Fields That Are Now, Or Likely Will Be, Connected to the Pipeline .................................................