Energy Transfer 2015 Annual Report Download - page 28

Table of Contents
site appearance and cleanliness, hours of operation, store safety, customer loyalty and brand recognition. We compete by pricing gasoline competitively,
combining retail gasoline business with convenience stores that provide a wide variety of products, and using advertising and promotional campaigns. We
believe that we are in a position to compete effectively as a marketer of refined products because of the location of our retail network, which is well integrated
with the distribution system operated by Sunoco Logistics.
Credit Risk and Customers
Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to the Partnership. Credit policies have been
approved and implemented to govern the Partnership’s portfolio of counterparties with the objective of mitigating credit losses. These policies establish
guidelines, controls and limits to manage credit risk within approved tolerances by mandating an appropriate evaluation of the financial condition of
existing and potential counterparties, monitoring agency credit ratings, and by implementing credit practices that limit exposure according to the risk
profiles of the counterparties. Furthermore, the Partnership may at times require collateral under certain circumstances to mitigate credit risk as necessary. We
also implement the use of industry standard commercial agreements which allow for the netting of positive and negative exposures associated with
transactions executed under a single commercial agreement. Additionally, we utilize master netting agreements to offset credit exposure across multiple
commercial agreements with a single counterparty or affiliated group of counterparties.
The Partnership’s counterparties consist of a diverse portfolio of customers across the energy industry, including petrochemical companies, commercial and
industrials, oil and gas producers, municipalities, gas and electric utilities, midstream companies and independent power generators. Our overall exposure
may be affected positively or negatively by macroeconomic or regulatory changes that impact our counterparties to one extent or another. Currently,
management does not anticipate a material adverse effect in our financial position or results of operations as a consequence of counterparty non-performance.
Our natural gas transportation and midstream revenues are derived significantly from companies that engage in exploration and production activities. The
discovery and development of new shale formations across the United States has created an abundance of natural gas and crude oil resulting in a negative
impact on prices in recent years for natural gas and in recent months for crude oil. As a result, some of our exploration and production customers have been
negatively impacted; however, we are monitoring these customers and mitigating credit risk as necessary.
During the year ended December 31, 2015, none of our customers individually accounted for more than 10% of our consolidated revenues.
Regulation of Interstate Natural Gas Pipelines. The FERC has broad regulatory authority over the business and operations of interstate natural gas
pipelines. Under the Natural Gas Act (“NGA”), the FERC generally regulates the transportation of natural gas in interstate commerce. For FERC regulatory
purposes, “transportation” includes natural gas pipeline transmission (forwardhauls and backhauls), storage and other services. The Florida Gas Transmission,
Transwestern, Panhandle Eastern, Trunkline Gas, Tiger, Fayetteville Express, Sea Robin, Gulf States and Midcontinent Express pipelines transport natural gas
in interstate commerce and thus each qualifies as a “natural-gas company” under the NGA subject to the FERC’s regulatory jurisdiction. We also hold certain
storage facilities that are subject to the FERC’s regulatory oversight.
The FERC’s NGA authority includes the power to:
• approve the siting, construction and operation of new facilities;
• review and approve transportation rates;
• determine the types of services our regulated assets are permitted to perform;
• regulate the terms and conditions associated with these services;
• permit the extension or abandonment of services and facilities;
• require the maintenance of accounts and records; and
• authorize the acquisition and disposition of facilities.
Under the NGA, interstate natural gas companies must charge rates that are just and reasonable. In addition, the NGA prohibits natural gas companies from
unduly preferring or unreasonably discriminating against any person with respect to pipeline rates or terms and conditions of service.
The maximum rates to be charged by NGA-jurisdictional natural gas companies and their terms and conditions for service are required to be on file with the
FERC. Most natural gas companies are authorized to offer discounts from their FERC-approved maximum just and reasonable rates when competition
warrants such discounts. Natural gas companies are also generally permitted
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