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Kelliher Doesn't Support Mandatory Price Reporting, Makes Storage Pricing a Priority

In his first working day at the helm of the agency, FERC Chairman Joseph Kelliher last Monday said one of his top priorities will be to review cost-based pricing and market-based policies for natural gas storage. He also said he opposed a provision in the House energy bill that would require mandatory reporting of natural gas prices to FERC.

At his inaugural briefing with energy reporters as chairman, he noted that the Federal Energy Regulatory Commission's cost-based pricing policies for storage were established in 1976. "After a quarter of a century, I think it's appropriate to take a look at our cost-based pricing policies for gas storage...We should also look at our market-based pricing policies to encourage additional gas storage capacity" to be constructed.

"Last year we saw record levels of gas storage. We also saw very high levels of price volatility," which suggests that natural gas storage capacity in the United States is inadequate, Kelliher noted.

He declined to speculate as to when FERC would issue something on gas storage, or whether it would be a notice of proposed rulemaking or notice of inquiry, saying, "We'll act when my colleagues and I agree on important [factors]."

Kelliher further said that "by and large voluntary price reporting is working...I don't see a need to [go] beyond that and mandate price reporting," although he did note that there may be a need to give the Commission authority to collect certain market data. He said he disagreed with his former boss, Rep. Joe Barton (R-TX), chairman of the House Energy and Commerce Committee, on this issue. Barton supports the mandatory collection of natural gas prices in the pending energy bill.

"[Barton's] goal I agree with -- he wants to improve the quality of price reporting," Kelliher said, adding that he just didn't support the Texas lawmaker's proposed solution.

As for his other priorities, Kelliher said he wanted to "accelerate" the issuance of refunds to California customers, close out the California proceedings at the Commission, and "put a padlock on the door" of the California PX; eliminate the potential for violations of open-access transmission tariffs; and ensure that regional transmission organization costs are just and reasonable.

Kelliher said the construction of new liquefied natural gas (LNG) import terminals "remains as much a priority now" as under the administration of Pat Wood, who left Washington, DC on July 8 after serving four years as chairman and commissioner. Kelliher, who has been a commissioner since November 2003, officially took over the reins of chairman on July 9.

Kelliher said he supported a provision in the Senate energy bill that clarifies FERC has exclusive authority over the siting of onshore LNG import terminals. If that language is approved by Congress, "FERC wins on the narrow question that is pending in the Ninth Circuit [Court of Appeals]."

The omnibus energy bill that is winding its way through Congress "is going to be one of my first priorities," Kelliher said, adding that now is "crunch time" on whether the measure will be enacted. He noted that he was "more optimistic" about the passage of the bill this year than he had been in the past four years.

A former staff member on the House Energy and Commerce Committee, Kelliher said he planned to meet with House-Senate conferees on the energy bill in the coming weeks. There will be "a lot of personal contact."

He also said there was "definitely a need to improve the Commission's standing with Congress." In addition, Congress and FERC "need to get on the same page now in terms of policy direction."

With the Commission now down to three members -- Kelliher and Commissioners Nora Brownell and Suedeen Kelly -- Kelliher did not say that he would press the White House to fill the two vacancies. "I think we are fully functional," he told reporters. "We have a quorum," with "excellent colleagues."

He also cited some procedural and staff changes. Beginning immediately, the Commission will move from biweekly meetings to monthly meetings. Monthly meetings are "more of the norm" with other federal agencies, Kelliher said.

He noted that FERC typically issues 1,500 orders a year, with about one-third issued notationally. With the move to a monthly meeting, the number of notational orders will rise, he said.

Kelliher also said he appointed Daniel L. Larcamp, who was director of FERC's Office of Markets, Tariffs and Rates (OMTR), as his chief of staff. Shelton Cannon, deputy director of OMTR, will replace Larcamp as OMTR director. Jamie Simler, director of OMTR-West, will become OMTR's deputy director.

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