The American Gas Association has added its voice to those whowould protect the pocketbooks of current customers and requiresponsors of new pipeline construction to bear the risk of theprojects.

There’s an $8 billion pricetag on new constructionprojects-announced, proposed or under construction. All told theywould add about 22 Bcf/d of capacity between now and 2002, AGA saidin a status report on new pipeline construction applications at theFederal Energy Regulatory Commission.

The report, “If You Build It, Will They Come?” voices AGA’sconcern that its distributor members who are pipeline customers notbe saddled with the costs of the new capacity or “the costs ofconsequent unsubscribed existing capacity.”

The report explores “how to make sure existing capacity is usedeffectively before building new capacity,” said Karen Hill, staffvice president, regulatory affairs. One way to achieve this wouldbe to formalize the process for reverse open seasons in whichpipelines solicit permanent turnbacks of existing capacity thatcustomers don’t need before offering new space.

Pipeline solicitations for capacity turnbacks have been offeredwith varying degrees of enthusiasm, AGA observed. While some havebeen proactive in the process, others have simply put a shortnotification on their bulletin boards, or included almostimpossible requirements as to what capacity they would accept.

Pipelines should hold expansive reverse open seasons withoutpoint-to-point requirements and without demanding that returnedcapacity maintains or improves the economics of an expansionproject, AGA said. In addition, if a new project will serve anexisting LDC customer directly, the LDC should be allowed to reduceits contract demand accordingly and turn back bypassed capacity.

AGA also believes FERC should revisit and tighten itspresumption for rolled-in pricing on smaller projects with a lessthan 5% impact on rates, and limit discount adjustments so costscannot be shifted to existing customers. Particularly, discounts toretain customers in the face of new construction competition shouldnot be allowed if the new construction sponsors include anaffiliate of the existing pipeline. This would “simply allow thepipeline to circumvent the intended effect of the ‘at risk’condition on the newly constructed pipeline,” AGA’s report said.

The association’s dollar total of new pipeline constructionplanned or underway has dropped from about $9 billion quoted in aJanuary, 1998 report to $8 billion today, according to Jane Lewis,AGA’s senior managing counsel, regulatory affairs, but it includes”a lot more offshore projects.” Some of the projects listedoriginally were simply “placeholders” offered by pipelines whichactually weren’t sure what options they would be pursuing. Thereport lists projects with miles of pipe, costs, capacity andprojected in-service dates.

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