FERC Grants AGL Waiver of Capacity Release Rules to Aid Unbundling
FERC ventured into unknown territory last week to help Georgia's
largest gas utility implement retail unbundling behind its citygate
and avoid costs stranded by retail competition. In a four-to-one
vote, the Commission granted Atlanta Gas Light (AGL) a limited
one-year waiver of certain federal regulations governing capacity
release and ownership of interstate storage capacity and related
AGL's Ed Overcast, vice president for strategic planning and
rates, said the Commission's decision comes just in time. Georgia
retail competition is scheduled to begin Nov. 1 with 26 marketers
already waiting at the door to participate. "Obviously we're
excited about it and glad the Commission is working to cooperate
with the states to make unbundling work," he said.
The draft order allows AGL to make short-term allocations of
capacity to retail marketers at less than the maximum pipeline rate
without following the notification and bidding requirements in the
Commission's capacity release regulations. In addition, the draft
order grants a one-year waiver of the Commission's
"shipper-must-have-title" policy for certain storage and
storage-related transportation held by AGL so the utility can
combine these services for its shippers under a proposed
Incremental Bundled Storage Service (IBSS). AGL must file with FERC
within 30 days tariff sheets setting the IBSS rates, which the
utility said will replicate the existing reservation, withdrawal,
injection and transportation charges it pays pipelines. It also
plans to set penalty charges.
In the draft order, the Commission said it "intends to encourage
an environment which will allow state commissions and local
distribution companies to implement retail unbundling." And to do
that, Commissioner Vicky Bailey said the Commission is "willing to
consider departures from existing practices."
However, Commissioner William Massey, who dissented, siding with
a number of protesters who wanted FERC to schedule a technical
conference on the case, said the decision was "directly contrary to
the precepts" of FERC Order 636. "There, the commission terminated
capacity brokerage certificates as inconsistent with its
procompetitive objectives. Today's order permits Atlanta to carve
out portions of interstate capacity and allocate it to individual
marketers. The fact that the interstate capacity is targeted to
these particular marketers and not made available generically to
any shipper on the interstate grid is discriminatory," he said.
"Concerns about this type of discrimination prompted the Commission
to terminate capacity brokering at the time of Order 636.
"In our efforts to accommodate state efforts to move forward
with retail unbundling, we must not move backward and balkanize the
interstate grid," Massey said. "As state policy becomes more
procompetitive, FERC policy must not become more anticompetitive."
Massey advised the Commission to begin a generic proceeding to
discuss the issue of capacity allocation, as opposed to release,
and its impact on the secondary market and state unbundling.
FERC Chairman James Hoecker agreed the waiver is risky, but said
FERC is undertaking this departure from existing regulation only as
a "learning experience."
"I think anything that compromises 636 is unacceptable in the
long run, and I share the apprehensions of Commissioner Massey
about the potential balkanization of the interstate grid when
capacity or services are dedicated to specific states or specific
customer groups even if it's by state statute. Here we don't know
what the impact of our waivers are going to be [or the impact of
the] Georgia program. So I will support the limited-term waivers as
a learning experience and emphasize that we do it in the spirit of
wanting more competition, wanting an integrated marketplace,
wanting liquid markets to make LDCs less fearful about being able
to assume the role of supplier of last resort without having to
rely on long-term upstream capacity commitments."
"Frankly I don't see any reasons [for Commissioner Massey's
concerns]," said AGL's Ed Overcast. "These services are things that
you couldn't [do] with normal pipeline capacity release. Marketers
need [bundled service]. I think, to the contrary, competition is
going to be enhanced by this because you are going to get
interstate capacity rights in the hands of more people not less."
Overcast said all the rates to be charged for the new services
will be rates set by FERC and passed through. "There will be a
prorated share of discounts going to everybody. So if you have 5%
of the market in an area where those discounted services are
available, you get 5% of the discounted capacity."
AGL can request an extension of the waiver no later than July
31, 1999. At that time, it must explain the effects of the program
on the interstate pipeline grid with data, including the volumes
and prices its affiliates received under the program.