Citing the breadth of the undertaking as the reason, six tradeassociations last week jointly asked FERC to extend by 74 days thedeadline for the gas industry to respond to the major notice ofproposed rulemaking (NOPR) and notice of inquiry (NOI) that wereissued in July.

Both Commission efforts “embrace a vast number of issuesaffecting the interstate gas transportation market, which, ifpromulgated, would effectuate a comprehensive change in the currentway of doing business…Between the NOPR and NOI, commenters are[being] asked to address approximately 200 separate issues,” thetrade groups said. Their request, if agreed to by FERC, would pushback the comment deadline from Nov. 9th to Jan. 22nd. They haveasked for expedited action on the request [RM98-10, RM98-11,RM98-12].

Groups seeking the extension include the American GasAssociation, the Interstate Natural Gas Association of America, theNatural Gas Supply Association, the Independent PetroleumAssociation of America, the Process Gas Consumers Group/AmericanIron and Steel Institute, and the National Association of ConsumerAdvocates. It was the second time in the last week that industrygroups backed away from FERC’s latest megaNOPR (See GISB reportthis issue).

Many of the issues posed by the NOPR and NOI don’t lendthemselves to easy answers and demand industry solutions, thegroups pointed out. “For example, the auction proposal isconceptual in nature and the details of how the auction would berun are not spelled out [in the NOPR]. This industry is called uponto step forward and fill in the details.” At the same time, “theNOI poses many questions of serious financial consequences to theindustry that require a thoughtful response.”

“We’re buried. The Commission basically laid on us…with theNOPR and the NOI a reconsideration of the entire regulatorystructure without giving us very much detail,” said a trade grouprepresentative in explaining the need for the extension. The NOPRaddresses the regulation of short-term transportation services.Specifically, it proposed the removal of existing price caps onshort-term (less than one year) firm, interruptible andcapacity-release transactions in return for pipelines conductingauctions of that capacity. The proposal has come under intense firefrom industry because FERC provided scant detail about how theauctions would be carried out. The NOI, on the other hand, focuseson the regulation of long-term transportation services, raisingissues such as the negotiation of terms and conditions of servicesand review of straight-fixed variable rate design.

“The auction [as outlined in the NOPR} is all ‘if then.’ If youdo this, then you should do something else that way. If you do itthis way, then you’ve got to do the same thing differently. It’sdriving people up the wall,” noted the source, who requestedanonymity. “And the fact the auction was totally unexpected, Ithink, by all the elements of the industry” has added to theconfusion.

Even the Commission staff is having its share of trouble withthe auction proposal. “…[W]hen we had some meetings [last] monthwith Kevin Madden [director of the Office of Pipeline Regulation]and his people about auctions, one of the interesting things thathappened…was they started arguing with each other. So I don’tthink the staff, and I can’t say anything about the commissioners,even has a clear vision of where this should be taken.”

He doesn’t think FERC will deny the gas industry’s request for adelay. “Everybody’s been telling us, at least the FERC staff hasbeen telling us, that the Commission’s not going to move on thisquickly,” the source noted, referring to both the NOPR and NOI. “Iget the sense…that there’s no rush to judgment.”

The NOPR and the NOI, specifically the auction proposal, alsowere a hot topic among executives at the Gas Industry StandardsBoard (GISB) annual board meeting in San Antonio, TX, last week.”Let’s face it. We asked them [the FERC] to do something like thiswith respect to secondary market issues. [But] as the FERC movesforward it needs to be careful to prioritize in order to avoidadopting mutually exclusive rules,” said Bill Boswell, vicepresident, secretary and general counsel for Peoples Gas.

“The thing that comes to mind here to me at least mostobviously is we have all of these intraday nominations standards,which in addition to being GISB standards are FERC regulations, andhow does that fit with daily auctions, which FERC has on the tableright now. They are potentially mutually inconsistent.Does itobviate the need for the rules we already have on the books rightnow which FERC already decided were pretty darn good?” he asked.

Also, the Commission “needs to avoid standing in the way ofwhat customers want, and putting my LDC hat on, one of the thingswe think our customers want right now is the ability to haveprearranged deals,” Boswell said. “FERC does not appear to likeprearranged deals, at least in terms of the initial thrust of theNOPR. I think that position, if that’s what it is, needs to berevisited.”

Meanwhile, there has been a lack of enthusiasm for theconvoluted new regulatory hoops FERC has suggested the industry setup and then jump through. The million-dollar question for LDCs andothers is: “Is the removal of price caps worth the cost?” FERCseems to believe “LDCs were very, very hot on removing the pricecaps…We had a number of issues that came under the heading ofsecondary market concerns, and while removal of price caps was oneof those, it’s not the leading one,” Boswell noted. “Indeed, whenwe initially raised it somebody. [indicated it would be] simplynice to have. It’s probably higher than nice to have right now, butconsidering what FERC would want in replacement of the removal ofprice caps we have to ask ourselves whether those are things suchthat the juice may not be worth the squeeze.”

Mike Bray, vice president of corporate rates and regulatoryaffairs at Duke Energy, also agreed the cure proposed by FERC mightbe a bit too drastic. “FERC seems to be overly concerned about themarket power issue. I also agree with [the] observation that thecurrent system seems to work okay. Maybe it just needs somefine-tuning.”

Susan Parker; Joe Fisher, San Antonio

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