Auctions Are a Non-Issue at Gas Industry Powwows
FERC's proposed auction procedures for short-term capacity have
been a virtual non-issue at the two bi-weekly sessions the gas
industry has held so far to discuss major FERC initiatives,
industry sources say.
Trying to raise the auction issue for discussion is like
"throwing a stone off a cliff," said a gas industry representative
who attended one of the sessions. "It's like the room goes
silent...everybody looks at their shoes for about ten minutes, and
then somebody gets the ball rolling in another direction." The gas
industry is meeting every other week in an attempt to reach a
consensus on key initiatives in the mega-notice of proposed
rulemaking (NOPR) and notice of inquiry (NOI) by April 22nd, when
comments are due at the Commission. The next session is Wednesday
The focus of the sessions so far, he noted, has been on the
pipelines' seasonal ratemaking proposal, which would enable pipes
to maintain their annual revenues by recovering more fixed costs
during peak winter periods than in off-peak periods. The proposal
is intended to address a major concern of pipelines: that the
NOPR's bias in favor of the short-term market over the long-term
market would result in the underrecovery of costs for them. The gas
representative believes the industry ultimately may end up
endorsing some form of seasonal ratemaking as an alternative to the
Commission's controversial auction initiative.
"I don't think anything's going to come out of it with respect
to auctions. In fact, I don't think we're going to spend a lot of
time there [on auctions] because that isn't what the pipelines" or
LDCs want, he said. "The question is what will come out of it with
respect to seasonal rates...," the gas insider, who requested
anonymity, told NGI.
He said the industry segment he represents might even endorse
seasonal ratemaking, that is if it can extract concessions from
pipelines on other issues in return - such as an agreement to build
interconnects on demand for non-LDC shippers. The Natural Gas Act
requires pipes to build interconnects for LDCs only, he noted.
At the Jan. 20th session, the pipelines indicated "they would be
amenable under a seasonal rate program to have annual true-ups so
that they don't recover over their annualized cost-of-revenue
requirements." The pipes offered the true-up proposal as an "olive
branch" to the rest of the industy. but the gas representative had
questions about whether the true-up would encompass pipeline
discounts. "If true-up to them means that the short-term customers
pay more because they [the pipelines] are underrecovering on
[discounts to] long-term customers, I can tell you there's going to
be a lot of howls..."
Another major issue at the industry-sponsored sessions has been
negotiated terms and conditions. "I'm not sure we're going to have
the time to necessarily get into all the details. If anything does
come out, it's more likely to be a generic agreement" on the
negotiated issue, similar to the one proposed by the American Gas
Association (AGA) and Interstate Natural Gas Association of America
(INGAA), he noted. The AGA-INGAA proposal "said a lot of things
like 'no degradation of recourse service' without really specifying
what the Commission should do, if anything, to ensure that the
recourse service isn't degraded."
At this point in the meetings, "we're still flying at the
30,000-foot level" on both negotiated terms and conditions and
seasonal ratemaking, meaning that the gas industry is focused on
"general principles rather than trying to work out an agreement on
specific details," he noted. He expects the latter to take shape
within the next few meetings.
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