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Columbia's Richard Pitches for Seasonal, Negotiated Proposals

Columbia's Richard Pitches for Seasonal, Negotiated Proposals

Columbia Energy Chairman Oliver G. "Rick" Richard III says proposals espousing seasonal ratemaking and negotiated terms and conditions are the most important of the many reform initiatives pending before FERC, and deserve priority. Obtaining regulatory approval for both will be a "key initiative" of pipelines this year.

He specifically cited the seasonal rate proposals of Columbia's pipelines and Northern Natural Gas, which would permit interstate pipelines to collect more fixed costs during the peak-time winter period when capacity is the "most valuable." He indicated seasonal rates "could" be an alternative to the Commission's proposal for mandatory auctioning of short-term capacity.

"I think the FERC is traveling down the right path - I'm not saying the auction is the way to go - [in that] they're trying to create transparency on the pipelines...," said Richard, who as chairman of the Interstate Natural Gas Association of America (INGAA), addressed pipeline regulatory priorities for 1999 at a press briefing last Thursday.

But seasonal rates "can go a long way towards" providing the transparency that producers seek, he told reporters. "Producers want as simple [a] business as we can divine so that [it's] a user-friendly system...And seasonal rates can help us get there."

To extend transparency even further, "you could have something like...[what's] currently being done in California where Sempra is putting up its bid and ask price, or you're doing it on the Internet with commercial and residential customers" so they're able to see gas prices a lot more quickly and choose. "And I think that's coming."

Producers want transparency to choose the best rates, while customers seek transparency to determine the best price for delivered gas. "...[I]f you can combine those two, then I think it's a win-win [situation]," Richard noted.

He believes that providing pipelines with seasonal ratemaking authority, as well as the ability to negotiate terms and conditions, would offer the "flexibility needed going forward" for all concerned - producers, pipelines, LDCs and customers. The key concern with negotiation of terms and conditions has been its potential to degrade "recourse" service.

He declined to comment on the progress so far of the industry-sponsored negotiations on major initiatives in the Commission's mega-notice of proposed rulemaking (NOPR) and notice of inquiry (NOI). He said the process has been "very, very positive," but added that he had "no predictions on how it all may turn out." Seasonal rates and negotiated terms and conditions have taken center stage at the sessions so far, according to sources.

Richard indicated the gas industry will meet FERC's April 22nd deadline for comments on the NOPR and NOI. "There's a sense of urgency in the group to meet the deadline. I think everyone in the entire value chain from producers all the way to the end-use customer [has] been engaging in the dialogue to try to move it towards some conclusion...by that deadline." The industry is near the half-way point in its negotiations, completing three of seven scheduled sessions.

For Columbia, Richard said the company's goal is to grow earnings by about 10-12% annually over the next five years. In addition, it wants to convert its "income mix," which currently is 90% regulated and 10% unregulated, to 70-30% by the year 2002. He dismissed questions about possible merger plans involving Columbia Energy. "I couldn't answer that [even] if it were" considering such plans, he quipped.

"...[W]e believe we have the culture and the assets to grow at a very good percent, even faster than utilities" in the year ahead. "Our core businesses are transmission and distribution. We like those businesses...We think we have some good growth potential there," Richard said, adding that Columbia also planned to continue as "one of the major [producer] players" in Appalachia, was "very interested" in the propane market and independent power generation, as well as acquiring generation assets.

Susan Parker

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