In an unusual step last week, FERC Chairman James Hoeckeroffered some advice to the industry negotiators who have beenmeeting in closed-door sessions to craft an agreement on the majornatural gas initiatives contained in the notice of proposedrulemaking (NOPR) and notice of inquiry (NOI).

Speaking at a conference of The Energy Council last Monday, hesaid that while consensus on the major initiatives would be “veryhelpful,” industry negotiators shouldn’t focus on “agreement forits own sake but [rather] on learning from each segment of businesshow [they] can benefit from further evolution in FERC’s policies,and craft common objectives and fair-market mechanisms that will bethe most useful to the industry as a whole.”

Moreover, he warned the gas industry not to “bring uslowest-common-denominator answers to our proposals in the hopesthat we will take what we can get.” Instead, Hoecker called onnegotiators to give the Federal Energy Regulatory Commission “solidagreement where it exists and frank, solid analysis where it doesnot.” Also, “bring alternatives if you can,” he said.

Furthermore, “tell us how the short-term issues of the NOPRrelate to the long-term objectives of the NOI and how we ought toview them together. Tell us how we can find practical approachesthat will, to the extent possible in the market, stand the test oftime and delay the need for another mega-proceeding of this kind inthe future.” Hoecker offered the suggestions after receiving a”personal update on the tenor” of the industry talks.

He reminded industry negotiators that the Commission’s interestin NOI issues, such as straight fixed variable rate design, willcontinue after April 22, when industry comments are due on the NOPRand NOI initiatives. “To continue the process, however, theCommission needs ideas it can act on, procedural proposals thatwill be helpful and not merely tactical, and a willingness on thepart of the industry to stay at the table on the issues itcontinues to deem important enough for further development.”

He noted that generic review of the gas issues was muchpreferable to the “awfully slow and uncertain” case-by-caseresolution. “…[I]f the gas industry tells us not to change thecurrent rules – which were written for a far different marketplace[than today] – the consequences of that choice are something itwill have to live with.”

Although the proposed gas initiatives in the NOPR and NOI havecreated considerable controversy within the industry, Hoecker said”we cannot let controversy deter us from making progress.”

Susan Parker

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