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Breathitt: Market Center Growth Stunted by Pipe Rates

Breathitt: Market Center Growth Stunted by Pipe Rates

FERC Commissioner Linda Breathitt last week called on the Commission to initiate a generic review of whether the rate structures of most interstate gas pipelines, especially Tennessee Pipeline, are inhibiting the development of market centers.

Her request accompanied FERC's decision, in response to a court remand, to set for hearing the market center and rate issues that were raised by Reliant Energy Gas Transmission with respect to the Tennessee system. The U.S. Court of Appeals for the District of Columbia Circuit remanded the case so that the Commission could respond to Reliant's concerns [RP95-112-024].

While Breathitt's request was seconded by Commissioner William Massey, it elicited a lukewarm response from Chairman James Hoecker. To "require them [rates] to be re-designed generically, of course, involves difficult issues of potential cost shifts. And frankly pipelines and their customers have agreed to settle this issue" between themselves, he said. But because the issue raises competitive concerns for the marketplace, he suggested that FERC's post-Order 637 technical conferences with industry "might be a good place to engage in a dialogue."

A key issue posed by Reliant, Breathitt said, "is whether bundling of production-area costs with market-area costs inhibits the development of market centers downstream of Tennessee's production area."

For several reasons, "I believe that the market center issues raised by Reliant [exist] on most long-line pipelines. Most long-line pipelines, including Tennessee, [have] rates through which shippers pay an allocated share of the costs of all of the facilities rather than only the cost of the facilities in a particular zone used by that shipper," she noted.

Breathitt believes a "comprehensive review" of the impact of interstate pipeline rate structures on market-center development is long overdue, pointing out that the issue was last addressed in 1992 when Order 636 was issued. "Consequently, a logical next step would be to seek a generic resolution of these market-center issues, either through an NOI or a notice of proposed rulemaking."

Susan Parker

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