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
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."
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