Columbia Gas Transmission has filed to replace its outmodedfive-day capacity bidding process with daily interactive bidding,including a daily sequence of postings, an interactive biddingperiod and after-hours market, and a shortened ROFR period(RP00-374)

Under its current system most capacity buyers on Columbia waituntil the final day and even hour of the five-day process to maketheir bids in order to take advantage of the latest marketinformation. The new system would be more responsive, in keepingwith the Federal Energy Regulatory Commission’s (FERC)encouragement for market efficiency in Orders 637 and 637-A.

The plan calls for Columbia to post daily offers of availablecapacity on its Internet-based electronic bulletin board by 7 a.m.CST, including terms and conditions. Between 8 a.m. and 8:15 a.m.Columbia will evaluate bids received from 7 a.m. on, as well asbids made in an after-hours period. If bids meet or exceed theterms set, Columbia will accept them, and the capacity sale will beautomatically transacted. From 8:15 a.m. until 3 p.m. aninteractive auction will be conducted with the remaining capacity,plus any new offerings, with shippers matching or counteringColumbia’s posting.

There will be only one variable to simplify the bidding process:discounted capacity will be offered for a fixed term and bidderscan choose a different rate; fixed or maximum rate capacity will beoffered for a specific term and bidders can choose a differentterm.

In the interactive period Columbia can revise its offer. If itdecides to lower its minimum price to meet a bid on a portion ofcapacity, Columbia will continue to offer any remaining capacity inthat parcel at the new lower rate for at least 15 minutes.

During an after-hours period, from 3 p.m. until 7 a.m. the nextday, bidders may continue to make bids, but Columbia will notrespond. The pipeline, however, may make changes in its offers toreflect changed market conditions during this period.

A sticking point in the process is FERC’s requirement for a15-day right-of-first-refusal (ROFR) period. “During this 15-dayperiod market events can occur that may have a dramatic impact onthe value of the capacity purchased…This was the reality atcertain times during last winter. A period of cold weather droveup market area prices, greatly increasing the value of capacityinto some areas. Under Columbia’s current tariff, parties areexposed to potential price movement after having won the biddingfor capacity without the ability to lock in the future price, untilafter waiting for the ROFR-holder for 15 days to exercise its rightto match.”

Columbia is proposing an ROFR matching period of two businessdays for transactions of less than 18 months and five business daysfor longer transactions. The pipeline explains the originalcapacity holder will have ample notice the capacity will be up forbids. It will also know what it will have to pay for a maximumrate, maximum term re-up. The customer also should already havecalculated the maximum it can afford to commit to, and by watchingColumbia’s bid-ask process should have an idea of the going rates.Making the final decision within those parameters should not takelong.

Columbia has asked for an effective date of Dec. 1, 2000.

Ellen Beswick

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