ICC Approves NOI, Questions California Influence
Prodded by Gov. George H. Ryan, the Illinois Commerce Commission (ICC)
voted late week unanimously to open a Notice of Inquiry (NOI) to investigate
the high natural gas prices in the state.
The NOI grew out of consumer complaints, two ICC hearings in as many
weeks, and a call by the governor for an investigation (see NGI, Jan. 15; Jan. 22).
In approving it, the commission also asked for further investigation of
affiliate rules for non-regulated subsidiaries and their parent companies.
As part of the NOI, the ICC developed the first seven questions pertaining
to the high price situation, which were made available yesterday. An additional
10 questions are expected to be added soon. The first seven questions range
from inquiries into adequacy of gas supply within the U.S. and Illinois,
to whether utilities have experienced significant expenses besides the
cost of purchased gas during 2000.
The two hearings helped establish the formal questions that are presented
to the public via the ICC web site, ICC spokesman David Farrell said. Farrell
emphasized that "anybody and everybody in the whole world" with
interest in the subject is invited to respond, and create a dialogue.
In the ICC's second hearing, industry experts testified that the California
energy crisis might be partially responsible for the high natural gas prices
experienced this winter in the Midwest.
Representatives from pipeline companies and analyst firms were among
those on hand last Wednesday to testify before the commission. A CMS executive
said some of the gas that normally would be destined for Midwest markets
is being sent out west instead.
"What we are seeing this winter, despite the cold weather, is less
throughput on Panhandle Eastern Pipeline into our Midwest markets then
we have seen in other winters, particularly cold winters," said Cynthia
Albert, vice president of regulatory affairs and information systems for
CMS Panhandle Pipe Line Companies.
"We are estimating about 200 MMcf/d of supply is being diverted
to serve California, and what we really are witnessing is less volume coming
up Panhandle into the Midwest market," Albert told Daily GPI. She
added that Panhandle has a mainline capacity of about 1.5 Bcf/d. "Pipeline
capacity serving California is completely full, so California is getting
as much gas as it can get, and some of that gas may in fact be gas that
would have otherwise come to us," she said. "Who knows what other
pipelines in the market area are experiencing, such as ANR and NGPL,"
Albert stressed there was no shortage of gas flowing into the state,
but it becomes a question of which gas is going to flow where. She emphasized
to the commission during the hearing that "gas will flow to the highest
priced market, and that will affect markets in the rest of the country."
The first question in the NOI is: who is receiving all the money from
higher gas prices? It is the same question the commission had also posed
to the state's utilities the week before.
"Illinois, and generally other Midwest markets, sit in a good position
in terms of pipeline capacity, because generally there is excess pipeline
capacity serving Midwest markets," said Albert. "So high prices
in the Midwest markets probably are not a result of limited pipeline capacity.
It's probably a result of other things happening in the industry."
She pointed to the addition of the Alliance pipeline and Northern Borders
extension - which expanded deliverability capacity into the state by 2
Bcf - as reasons for the capacity surplus.
"The other key point is that our transportation rates on pipelines
into the Midwest market have continued to decline over time. We have seen
on both of our two pipelines - Panhandle Eastern Pipeline and Trunkline
Gas Co. - a decline in our transportation rates over the last six or seven
years." Albert said Trunkline - which serves the Chicago market via
an interconnection with Peoples' system - makes up just 4% of the total
transportation cost to the Chicago citygate, excluding fuel costs. "We
are a small piece of the overall pie. Certainly the point here is that
when prices increase like they have been, it is not the pipeline companies
that are able to capture higher rates. We are still getting the same rates
that we have been getting."
Albert told the commission that there might be some increases in rates
this winter as the company renegotiates contracts, but overall she believes
the excess capacity and abundant competition will tend to keep transportation
rates fairly flat, and would not allow CMS to get more money out of the
market. "We are aware that the Illinois Commission and others are
certainly looking to find out who is making all the money in this market."
Submission of initial comments from interested parties is due on Feb.
16, with the submission of reply comments completed on Feb. 26. The commission
also has scheduled a public meeting for March 6. A full list of the NOI
questions will be made available at the ICC website: http://www.icc.state.il.us/icc/gas/noi.asp.
Farrell said all the information gathered from the NOI will ultimately
be compiled in the form of a report and submitted to the commission by
April 3 by the commission staff. Soon after, it will be forwarded to the
governor's energy cabinet, then on to the governor and the general assembly.
"What I do not know is whether that is going to include the findings
of 'X' problem or 'Y' problem with a corresponding suggestion for a solution,"