AGA Recall Proposal Assailed at FERC

The American Gas Association's (AGA) proposal to expand the rights of firm capacity-holders to recall released capacity --- to include recalling capacity on which gas has already been nominated or scheduled to flow --- has come under fire at FERC from natural gas producers, marketers and pipelines.

In protests and comments filed at the Commission last week, they argued that the AGA's proposal to implement so-called "flowing-day recall rights" for scheduled released-capacity transportation would disrupt the pipeline grid, threaten to degrade the quality of existing pipelines services, increase the likelihood of producers' gas being shut in, and jeopardize competition in the market [RM98-10-008].

While firm capacity-holders currently are permitted to recall released capacity on a daily basis, provided sufficient advance notice is given to replacement shippers, the AGA is seeking to allow recalls at mid-day on released capacity even if the gas has been nominated and/or is scheduled to flow, explained one critic. "It would be like pulling the rug out from under shippers," she noted.

AGA offered its proposal in mid-March in response to a Gas Industry Standards Board (GISB) report and petition, which sought direction from FERC on achieving scheduling equality between capacity releases and pipeline services, as advocated in Order 637.The issue of flowing-date recall rights still is unresolved at GISB, although its members are widely opposed to the idea.

"Recalls after gas has been scheduled on released capacity or during the gas day would present significant scheduling difficulties...," the Interstate Natural Gas Association of America (INGAA) said. These flowing-day recalls "will present administrative and economic consequences that will devastate the capacity-release market," agreed Dynegy Marketing and Trade.

For instance, recall notices that are shorter than 24 hours will not provide enough time for shippers to obtain replacement capacity, and as a result will be "highly disruptive" to the market, it said. Further, capacity-release deals with flowing-day recall provisions would devalue the capacity in the eyes of many shippers and marketers, Dynegy noted. "...[T]his could actually end up limiting the amount of reliable, available capacity that would be utilized in the secondary market."

The Natural Gas Supply Association (NGSA), which represents major producers, also opposed AGA's proposal, saying it would increase the risk of producer shut-ins "at a time when security of supply should be a paramount concern." In addition, there would be increases in scheduling problems, overruns, penalties and operational flow orders on interstate pipeline systems, the group noted.Pipelines just "are not equipped at this point" to do flowing-day recalls, a NGSA official said, but they may be able to do so in the future.

In the event FERC grants the AGA's petition, the NGSA and Dynegy requested that the issue of flowing-day recall rights be set for a technical conference.

INGAA disputed that Order 637 even addressed the issue of capacity recalls, as claimed by AGA. It "clearly does not address recalled capacity and the associated unwinding of a capacity-release arrangement or any nomination requirements...The only Commission discussion of capacity recalls in the various Order 637 documents [was] in response to Indicated Shippers' requests to eliminate recalls in general," it said.

"Therefore, the lack of any substantive dialogue or discussion of capacity recall rights or recall timing demonstrates that the Commission did not intend to apply the same scheduling equality policies to the abrogation of released capacity as it clearly called for regarding the award of released capacity."

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