FERC Mandates OBAs, Internet Access, Intra-day Noms

The Federal Energy Regulatory Commission last week unveiled a final rule it hopes will put an end to the industry stalemate over the hotly debated issues of intra-day nominations, operational balancing agreements (OBAs) and communications protocols.

With the Gas Industry Standards Board (GISB) deadlocked on these issues, the Commission stepped in as referee and issued regulations at its Wednesday meeting that would, among other things, give firm intra-day nominations priority over already nominated and scheduled interruptible service. The new rules also would permit firm intra-day noms submitted on the day prior to gas flow to go into effect at 9 a.m. the following day.

Unlike with GISB, FERC's proposals on these sticky issues elicited little resistance from the gas industry, including pipelines. "...[N]early all of the commenters came together to support our decision to resolve these contentious issues," remarked Chairman James Hoecker. Indeed, the industry even backed the Commission's move to intercede in the process.

The Commission was "happy to referee" this dispute, which required the resolution of some "fairly knotty issues," Hoecker said. "We stand ready to do it again if it becomes necessary." He doesn't believe that "making these kinds of hard calls...denigrates in any way GISB's important role." While reaching "consensus among GISB members has not always been [easy]," Hoecker said he believes the organization nevertheless performs "extremely well."

The final rule also calls for pipelines to enter into OBAs at all intrastate and interstate pipeline-to-pipeline interconnects. In addition, it would allow a pipeline's shippers to trade imbalances among themselves when such imbalances would have similar operational impact on the pipe's system.

Significantly, the new rule also would require that pipelines post all information and conduct all business on a public Internet beginning June 1, 1999. It calls for shippers to be notified of critical events, such as operational flow orders (OFOs), by posting the information on pipeline web sites and via Internet e-mail, or by posting it to shippers' Internet addresses. In addition, it spells out standards for displaying information on pipelines' web sites, and requires pipelines to retain electronic records summarizing transactions for three years.

The changes "will give parties more access to pertinent information in a much more user friendly fashion," than the natural gas pipelines' electronic bulletin boards (EBBs), remarked Commissioner Linda Breathitt. Some pipelines are concerned that this aspect of the ruling signals FERC's intent to require a full-scale discarding of the EBB-based system within a year.

The final ruling is a "vindication" by FERC of the electronic data interchange (EDI) system, which uses the Internet to move files, over that of EBB-based systems, according to Greg Lander, president of TransCapacity. Effective June 1, 1999, all transactions currently performed on EBBs will be done over EDI, and EBBs will become back-up systems only, he said.

Currently, the pipelines provide EBBs to shippers for free, but this basically will cease after June 1, 1999. If pipes choose to continue to provide the service, they either will have to charge the user for the costs, have their shareholders bear the costs, or build a GISB-compliant EBB and maintain it according to certain standards, Lander noted.

The EDI system puts shippers more in control and on equal footing with pipelines, while EBBs relegated them to nothing more than data entry clerks for pipes, he said. This is FERC's way of transitioning the industry to the computer-to-computer Internet mode.

The rule also calls for title transfer tracking. Pipelines don't have to provide this service, but if they do, they can charge for it, Lander said. It also requires pipelines to coordinate and work with third parties, such as TransCapacity, that provide title transfer tracking.

Implementation of all the technical standards for intra-day noms is anticipated by Sept. 1 of this year; by June 30 for OBA and imbalance-trading standards; and by Dec. 31 for critical-notice standards, according to the Commission. Pipelines will be required to adopt and comply with standards for posting information on their web sites by the first day of the month following 90 days after publication of the order in the Federal Register.

Commissioner Vicky Bailey said FERC's action in this case was important "because it does demonstrate the positive role that the Commission can play in helping voluntary standards organizations," in both the gas and electric industries. "It reflects the best of a collaborative process."

Susan Parker

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