FERC Workshop on Auctioning Set for Mid-October
Chairman James Hoecker last week announced that FERC plans to
hold a workshop with the gas industry in mid-October to flesh out
the details involved in the auctioning of short-term capacity. The
workshop will occur prior to the deadline for industry comments on
the notice of proposed rulemaking (NOPR) that addresses regulation
of short-term capacity, specifically the auctioning of that
capacity. The comments are due in early November.
The Commission in its July NOPR proposed the concept of capacity
auctioning in return for lifting the price caps on short-term
capacity, but the proposal was bereft of any specifics about how
the auctioning process would be carried out. This lack of details
has drawn criticism from nearly all quarters of the gas industry.
"The question that's relevant in the current discussions outside
the agency is how's it going to work precisely, and rather than
await comments that simply tell us that we haven't said enough, we
think we need to have a discussion on that issue," Hoecker said at
the FERC open meeting last Wednesday. "So the Commission staff will
provide some background information, and this process hopefully
will facilitate comments on the gas NOPR," with a special focus on
A workshop is "very important to improving our understanding and
the understanding of industry as to how this might work," he said.
"It's a very new issue. And it's broader than simply the bidding
and allocation processes for capacity that exist now." The workshop
will be held at 9:30 a.m. on Oct. 20 at FERC's headquarters.
In Dynegy Corp.'s view, the proposed daily auctioning of
short-term capacity could lead to a logistical nightmare for
marketers and other buyers of pipeline capacity. "Just the
logistics of a day-ahead market will be incredibly (and
unnecessarily) complicated. We'll have a day-ahead capacity bid,
two prior-to-gas-day nominations and four bumping opportunities,"
it noted in comments that still are in the draft stage.
Auctioning will unnecessarily demand shorter lead times for
purchasing transportation and supply, ultimately playing havoc with
the market, Dynegy believes. "We're talking about introducing into
the gas market one of the primary reasons [why] the electric market
has become so volatile. In the electric market, short lead times
(and concomitant price volatility) are inevitable because of the
lack of storage. [But] gas has storage and line pack, so daily and
hourly trading is much less of a necessity," the company draft
Also, since daily auctioning will force gas suppliers to line up
supply, transportation and markets simultaneously, they will always
either be long or short, Dynegy noted. "Suppliers need to be able
to match the supply deal with capacity deal. This can be
accomplished today via pre-arranged deals. But, if under the FERC's
proposal, one has to bid for transportation before supply is
wrapped up or has to buy gas before transportation, then we've
created a situation where suppliers are perpetually long or short.
This is a huge market dislocation. There will be fewer and fewer
willing to play in this distorted market."
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