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FERC Examines Market Center Obstacles on Eastern Pipelines

FERC Examines Market Center Obstacles on Eastern Pipelines

Seeking a generic response to the restraints on competition posed by pipelines' bundling of production area costs into market area rates, FERC has asked parties in cases involving three pipelines delivering to the East Coast to respond to its transportation rulemaking.

At issue is the viability of market centers and whether or not the pipelines' bundled costs make it prohibitively expensive to ship on one pipeline in the production area and then switch to one or more other pipelines on the way to eastern markets.

Orders voted out by the Commission last week call on parties in cases involving Tennessee Gas Pipeline (RP95-112-023) and Texas Eastern Transmission (RS92-11-023) to address the issues in their respective cases by filing comments by the same Jan. 22 date that comments are due in the transportation NOPR. The parties are to advise the Federal Energy Regulatory Commission whether its proposals in the NOPR to auction short-term capacity and improve capacity segmentation would answer complaints which initially were raised by NorAm Gas Transmission. FERC will consider comments filed in the cases at the same time it is considering its generic NOPR.

The Commission orders last week were in response to a remand last July by the U.S. Court of Appeals for the District of Columbia Circuit in the Tennessee case. The Commission then requested the remand of two cases on appeal to the court involving similar issues on Texas Eastern.

FERC said that because of the pipelines' systemwide cost-of-service, "it has been argued that a shipper on a long-line pipeline has an incentive to purchase gas from the supply basins attached to the pipeline's production area facilities because they already are paying for these facilities. Thus it is argued a shipper is likely to use one pipeline for its entire haul rather than ship on one pipeline in the production area and on another pipeline in the market area." On Tennessee NorAm was specifically concerned with the development of a market center at Perryville, LA. The Texas Eastern complaint related to the shift of a zone boundary that it was claimed would inhibit development of a market center at Longview-Atlanta, TX.

In the case of Texas Gas (RP97-344-011) the Commission denied rehearing of its call for an evidentiary hearing on the so-called "NorAm issues," including the tie-in of costs and rates for production area transportation with the rest of the pipeline system. The Commission had earlier approved a settlement for the rest of the parties, but remanded the case to an ALJ to settle the issues for the dissenting party, NorAm. It defended its action over the objections of Commissioner Linda Breathitt, who objected to the full hearing process for Texas Gas, while the other two pipelines were subjected only to a paper hearing. The order noted NorAm had been promised a hearing on the issue in a previous rate case and said "it would be beneficial to have a specific record developed here on those issues, particularly if it turns out that the proposals in the NOPR do not provide a complete solution...."

Ellen Beswick

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ISSN © 2577-9877 | ISSN © 1532-1266
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