Pipes Debut 'Global' Seasonal Rate Proposal
Interstate pipelines last week unveiled a "global" proposal on
seasonal ratemaking and flexible terms and conditions of service at
the fourth industry pow-wow exploring major FERC gas initiatives
and possible alternatives. Seasonal ratemaking, which would enable
pipes and LDCs to recover more value for capacity when it's in
greatest demand, is emerging as the industry's front-runner
replacement for the Commission's much-criticized auction mechanism.
Although details were sketchy, the pipelines reportedly proposed
seasonal, term-differentiated rates for long- and short-term
capacity contracts. However, they also would offer pipeline
customers the option to be billed at annualized rates. The
pipelines further proposed to make "periodic reports to verify
seasonal, term-differentiated rate assumptions," which caused some
to question whether or not this was a true-up.
"I don't get the same sense" that this was what the pipelines
meant, remarked one industry source. "If there's going to be any
meeting of the minds [on this proposal], the words have to start
meaning the same things to everybody."
The proposal came under some fire for its lack of detail. "The
only disappointment is that it's not detailed enough to really
critique quite frankly, which puts the burden on the people at the
meetings...to ask the right questions," the source said.
Seasonal ratemaking would get LDCs "out of the ditch" by
allowing them to recover higher prices for their capacity when it's
most in demand, and it would provide pipelines with "greater
assurance" of revenue recovery in the winter to offset the
discounts they give in the summer.
The pipelines further proposed the lifting of the price cap for
secondary capacity only - not primary short-term capacity. They
made abundantly clear their opposition to the mandatory auction
mechanism for short-term capacity, as proposed by FERC in its
mega-notice of proposed rulemaking issued last July.
Straight-fixed variable (SFV) rate design wasn't in the
proposal, but the source told NGI that he expects the pipelines to
"somehow, some way" address a shift away from the controversial
rate design later. LDCs "clearly have been agitating" for such a
change, and "I think the pipes will probably buy into it...to try
to build some consensus" on other issues.
He believes the final proposal on negotiated terms and
conditions to emerge probably will be a "rehash" of the joint
initiative submitted by the American Gas Association (AGA) and the
Interstate Natural Gas Association of America (INGAA) to FERC last
May. The only noticeable change, he added, is that pipelines have
"indicated a willingness" for a Commission proceeding to determine
the bounds of the terms and conditions to be negotiated.
The pipelines also put the Commission's complaint process on the
table as an item for possible discussion, the source noted. This
could be a tough nut to crack because although both the pipelines
and LDCs favor a more expedited process at FERC, they have proposed
completely different procedures for achieving this.
In addition, he said industry participants are trying to set up
a meeting with FERC Chairman James Hoecker for Feb. 26th to apprise
him of the status of the discussions so far. Industry
representatives have been meeting in closed-door sessions every
other week in an attempt to reach a consensus on key initiatives in
the mega-NOPR and notice of inquiry (NOI). Industry comments are
due at FERC by April 22nd.
Asked whether industry will need another extension of the
comment deadline, the industry insider said, "I suspect we're not
going to know the answer to that question until the last meeting on
April 7th." Susan Parker