Commissioners Linda K. Breathitt and Vicky A. Bailey last weekjoined the club of those confused about when, if ever, FERC mightsettle the huge number of gas issues that have been on its platefor more than a year. Much to the chagrin of the industry, whichhas been anticipating some type of FERC action soon, Breathittindicated it would take up to six more months, while Baileypredicted the Commission would be delivering a package of gasdecisions by Christmas.

Both appeared to agree on one thing, however. The presentdelivered won’t be nearly as big as the Commission led on. “That,to some of you guys – maybe more than girls – means that after allthis labor the elephant will deliver a mouse..,” said Bailey.

“I do think that a majority of the Commission will bedisinclined to significantly tamper with a system that appears towork well,” she said at a conference on FERC regulation sponsoredby Financial Times. Whatever the Commission decides to do, it will”not fall toward the radical end of the spectrum,” despite thescare tactics FERC used to draw an army of industry attorneys outof their corporate cubbyholes and into Washington.

Bailey said although there was no consensus among industrycomments on the notice of proposed rulemaking (NOPR) on short-termtransportation capacity issues or on the notice of inquiry (NOI) onlong-term transportation capacity regulation, one common theme didemerge. “That theme falls under the heading ‘whatever you doCommission, do no harm.’

“There seems to be no great clamor for change to the post-Order636 world that there was earlier. Everyone is telling me that theregulatory regime is working quite well. It seems that the commentslean more toward a fine-tuning and making adjustments around theedges. I suspect that’s probably what we’ll actually do.” Breathittagreed that this course – minor tweaking – might be the wisest forthe Commission now.

Bailey said there has been entirely too much focus on theshort-term capacity auction idea, but she indicated the Commissionlikely got the message from the nearly unanimous industryopposition. Producers did voice some support for the proposal.

Speaking at The LDC Forum sponsored by the Interchange Group inChicago, IL, last Monday, Breathitt expressed interest in dividingup the NOPR and NOI issues, leaving the most contentious to bedecided at a later date. She said FERC proposals onterm-differentiated rates, enhanced market transparency and changesto penalty procedures were ripe for review, and should be includedin a final rule. But like Bailey, she believes final action on theCommission’s more controversial proposals for daily auctioning ofpipeline capacity and negotiated terms and conditions of serviceshould be postponed.

“After reviewing the [industry] comments we received, I know Iam not alone in the belief that the time isn’t ripe for a massivepolicy shift,” she said at the Forum. She believes the two-prongedapproach she advocates for dealing with the gas issues “appears tobe one that many in the market could support.” Perhaps, shesuggested, “the wise decision would be to continue to make progresson our present course, with appropriate adjustments.” while at thesame time “analyz[ing] whether more extensive changes in ourpolices are necessary in the long term…..”

Bailey said to expect a decision on removing price caps onreleased capacity and on how to address the perceived potential forthe exercise of marker power by pipelines.

Despite rumors that FERC staff already has ironed out thedetails, Bailey said she has not seen anything yet. “There may besomething circulating that I’m not aware of, but they haven’tforwarded any recommended proposals to the Commission forconsideration. That appears that maybe we’re not as far down theroad as we should be.”

Rocco Canonica, Washington, D.C.;

Susan Parker, Chicago

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