Columbia Seeks Speedy Capacity Auction
Columbia Gas Transmission has filed to replace its outmoded
five-day capacity bidding process with daily interactive bidding,
including a daily sequence of postings, an interactive bidding
period and after-hours market, and a shortened ROFR period
Under its current system most capacity buyers on Columbia wait
until the final day and even hour of the five-day process to make
their bids in order to take advantage of the latest market
information. The new system would be more responsive, in keeping
with the Federal Energy Regulatory Commission's (FERC)
encouragement for market efficiency in Orders 637 and 637-A.
The plan calls for Columbia to post daily offers of available
capacity on its Internet-based electronic bulletin board by 7 a.m.
CST, including terms and conditions. Between 8 a.m. and 8:15 a.m.
Columbia will evaluate bids received from 7 a.m. on, as well as
bids made in an after-hours period. If bids meet or exceed the
terms set, Columbia will accept them, and the capacity sale will be
automatically transacted. From 8:15 a.m. until 3 p.m. an
interactive auction will be conducted with the remaining capacity,
plus any new offerings, with shippers matching or countering
There will be only one variable to simplify the bidding process:
discounted capacity will be offered for a fixed term and bidders
can choose a different rate; fixed or maximum rate capacity will be
offered for a specific term and bidders can choose a different
In the interactive period Columbia can revise its offer. If it
decides to lower its minimum price to meet a bid on a portion of
capacity, Columbia will continue to offer any remaining capacity in
that parcel at the new lower rate for at least 15 minutes.
During an after-hours period, from 3 p.m. until 7 a.m. the next
day, bidders may continue to make bids, but Columbia will not
respond. The pipeline, however, may make changes in its offers to
reflect changed market conditions during this period.
A sticking point in the process is FERC's requirement for a
15-day right-of-first-refusal (ROFR) period. "During this 15-day
period market events can occur that may have a dramatic impact on
the value of the capacity purchased...This was the reality at
certain times during last winter. A period of cold weather drove
up market area prices, greatly increasing the value of capacity
into some areas. Under Columbia's current tariff, parties are
exposed to potential price movement after having won the bidding
for capacity without the ability to lock in the future price, until
after waiting for the ROFR-holder for 15 days to exercise its right
Columbia is proposing an ROFR matching period of two business
days for transactions of less than 18 months and five business days
for longer transactions. The pipeline explains the original
capacity holder will have ample notice the capacity will be up for
bids. It will also know what it will have to pay for a maximum
rate, maximum term re-up. The customer also should already have
calculated the maximum it can afford to commit to, and by watching
Columbia's bid-ask process should have an idea of the going rates.
Making the final decision within those parameters should not take
Columbia has asked for an effective date of Dec. 1, 2000.
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