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Columbia Seeks Speedy Capacity Auction

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 (RP00-374)

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 Columbia's posting.

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 term.

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 to match."

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 long.

Columbia has asked for an effective date of Dec. 1, 2000.

Ellen Beswick

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