NGPL's New FT Auction Approved
A revised auction process for firm capacity, described as more
market responsive, on Kinder Morgan's Natural Gas Pipeline Company
of America won approval from the Federal Energy Regulatory
Commission last week (RP97-431-009).
FERC rejected most of the requests for revisions in the
contested settlement plan, which replaces an auction process
installed in 1998.
Under the terms of the settlement, newly available firm capacity
will be posted 15 months before the date it is scheduled to become
available. Postings will be updated daily. An Initial Open Season
(IOS) will be held each month for capacity posted during the
previous month. In this initial auction, all bids must be in
Natural's current SFV format. NGPL also must establish a reserve
price or reserve price matrix for each IOS, defining minimum
acceptable bids which must be equal to or less than maximum rates.
If capacity is not awarded in the IOS, Natural may sell the
capacity in prearranged transactions under request procedures or
conduct an Alternate Open Season (AOS). In the AOS, negotiated rate
bids will be evaluated based on net present value. Customers also
may initiate a shipper-initiated open season (SOS) for capacity
still available, using SFV-based rates.
Regarding objections from some customers to negotiated rate
deals, FERC agreed with NGPL that since it has disposed of its
marketing affiliate its incentive is to maximize revenue by
accepting the best deal, whether it is in the form of a maximum
recourse rate or a negotiated rate. Since the first auction --- the
IOS --- provides for SFV rate bidders only, "the proposed
proceedures provide a reasonable opportunity for recourse rate
bidders to obtain capacity without competition from negotiated rate
bids." The Commission noted that separating the bid methods into
separate auctions eliminates the "inherent difficulty of directly
comparing negotiated rate bids and SFV recourse rate bids."
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