Customers Call for Expansion of Pipeline Affiliate Rules
Expansion of the FERC definition of interstate pipeline
affiliate to include other subsidiaries beside marketing
affiliates, and rigorous market monitoring by the Commission,
appeared to be the most popular of the solutions offered last week
by pipeline customers to level the playing field in the face of the
increasing convergence of pipeline and power companies.
The suggestions came from marketers, producers, state regulators
and consumers at a first-of-its-kind roundtable discussion before
key staff members of the Federal Energy Regulatory Commission.
Dynegy Inc. favors preventive, rather than reactive measures, Ed
Ross, representing the marketer, said. "The best solution is
structural change." This means expanding the definition of
affiliates subject to the Order 497 affiliate rules to include more
than just marketing affiliates. He also advocated more rigorous
market monitoring by FERC, a levelized bidding process and physical
separation of pipeline and affiliate offices. Ross joined with Mike
Goldenberg of FERC's General Counsel's Office, in leading a
discussion of pipeline "funny money," or intracorporate transfers.
"We can't compete on any deal that a pipeline affiliate doesn't
want us to get," Ross said.
New York Public Service Commission representative Phillip Teumim
blasted merchant generating affiliates, saying convergence has
brought "wonderful new opportunities for new types of affiliate
abuses." It is just too easy for "subtle" information about siting
of prospective power plants to pass between a pipeline and its
merchant generating affiliate, Teumim said.
The current system of relying on the market to police itself and
send complaints to FERC doesn't work, pipeline customers charged.
It is too difficult and costly to monitor all the necessary
pipeline transactions, to aggregate data from the varied displays
on pipeline bulletin boards and to pursue legal actions that often
take years. Dynegy's Ross complained that posting an Adobe Acrobat
data file does not allow for manipulating the data to make
comparisons. Small producers and representatives of large consuming
companies said they did not have the budget for a full time staff
to monitor pipeline transactions, saying it should be FERC's job as
the watchdog over monopoly pipelines to ensure fair play.
BP's Jeff Holligan and representatives of independent producers
said that much of the problem was at the producer end and involved
denying access to gathering lines, or affiliates bidding up the
price of the capacity to make producers pay more or keep them out
of the market.. BP Amoco "has never won capacity unless we bid more
than it's worth," Holligan said.
Pipeline defenders argued that the rules are working. Joan
Dreskin, representing the Interstate Natural Gas Association of
America, presented a table showing that all pipeline affiliates
held a slightly smaller share (14.4%) of transportation capacity on
their own pipeline affiliates in 2000 than they did in 1996
(14.7%). Also, in the three cases of affiliate abuse prosecuted
before FERC, the Commission made no finding that competitors had
been harmed. Beyond those cases, Dreskin said there is only
anecdotal evidence of abuses, and pointed out that complaints are
Ross disputed the INGAA figures, saying they did not include
pipeline capacity managed by affiliates. And, he suggested, FERC
didn't find any competitors harmed because it couldn't find any
left. "How many marketers are left? How many have been acquired by
pipeline affiliates?" Adhering to the guidelines that no pending
cases be discussed, no mention was made of the heated controversy
surrounding El Paso Merchant Energy's contract for a large block of
capacity on El Paso Natural Gas, which many credit with sparking
the current affiliate debate.
Bill Scherman, representing an ad hoc group of marketers, and
Leslie Lawner, Enron North America's counsel, defended the rules as
they stand. Scherman, a former FERC general counsel, pointed out
the Commission had no record to base an expansion of the rules.
Lawner said "the rules are generally good. I don't think any games
are played in most cases."