Commissioners Linda K. Breathitt and Vicky A. Bailey this 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. Early in the week, Breathitt indicated itwould take up to six more months, while Bailey said yesterday theCommission would be delivering a package of gas decisions byChristmas.

Both appeared to agree on one thing, however. The presentdelivered won’t be nearly as big as the Commission let 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 cubby-holes 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.”

Bailey said there has been entirely too much focus on theshort-term capacity auctions idea, but she indicated the Commissionlikely got the message from unanimous industry opposition.

Speaking at The LDC Forum sponsored by the Interchange Group inChicago, IL, earlier this week Breathitt expressed interest individing up the NOPR and NOI issues, leaving the most contentiousto be decided at a later date. She said FERC proposals onterm-differentiated rates, enhanced market transparency and changesto penalty procedures are ripe for review now. But like Bailey, sheindicated the Commission’s proposals for daily auctioning ofpipeline capacity and negotiated terms and conditions of servicewill be postponed.

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.”

Although FERC has gas demand and pipeline capacity needs on theagenda for today’s meeting, Bailey gave no indication what will bedecided or where FERC is headed on the proposed and competingIndependence and Millennium pipeline projects. In fact, she let onthat the issue of new pipeline construction and expected gas demandis more unsettled than ever.

“The issue of need is not an easy one to resolve,” she said,referring to political and environmental pressure and differing gasdemand forecasts. “Projections of gas demand in the next 15 yearsare divergent and depend on many unpredictable variables. Capacityturnback on the [pipeline grid] complicates the equation. Andpredicting where capacity increases will be needed is not a precisescience… Can we rely on the financial markets to tell us whichprojects are needed? How do we respond to the increasing level ofenvironmental and political opposition? These are all questionsthat must be addressed and some of them will be addressed [today],giving you an idea of the quagmire of where we are.”

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