Instead of trying to tackle head-on all the issues before it inits review of the short-term and long-term transportation markets,Commissioner Linda Breathitt has proposed that FERC first issue alimited final rule addressing the less-controversial issues andsave the more complex items for later. “From what I’ve read in thecomments [filed at FERC], the approach I am proposing appears to beone that many in the market could support,” she said in a recentspeech to the American Gas Association Legal Forum in La Jolla, CA.

She believes certain issues – such as term-differentiated andseasonal ratemaking, changes in penalty procedures and increasedpipeline reporting requirements – should be resolved in a limitedrule on short-term transportation issues (RM98-10). Such issues are”less controversial and [would] act to enhance comparability andtransparency in the natural gas industry.” And the more contentiousitems that “could fundamentally change the dynamics in the market”- daily capacity auctioning and negotiated terms and condition ofservice – would be better dealt with at a later time, possibly inthe docket on long-term policies (RM98-12).

Breathitt said she favored elements of term-differentiated andseasonal ratemaking, which would allow pipes to adjust ratesaccording to demand, because they would give pipelines and shippers”the opportunity to structure service agreements that are moreresponsive to present market conditions while still retaining acost basis.” A big plus of these proposals is “they do not have theinherent market-power issues that releasing the price cappresents.”

Breathitt expressed reservations with daily auctioning andnegotiation of terms and conditions of pipeline service ascurrently proposed. While “I continue to believe that they [dailyauctions] are a fundamentally sound concept for the mitigation ofmarket power,” she believes the industry needs “more experiencewith longer term capacity auctions before a daily auction would beviable.”

With respect to negotiated terms and conditions, she said thatwhile she thinks FERC should “encourage and promote” pipelines toprovide flexible services, “I would prefer that the flexibility beimplemented through generally available rate schedules that permitother shippers who are similarly situated to avail themselves ofdeveloping services.”

Breathitt said she was concerned that individually negotiatedterms and conditions “may result in undue discrimination and wouldcause the market to be more fragmented, giving rise to a multitudeof service agreements with many disparate features.”

Susan Parker

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