FERC Commissioner Linda Breathitt yesterday called on theCommission to initiate a generic review of whether the ratestructures of most interstate gas pipelines, especially Tennessee,are inhibiting the development of market centers.

Her request accompanied FERC’s decision, in response to a courtremand, to set for hearing the market center and rate issues thatwere raised by Reliant Energy Gas Transmission with respect to theTennessee system. The U.S. Circuit Court of Appeals for theDistrict of Columbia remanded the case so that the Commission couldrespond to Reliant’s arguments [RP95-112-024].

While Breathitt’s request was seconded by Commissioner WilliamMassey, it elicited a lukewarm response from Chairman JamesHoecker. To “require them [rates] to be re-designed generically, ofcourse, involves difficult issues of potential cost shifts. Andfrankly pipelines and their customers have agreed to settle thisissue,” he said. But because the issue raises competitive concernsfor the marketplace, he suggested that FERC’s post-Order 637technical conferences with industry “might be a good place toengage in a dialogue.”

A key issue posed by Reliant, Breathitt said, “is whetherbundling of production-area costs with market-area costs inhibitsthe development of market centers downstream of Tennessee’sproduction area.”

For several reasons, “I believe that the market center issuesraised by Reliant [exist] on most long-line pipelines. Mostlong-line pipelines, including Tennessee, [have] rates throughwhich shippers pay an allocated share of the costs of all of thefacilities rather than only the cost of the facilities in aparticular zone used by that shipper,” she noted.

Breathitt believes a “comprehensive review” of the impact ofinterstate pipeline rate structures on market-center development islong overdue, pointing out that the last one took place in 1992when Order 636 was issued. “Consequently, a logical next step wouldbe to seek a generic resolution of these market-center issues,either through an NOI or a notice of proposed rulemaking.”

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