NGI The Weekly Gas Market Report
Columbia Energy Chairman Oliver G. “Rick” Richard III saysproposals espousing seasonal ratemaking and negotiated terms andconditions are the most important of the many reform initiativespending before FERC, and deserve priority. Obtaining regulatoryapproval for both will be a “key initiative” of pipelines thisyear.
He specifically cited the seasonal rate proposals of Columbia’spipelines and Northern Natural Gas, which would permit interstatepipelines to collect more fixed costs during the peak-time winterperiod when capacity is the “most valuable.” He indicated seasonalrates “could” be an alternative to the Commission’s proposal formandatory auctioning of short-term capacity.
“I think the FERC is traveling down the right path – I’m notsaying the auction is the way to go – [in that] they’re trying tocreate transparency on the pipelines…,” said Richard, who aschairman of the Interstate Natural Gas Association of America(INGAA), addressed pipeline regulatory priorities for 1999 at apress briefing last Thursday.
But seasonal rates “can go a long way towards” providing thetransparency that producers seek, he told reporters. “Producerswant as simple [a] business as we can divine so that [it’s] auser-friendly system…And seasonal rates can help us get there.”
To extend transparency even further, “you could have somethinglike…[what’s] currently being done in California where Sempra isputting up its bid and ask price, or you’re doing it on theInternet with commercial and residential customers” so they’re ableto see gas prices a lot more quickly and choose. “And I thinkthat’s coming.”
Producers want transparency to choose the best rates, whilecustomers seek transparency to determine the best price fordelivered gas. “…[I]f you can combine those two, then I thinkit’s a win-win [situation],” Richard noted.
He believes that providing pipelines with seasonal ratemakingauthority, as well as the ability to negotiate terms andconditions, would offer the “flexibility needed going forward” forall concerned – producers, pipelines, LDCs and customers. The keyconcern with negotiation of terms and conditions has been itspotential to degrade “recourse” service.
He declined to comment on the progress so far of theindustry-sponsored negotiations on major initiatives in theCommission’s mega-notice of proposed rulemaking (NOPR) and noticeof inquiry (NOI). He said the process has been “very, verypositive,” but added that he had “no predictions on how it all mayturn out.” Seasonal rates and negotiated terms and conditions havetaken center stage at the sessions so far, according to sources.
Richard indicated the gas industry will meet FERC’s April 22nddeadline for comments on the NOPR and NOI. “There’s a sense ofurgency in the group to meet the deadline. I think everyone in theentire value chain from producers all the way to the end-usecustomer [has] been engaging in the dialogue to try to move ittowards some conclusion…by that deadline.” The industry is nearthe half-way point in its negotiations, completing three of sevenscheduled sessions.
For Columbia, Richard said the company’s goal is to growearnings by about 10-12% annually over the next five years. Inaddition, it wants to convert its “income mix,” which currently is90% regulated and 10% unregulated, to 70-30% by the year 2002. Hedismissed questions about possible merger plans involving ColumbiaEnergy. “I couldn’t answer that [even] if it were” considering suchplans, he quipped.
“…[W]e believe we have the culture and the assets to grow at avery good percent, even faster than utilities” in the year ahead.”Our core businesses are transmission and distribution. We likethose businesses…We think we have some good growth potentialthere,” Richard said, adding that Columbia also planned to continueas “one of the major [producer] players” in Appalachia, was “veryinterested” in the propane market and independent power generation,as well as acquiring generation assets.
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