If there was ever any indication there was industry consensus onthe need for negotiated terms and conditions of pipelinetransportation service, it was soundly dispelled in a letter beingmailed to FERC today by a group of producers, end users, marketers,and municipal distributors. The Pipeline Transportation CustomerCoalition, which is being led by the Natural Gas Supply Associationand the Independent Petroleum Association of America, blasted therecent FERC policy proposal (filed May 4) by the American GasAssociation and the Interstate Natural Gas Association of Americaas “seriously flawed as to undercut any purported value.” A filingmade by Columbia Energy’s pipeline subsidiaries last week also canbe grouped with the AGA-INGAA proposal. An NGSA spokeswoman said ittoo falls under this protest.

In allowing pipelines to negotiate terms and conditions ofservice, the Commission could harm competition in the commoditymarket, the secondary market and in the retail market, as well asdamage the pipeline grid, the coalition said. “Even with recourseservice and public postings of negotiated terms and conditions assuggested by AGA/INGAA, a significant concern remains that thepipelines will be in a position of market power to use negotiatedterms and conditions to discriminate and effectively sell acompetitive advantage to selected customers. By selectively sellingspecial advantage to some shippers at premium rates, pipelines willbe able to unfairly profit at the expense of other marketparticipants and consumers.

“Such a system of ‘balkanized’ pipeline services would underminecontinued development of liquid natural gas and pipeline capacitymarkets (including secondary capacity markets) by seriouslyinhibiting the fungiability of pipeline products and services.” Thecoalition further said giving advantages to some large capacityholders could reduce competition in the commodity andtransportation markets, “weakening secondary markets andfrustrating state commission efforts to bring greater competitionto retail markets.”

The AGA/INGAA proposal has a long list of defects, the coalitionadded. They include the “mechanics, the benchmarking process,potential cross subsidies, the need to continuously examine theharm to secondary markets, the likelihood of burdensome complaintproceedings, and the constant reassessments of the quality andongoing viability of recourse service.”

NGSA’s Philip Budzik, director of federal regulatory affairs,said, “The flexibility a pipeline gives to Peter has to come fromPaul. Our counsel to the Commission is that its first and foremostobligation to pipeline customers is to do no harm. As such, theCommission should be wary of any proposal which discards thetraditional customer protections provided by the current regulatorystructure.”

Budzik said NGSA “strongly supports the development of new andinnovative pipeline services,” but only according to FERC policyand only after public review. “That ensures service is notdegraded, there is no discrimination and customers don’t end upfooting the bill for services provided to others.”

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