FERC Commissioner Joseph Kelliher on Thursday said that the Commission wants to encourage more natural gas storage in market areas “because we do think it would reduce some of the volatility, and prices shouldn’t go quite as high.” He said that FERC is considering whether there’s a need to reform its market-based pricing policies to encourage expansion.

Kelliher made his comments at a UBS Warburg natural gas and electric utilities conference in New York City. “One thing that has occurred, which is interesting and perhaps explains some of the volatility, is that as the role of the marketers has shrunk, more of the gas storage capacity is owned by local distribution companies” (LDCs).

Kelliher said that LDCs “use the gas that they have in storage differently than a marketer would. They’re less responsive to price.” He noted an analysis that revealed that if one were to look at the “pie” of gas storage, “as the wedge controlled by LDCs has gotten larger, there has been more price volatility.” FERC wants to make “the pie bigger — having more gas storage capacity.”

Kelliher noted that the issue of natural gas storage is one of several initiatives under discussion at the federal agency. “In response to the recent gas price spikes, the Commission is considering what it can do to encourage expansion of gas storage capacity in the market areas.”

Meanwhile, regarding new gas supply sources, Kelliher said that he was “encouraged” by the recent announcement by MidAmerican Energy Holdings Co. of a preliminary filing with Alaska for favorable tax treatment to build the Alaska portion of a 4.5 Bcf/d gas pipeline to deliver North Slope natural gas to markets in the Midwest (see Daily GPI, Jan. 26). The filing “raises the prospect that Alaska gas could be available sooner than people would have thought,” Kelliher said.

Commenting on liquefied natural gas (LNG), the commissioner noted that FERC is dedicating “substantial resources” to review of applications to build LNG facilities. “There’s been a host of applications to the Commission [and] I think the Commission has a good track record of acting on the applications expeditiously.”

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