In the nearly two years since FERC waived the price ceiling on short-term capacity release transactions, the transportation capacity that was released at above-cap prices accounted for only 2% of all capacity-release deals (including long-term transactions) and 2% of the total release volumes, while the average release rates were never more than $0.03 MMBtu/d higher than what they would have been with prices still capped, according to a FERC staff paper reviewing the waiver pilot program.

It “appears that the waiver of the price cap for short-term releases [less than one year] did not result in a large increase of capacity releases or release volumes over the price cap,” except during peak periods, FERC staff noted in a 16-page white paper. It is seeking public comment in 30 days on whether FERC should continue the price-cap waiver pilot, which expires on Sept. 30.

The staff reviewed the capacity-release activity on 34 pipelines during a 22-month period from March 2000 to December 2001. It found a total of 713 releases were transacted at above-cap prices, which represented only 2% of all releases, and that the average total released gas volume at above-cap prices was 4,316 BBtu/d. This accounted for only 2% of all release volumes during the period.

During the 22-month time frame, FERC staff reported the average unadjusted rate for all releases (both short and long term) was $0.19 per MMBtu/d, or six cents below the associated $0.26 per MMBtu/d maximum rate. This was only $0.01 per MMBtu/d, or 5.5%, higher than the $0.18 per MMBtu/d shippers would have paid if the cap had still been in place, the paper noted.

A closer “month-by-month examination of the effect on rates of permitting capacity releases over the price ceiling cap reveals that the average release rates were never more than $0.03 higher” during the nearly two-year period, staff said.

Seventy-six percent of all above-cap releases occurred on four pipelines — Transcontinental Gas Pipe Line (183 releases), Texas Eastern Transmission Corp. (122 releases), Columbia Gas Transmission (101 releases), and El Paso Natural Gas (135 releases), FERC staff reported. It said above-cap releases on Transco, Tetco and Columbia Gas added $0.01 MMBtu/d or less to the average release on their systems. However, the story was different on El Paso. “Above-cap releases had a more substantial impact on rates, raising the average release rate for the period by $0.09 (31%), and by $0.60 in November 2000.”

Above-cap release volumes were highest during the fall and winter of 2000-2001 and were lower the following winter, according to the staff paper. Releases also rose on individual pipelines in response to pipeline-specific events. For example, staff noted that above-cap releases rose on El Paso in August 2000 following the deadly explosion on its South Mainline system, and during the period of high power prices in California during the spring of 2001.

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