Besides pointing up an inadequate physical intrastate natural gas transportation infrastructure, the staff of the Federal Energy Regulatory Commission, has suggested the California Energy Commission (CEC) look into how the regulatory environment may be discouraging electric generators from hooking up to pipelines and distribution systems in the state.

The recommendations came in comments on the CEC’s draft report on the natural gas system in California which was presented at FERC’s May 24 public conference on infrastructure issues (see Daily GPI, June 5). Responding to CEC Commissioner Michal Moore’s invitation to comment on the California commission’s draft report, the staff of the federal agency also suggested other contributing factors to be explored would be the inability of some electric generators to obtain firm capacity rights to the utilities’ backbone systems or firm/flexible rights to their receipt points.

The federal commission staff agreed with the California study that if intrastate receipt capacity exceeded interstate delivery capacity “there would be greater operational flexibility on the California systems and more gas on gas competition.” FERC suggested the analysis be expanded to consider “the economic impacts of slack capacity on capacity values, the willingness of shippers to contract for firm capacity in surplus capacity conditions, and rate mechanisms that may be appropriate to keep the LDCs whole if slack capacity is built, but cost recovery remains on a volumetric basis.”

There should also be a more thorough examination of customers’ rights to storage capacity and firm redelivery services.

The FERC staff also noted that price manipulation by marketers “is treated as a fact rather than an allegation. The report could be improved by exploring the distinction between shortage price premiums, price manipulation potential, and market dynamics, particularly the demand elasticity of gas customer sand whether electric generators have any real demand response to prices.”

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