FERC Chairman Pat Wood said the Commission was keeping close tabs on natural gas prices as the winter heating season gets underway to determine whether any manipulation has been involved in the current price run-up.
“You better believe we’re looking at it. But if it’s a legitimate supply and demand response then that’s the way it works,” he told reporters during a press briefing following last Wednesday’s regular Commission meeting. However, “if there’s an issue that needs to be looked at, the Commission…will take appropriate steps.”
Although no new price-related complaints have been filed by either industrial or commercial customers, Wood said he met with officials of the Electricity Consumers Resource Council recently, and “they’re not happy campers” about the lofty gas prices. “It’s [been] one of the four horsemen of the Apocalypse in the last three years that I’ve been here,” he noted, referring to the escalating prices.
“The Commission has been looking at this [gas prices] really full time since last January,” when prices spiked in the New England region, Wood told reporters. “We are very plugged in on this,” and are working with the Commodity Futures Trading Commission (CFTC) to monitor the market.
The chairman was asked why gas prices were setting record highs when there was a comfortable level of gas in storage for the winter. He noted that while gas in storage was high, the expectations for a cold winter were also high. In addition, Wood said the 3.2 Tcf winter storage level paled in comparison with the nation’s gas consumption of 22 Tcf or more, much of which is used in the winter.
“There are a lot of other factors that drive price other than storage,” he noted. For example, he cited the gas production that is still shut in in the Gulf of Mexico as a result of the damage caused by Hurricane Ivan.
Separately, Wood indicated that the Commission will likely spell out any policy changes to encourage the development of gas storage in a contested case pending before the agency, rather than in a policy statement.
“We may have a pending case to articulate aspects of any policy changes we decide to make,” he said. Wood did not identify the case. The direction of the policy changes will hinge a lot on industry’s comments following FERC’s recent gas storage conference, which are due at the agency by Nov. 15. “We may get some wisdom from all of that.” He indicated that the Commission may act within the next few months on the issue.
Commissioner Joseph Kelliher was asked what he thought of the proposal to grant independent storage operators a presumption of market-based rates. “I think it’s worth considering,” he responded.
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