The Federal Energy Regulatory Commission staff has made headway in narrowing the list of “energy affiliates” that would be subject to the broader standards of conduct that are being considered for natural gas pipeline and electric transmission providers and their sister companies, said an official with a major pipeline group. But she believes the list of potentially affected affiliates still is far too expansive.

“I like the changes that staff proposed. But I still think there needs to be a narrower definition” for “energy affiliates” in the final rule regulating the behavior of regulated transmission providers and their affiliates, said Joan Dreskin, vice president and counsel for the Interstate Natural Gas Association of America (INGAA).

Under a NOPR issued in September 2001, FERC proposed restricting the business contacts between monopoly gas pipeline and electric transmission providers and all of their energy affiliates. This action would significantly broaden existing regulations that limit only contacts between pipeline/transmission providers and their marketing and sales affiliates. The Commission goal is to close any loopholes in current regulations that allow pipeline and transmission providers to give their affiliates undue preference in the market or preferential access to information.

In its proposed rule, FERC defined “much, much broader” the types of energy affiliates that could be subject to the standards of conduct. However, staff in a recent analysis proposed streamlining the list of “energy affiliates” that would be potentially affected. It agreed three types of affiliates should be exempted: regulated transmission affiliates of pipeline and transmission providers, holding or service companies that don’t engage in transmission transactions in the U.S. energy market, and foreign affiliates that don’t participate in the U.S. energy market.

In addition, staff supported allowing pipeline/transmission providers to share services with their information technology staffs, which Dreskin called a “positive” development. “It’s clear that staff did a careful analysis” of the energy industry’s comments on FERC’s proposed rule.

“We think it’s very, very positive that FERC opted to take this approach” to fine-tune the category of “energy affiliates” that would be subject to a final rule on standards of conduct, she told NGI. Still, she said INGAA believes there’s room for further adjustments. “We do not think it’s appropriate to [make] processors, producers, gatherers and LDCs” bound to the standards being considered, as the Commission proposes.

More importantly, “this [staff] paper does not strengthen in anyway FERC’s original analysis of why [it] needed to strengthen its current” Order 497 standards, Dreskin noted. That order restricted communications only between pipeline providers and their marketing affiliates.

In addition to further streamlining the category of “energy affiliates,” Dreskin said INGAA wants a rule that is “workable and clear, so compliance is easy to understand,” and doesn’t create “unintended inefficiencies unrelated to market power.” The affiliates of pipeline and transmission providers “want to make sure that the rule does not put them at a competitive disadvantage.”

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