Natural gas storage may “routinely fill up in the U.S. much earlier than in the past,” FERC Chairman Joseph Kelliher told reporters at a Washington, DC press briefing on Wednesday.

“It used to fill up in October,” he noted at a Platts-sponsored briefing. “It could fill up routinely a few months earlier,” Kelliher said.

“If storage capacity remains flat and demand keeps on increasing, that could be a problem in winter months,” the chairman of the Federal Energy Regulatory Commission (FERC) went on to note. “It makes weather an even greater variable with respect to price” than would have otherwise been the case.

That’s one reason why FERC implemented a gas storage pricing reform rule this summer, he noted. The Commission in June issued a final rule that reforms the agency’s pricing policies to jump-start the development and construction of new underground natural gas storage facilities in the U.S. (see Daily GPI, June 16).

FERC wants to increase gas storage capacity in part because there may be a “changing pattern” with liquefied natural gas (LNG) “where LNG imports in the U.S. increase, they peak in the summer months, filling up our gas storage,” with Europe having a dearth of storage capacity, Kelliher said.

This could lead to natural gas prices in the U.S. being lowered in the summer months “and contributing to more volatility in winter months and making variable weather an even more important variable than it’s always been.”

“The change in gas storage is interesting,” Kelliher said. “It used to be 30 years ago, gas storage was characterized by single, annual cycles of injections and withdrawals. That’s changed remarkably. Last year we saw withdrawals in July, injections in December. So the gas storage business has changed a lot.”

It’s changing further with LNG, he pointed out. “Europe has very limited storage capacity.” Last year, even though gas prices were high in the U.S., LNG imports fell in the winter “because they were higher still in Europe.”

“Some of the LNG developers think that LNG shipments to the U.S. will peak in the summer months.” Storage “may routinely fill up in the U.S. much earlier than in the past,” he said.

A reporter asked the FERC chairman whether he thinks enough gas storage is getting built in the U.S. “I don’t think in recent years, no,” Kelliher responded. “Since 1988, U.S. gas storage capacity has increased a total of 1.4%,” he noted.

“I think we’ve done what we can do and that’s reform pricing to encourage that investment,” Kelliher said. He also said FERC is “very efficient” once a company applies to the agency for a permit to build a pipeline or gas storage facility.

Meanwhile, Kelliher was asked to comment on the current state of natural gas and electricity price reporting and the reliability of price indexes.

The FERC chairman noted that the authority given to FERC in this area under the Energy Policy Act of 2005 (EPAct 2005) is “very discretionary. We have authority to issue rules or orders to assure greater transparency in both electricity and gas markets, both with respect to wholesale sales and transportation or transmission.”

FERC hasn’t acted to exercise that authority yet, he said, but the agency has developed an internal straw man “to figure out, if we were to exercise it, what might be reasonable options on how to exercise it. We are not hell bent on exercising that new authority. But we want to make sure that if we don’t exercise it, it’s the result of an affirmative decision.”

FERC is examining options “on how we might exercise that authority. We are looking at having some kind of public technical conference to discuss those options and we are actively looking for ideas. Commission staff are consulting with outside stakeholders and asking for their views on how we might exercise that authority. I’m sure we’ll get the full range. We’ll get some people saying we shouldn’t act at all and we’ll probably get others who think they have a great number of suggestions on what we might require.”

FERC is looking to convene the technical conference sometime this fall. “It was something we actually were thinking about doing this summer, but then when we were looking at three new commissioners” arriving at the agency, “it really wouldn’t have made sense to have a technical conference in July that might require Commission action in September or beyond, if the Commission would change in between July and that future action,” Kelliher said.

Former Arizona regulator Marc Spitzer and ex-Alliant Energy executive Philip Moeller were recently sworn in as new FERC commissioners (see Daily GPI, July 25). Jon Wellinghoff, an attorney with the Nevada-based law firm of Beckley Singleton, is expected to be sworn in by Senate Democratic Leader Harry Reid of Nevada on Aug. 1.

On Tuesday, Susan Court, director of FERC’s Office of Enforcement, noted that FERC has yet to exercise its increased penalty authority under EPAct 2005, but indicated that Columbia Gulf could be the first company — at least on the natural gas side — assessed the tougher penalties (see Daily GPI, July 26).

FERC issued a “very important decision” last Thursday in which the agency, for the third time, ordered that Tennessee Gas Pipeline be allowed to build an interconnect on a pipeline that is jointly operated with Columbia Gulf Transmission off the Gulf Coast of Louisiana, said Court at the Natural Gas Roundtable in Washington, DC. Columbia Gulf repeatedly has failed to comply with the orders approving the interconnection, she said.

“We had an interconnection request in 2004 and we granted the request,” Kelliher said on Wednesday. “In our view, Columbia Gulf has not complied with our orders that were issued after that request and they’ve actually persisted in noncompliance and that if they continue in that course, they will likely be subject to civil penalties.”

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