Interstate pipelines are expected to propose a “global”initiative on seasonal ratemaking and possibly negotiated terms andconditions of service at an industry-sponsored session in Houstonlater this week. Seasonal ratemaking, which would enable pipelinesto recover more fixed costs when capacity is in greatest demand, isemerging as the industry’s front-runner alternative to FERC’smuch-criticized auction mechanism for pricing pipeline capacity.

Although the details of the proposal remain unknown – even tomany of the industry participants that will be at Friday’s session- a source said he believed the pipelines would propose seasonalrates for short-term pipeline services. He anticipated a separateinitiative seeking removal of the price cap in the secondarymarket.

The source told NGI that he also expected the pipelines – if notthis week then later – to “somehow some way” address a shift awayfrom straight-fixed variable (SFV) rate design. LDCs “clearly havebeen agitating” for such a change, and “I think the pipes willprobably buy into it…to try to build some consensus” on otherissues.

The proposal on negotiated terms and conditions to emergeprobably will be a “rehash” of the joint initiative submitted bythe American Gas Association (AGA) and the Interstate Natural GasAssociation of America (INGAA) to FERC last May. The onlynoticeable change, he added, is that pipelines have “indicated awillingness” for a Commission proceeding to determine the bounds ofthe terms and conditions to be negotiated.

In addition, the source said industry participants are trying toset up a meeting with FERC Chairman James Hoecker for Feb. 26th toapprise him of the status of the discussions so far. Industryrepresentatives have been meeting in closed-door sessions everyother week in an attempt to reach a consensus on key initiatives inthe mega-notice of proposed rulemaking (NOPR) and notice of inquiry(NOI) by April 22, when comments are due at the Commission. ThisFriday will mark the fourth meeting, which puts the industry morethan half way through its negotiations.

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