With little explanation for its action, the FERC announced last week it will allow a pilot program to expire, restoring price caps on short-term capacity release transactions, effective Sept. 30.

Chairman Pat Wood was mum about why the Commission chose to let the experimental waiver on price caps for short-term capacity releases expire later this month, clearing the way for a return to capped prices. “We did not issue an order that would [require us to] explain reasoning,” he said when questioned by reporters Thursday.

Massey said he was “comfortable” with FERC’s decision to allow the resumption of price caps. During the two-year pilot, the Commission found that a number of the capacity-release transactions at uncapped prices tended to be concentrated on four large pipelines, he said (see related story). “Some of the transactions were at 800% of max rates. I think some of the transactions may have produced prices that were not just and reasonable.”

A FERC staff white paper last June found that 76% of the releases at above-cap prices occurred on four pipelines — Transcontinental Gas Pipe Line, Texas Eastern Transmission Corp., Columbia Gas Transmission, and El Paso Natural Gas. It said above-cap releases on Transco, Tetco and Columbia Gas added $0.01 MMBtu/d or less to the average release on their systems, but the story was different on El Paso. “Above-cap releases had a more substantial impact on rates, raising the average release rate for the period by $0.09 (31%) and by $0.60 in November 2000.”

Overall, however, the staff white paper said it appeared that the waiver of the price cap for short-term releases (less than one year) did not result in a large increase of capacity releases or release volumes over the price cap, except during peak periods (see NGI, June 3). At that time, staff said it was seeking public comment for 30 days on whether FERC should continue the program.

FERC staff said it reviewed the capacity-release activity on 34 pipelines during a 22-month period from March 2000 to December 2001. It found a total of 713 releases were transacted at above-cap prices, which represented only 2% of all releases, and that the average total released gas volume at above-cap prices was 4,316 BBtu/d. This accounted for only 2% of all release volumes during the period.

During the time frame, FERC staff reported the average unadjusted rate for all releases (both short and long term) was $0.19 per MMBtu/d, or 6 cents below the associated $0.26 per MMBtu/d maximum rate. This was only $0.01 per MMBtu/d, or 5.5%, higher than the $0.18 per MMBtu/d shippers would have paid if the cap had still been in place.

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