While efforts to deregulate the electric industry at both thestate and federal level drag on, at least one internationalobserver found U.S. gas deregulation worthy of praise. RobertPriddle, executive director of the International Energy Agency(IEA) in Paris, told reporters at the 17th Congress of the WorldEnergy Council that the United States leads the world in gascompetition. Priddle said he is heartened by the Federal EnergyRegulatory Commission’s (FERC) decision to review pipeline rateregulation. Priddle gave his talk to highlight findings of theIEA’s report card on U.S. energy policy. The findings stem from a1998 review and are published by the agency in a 152-page book.
“The outlook for further deregulation of gas transportation isquite mixed,” the report says. “Despite a very large number ofpipeline companies, wide areas of the country still receivesupplies from fewer than three transportation companies. Somecities like Chicago and some states like Louisiana or New York haveample opportunity to choose between different pipelines, but mostparts of the country still depend on a small number of lines -sometimes only one.” Judging from the IEA’s map of the U.S.pipelines, states with a dearth of options include Idaho, NevadaUtah, and the Carolinas.
The review found the secondary market of pipeline capacity to becritical to competition, but it points out trouble with electronicbulletin boards intended to disseminate capacity information.”Obtaining timely information on – and confirmation of – capacityreservation can become a problem if a shipper needs to line upseveral pipeline segment reservations, plus possibly other networkservices, for one delivery. The information and transaction costscan be high because time lags in posting bids and completingtransactions typically takes two to three days. FERC has a crucialrole in reducing such transaction costs.” The report continued tooutline findings that more work needs to be done on capacity rateregulation. “During off-peak periods (the non-heating season),prices have fallen considerably below market value. This has meantthat companies in regions with ample pipeline capacity have beenunable to earn the regulated rate of return on the releasedcapacity. It clearly reflects how the current system of priceregulation does not take properly into account the peak-loadcharacteristics of the gas business reflected in marginal costs.”
Speaking on the topic of electric deregulation, Priddle said,”We have no doubt that the United States is in a dynamic transitionphase in its electricity market, and we applaud that.” However,Priddle noted that dynamic transition is not taking place in aunified fashion. In other words, every state and the federalgovernment is doing its own thing. Priddle and the IEA recommendthat federal policy create a legal framework to shepherd the statestransition to competition. This would avoid, for instance, disputesbetween states power moves between.
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