00-30595. Dialog Concerning Natural Gas Transportation Policies Needed to Facilitate Development of Competitive Natural Gas Markets

November 22, 2000.

AGENCY:

Federal Energy Regulatory Commission, DOE.

ACTION:

Final rule; notice of staff conference.

SUMMARY:

In Order No. 637, issued on February 9, 2000,the Federal Energy Regulatory Commission (Commission) revised its regulatory policies, amended its regulations, and established new procedures to enhance the competitiveness and efficiency of markets for the transportation of natural gas in interstate commerce. This document establishes the second of three public staff conferences in a dialog between the industry and Commission staff. This conference focuses on affiliate issues.

DATES:

The conference will take place on January 31, 2001, starting at 1:00 p.m. Comments and requests to participate are due by January 5, 2001.

ADDRESSES:

Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426.

FOR FURTHER INFORMATION CONTACT:

Robert A. Flanders, Office of Markets, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426. [phone], e-mail: [e-mail].

SUPPLEMENTARY INFORMATION:

Take notice that on January 31, 2001, the Staff of the Federal Energy Regulatory Commission will hold a public conference, as contemplated by Order No. 637, ^[1] to discuss how the changes in the natural gas market affect the way in which the Commission should regulate transportation transactions between pipelines and their affiliates, as well as between pipeline capacity holders and their affiliates, capacity managers and agents. The conference will begin at 1:00 p.m. in the Commission's Meeting Room at 888 First Street, N.E., Washington, D.C. All interested persons are invited to attend.

This conference is part of the continuing process established in Order No. 637, ^[2] to enable the industry and market participants to discuss with staff, and each other, issues relating to the development of Commission policy and regulatory responses so that Commission staff can develop “a better understanding of industry trends and regulatory changes that better meet the changing character of the industry.” ^[3] This is the second of three conferences to discuss these issues.

As stated in Order No. 637, this conference will focus on “whether the regulatory policy with respect to pipeline affiliates and non-affiliates, as well as asset managers and agents, should be revised to reflect the changing nature of the gas market” and “whether there needs to be revisions to the regulations relating to pipeline affiliates.” ^[4] Currently, the relationship between a pipeline and its marketing affiliate(s) is governed by the standards of conduct. ^[5] Market participants are also able to monitor pipeline/marketing affiliate relationships and capacity holder/affiliate relationships by obtaining specific information through various posting and reporting requirements. This conference is intended to open a dialog concerning the market consequences of transactions between pipelines and their affiliates as well as transactions between non-pipeline capacity holders and their affiliates.

This conference will be structured as a roundtable debate with staff as moderator. Panel participants will be selected after the submission of comments and will be announced in a subsequent notice. The debate roundtable format is intended to encourage a discussion of the issues, and, accordingly, participants will not be afforded the opportunity to make oral presentations at the conference. Parties are therefore encouraged to submit written comments by January 5, 2001 to: (1) provide input on how to structure the discussion; (2) identify issues and examples to foster a meaningful dialog; and (3) suggest questions the staff moderator may wish to pose to the panel.

Comments should include a one-page single spaced position summary. Each comment should indicate whether the party is interested in participating in the roundtable. To limit the number of panelists, parties with common positions are encouraged to select an appropriate spokesperson to allow balanced representation of each industry segment, such as pipelines, local distribution companies, producers, industrial end-users, electric utilities, marketer groups, state regulatory bodies, consumer groups, or other recognized industry trade organizations or groups. Comments should be addressed to the Secretary, Federal Energy Regulatory Commission, 888 First Street, NE, Washington, D.C. 20426, and should refer to Docket No. PL00-1-000. Each request to participate must include a contact person, telephone number and e-mail address.

Commenters are encouraged to address the following areas:

Current Regulatory Approach: Comments should address the effectiveness of the current standards of conduct under Part 161 of the Commission's regulations, 18 CFR part 161 (2000), including a discussion of experiences in which the rules have been successful or unsuccessful, and whether the costs imposed by the current rules exceed the benefits. Comments should also address whether the affiliate transaction and index of customer reporting under sections 284.13(b)(1)(ix) and 284.13(c)(1)(ix), respectively, are effective in monitoring affiliate market activity.

Potential Affiliate Concerns: Comments should discuss whether, and in what circumstances, affiliate transactions pose the potential for anticompetitive or discriminatory effects or explain why such effects are not likely. Comments asserting that affiliate transactions do pose anticompetitive/discriminatory risks should provide examples or scenarios in which there is the potential for such effects. Comments also should address whether the same or different risks apply depending on the nature of the affiliate, gas or power marketer, asset manager, electric generator, or local distribution company. Comments should explore the impact of the changing market conditions on the potential, if any, for a pipeline or capacity holder, to give preferential treatment to an affiliate. Comments may also consider the potential market or consumer benefits of permitting affiliate transactions. Comments should focus on whether the problem or benefit relates to the ability to acquire services, construction of facilities, the rates at which services are acquired, the quality of that service, or other factors.

Potential Approaches for Dealing with Affiliates: Comments should address whether there may be better methods of regulating affiliate transactions that should be used in lieu of the current standards of conduct and reporting requirements. Some alternatives that could be considered are: maintaining open and fair bidding procedures; prohibitions on affiliates holding capacity on the affiliated pipeline; limitations on an affiliate's capacity market share; changes in open-season bidding evaluations to break-up large capacity packages; or divestiture of affiliates. Similar approaches could be considered for affiliates of non-pipeline capacity holders. Comments need to address the costs and benefits of adopting these approaches and whether there is a potential adverse impact on the market, such as the risk of unsubscribed pipeline capacity, potential cost shifts, or difficulties in planning new pipeline construction without reliance on affiliate contracts.

Comments should consider whether changes to the current standards of conduct approach should be made in light of the current operation and changing nature of the industry. Specifically, comments should discuss the options of eliminating, expanding or modifying the standards of conduct, whether there is a need for uniform standards of conduct for all sellers or holders of jurisdictional capacity, and whether there should continue to be distinctions in the treatment of affiliate relationships, and ownership rules, between the gas and electric industries.

The Capitol Connection may broadcast this conference in the Washington, D.C. area if there is sufficient interest. For those interested persons outside the Washington, D.C. area, the Capitol Connection may broadcast the conference via live satellite for a fee if there is sufficient interest to justify the cost. To indicate interest in either the local or national broadcast, please call David Reininger or Julia Morelli at the Capitol Connection at 703-993-3100 as soon as possible.

In addition, National Narrowcast Network's Hearing-On-The-Line service covers all FERC meetings live by telephone so that interested persons can listen at their desks, from their homes, or from any phone, without special equipment. Billing is based on time on-line. Call 202-966-2211 for further details. Anyone interested in purchasing videotapes of the meeting should call VISCOM at 703-715-7999.

Questions about the conference should be directed to: Robert A. Flanders, Office of Markets Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426, 202-208-2084. e-mail: [e-mail].

David P. Boergers,

Secretary.

Footnotes

1.  Regulation of Short-Term Natural Gas Transportation Services, Order No. 637, Final Rule, 65 FR 10156 (Feb. 25, 2000), FERC Stats. & Regs. Regulations Preambles [Jan. 2000-June 2000] ¶31,091 (Feb. 9, 2000), Order No. 637-A, Order on Rehearing, 65 FR 35705 (June 5, 2000) FERC Stats. & Regs. ¶31,099 (May 19, 2000).

2.  Id., FERC Stats. & Regs. ¶31,091 at pp. 31,268-69.

3.  Id., FERC Stats. & Regs. ¶31,091 at p. 31,268.

4.  Id., FERC Stats. & Regs. ¶31,091 at pp. 31,268-69.

5.  18 CFR Part 161 (2000).