[Federal Register Volume 62, Number 44 (Thursday, March 6, 1997)]
[Notices]
[Pages 10266-10268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5535]
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DEPARTMENT OF ENERGY
[Docket No. PL97-1-000]
Issues and Priorities for the Natural Gas Industry; Notice of
Public Conference and Opportunity To Comment
February 28, 1997.
Take notice that the Federal Energy Regulatory Commission is
convening a public conference on May 29 and 30, 1997, to conduct a
broad inquiry into the important issues facing the natural gas industry
today, and the Commission's regulation of the industry for the future.
The Commission expects a broad ranging discussion that will allow the
members of the Commission to discuss these issues with the industry,
and the public generally, in order for the Commission to establish its
regulatory goals and priorities in the post-Order No. 636 \1\
environment. We anticipate engaging all industry segments in a dialogue
about how the industry currently works, how the industry is changing,
and how the Commission's regulatory policies should respond to such
changes in the marketplace.
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\1\ Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation; and Regulation of
Natural Gas Pipelines After Partial Wellhead Decontrol, [Regs.
Preambles Jan. 1991-June 1996] FERC Stats. & Regs. para. 30,939
(1992), order on reh'g, Order No. 636-A, [Regs. Preambles Jan. 1991-
June 1992] FERC Stats. & Regs. para. 30,950 (1992), order on reh'g,
Order No. 636-B, 61 FERC para. 61,272 (1992), reh'g denied, 62 FERC
para. 61,007 (1993).
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I. Background
Since the issuance and implementation of Order No. 636, natural gas
markets have developed rapidly and the industry has gained experience
functioning under different conditions.\2\ Also, significant changes in
the structure of the natural gas industry have occurred since Order No.
636 issued. These include consolidation in the ownership of interstate
pipelines, the spin-off and spin-down of gathering with the potential
for state regulation, the emergence of mega marketers, and the emerging
electric and gas convergence. In addition, many more market centers
exist today, offering a wide array of services that increase the
flexibility of the system and facilitate connections between gas
sellers and buyers. These services commonly include wheeling, parking,
loaning, and storage.
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\2\ For example, the winters of 1993-94 and 1995-96 were
relatively cold and capacity in some regions was tight, and the
winter of 1994-95 relatively warm and capacity was unusually slack
in some regions.
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The interstate pipeline transportation grid has expanded
significantly, offering
[[Page 10267]]
shippers more flexibility in their choice of supply areas, and creating
new paths from existing supply areas to additional markets. Today, the
natural gas contract is among the most heavily traded of all commodity
futures. Also, pipeline capacity rights can now be traded, and
electronic communication and trading is increasingly more common.
Electronic trading systems enable buyers to discover the price and
availability of gas at transaction points, submit bids, complete
legally binding transactions, and prearrange capacity release
transactions. Further, capacity release is also playing an increasingly
significant role in permitting the reallocation of firm pipeline
capacity to customers most desiring it. Capacity release permits
shippers to release the rights to transportation on the segments of a
pipeline they do not need, and to acquire firm rights in segments that
connect to other supply areas, on a temporary or permanent basis. In
sum, all of the changes that have occurred since Order No. 636 have
given shippers better alternatives at less cost and greater reliability
than ever before.
With all these advances, the industry now faces new issues. A few
states have implemented unbundled retail access for all customer
classes. Unbundled retail access is progressing in some states faster
than others, and unbundled retail access generally is not available to
all customer classes equally. Further, the exercise of market power
behind the city gate may translate into the exercise of market power in
the interstate transportation market. These developments may create new
issues for the Commission in its regulation of interstate pipelines.
In addition, the ability of customers to buy and sell gas and
transportation capacity, especially in the intraday market, is not yet
a reality. Electric generators, for example, sell into increasingly
competitive hourly electric markets. The natural gas market has not yet
developed the ability to engage in transactions on an hourly basis. The
Commission would like input on whether trading gas and transportation
capacity on an hourly basis is desirable to meet the needs of
customers. It may be that regulatory impediments exist that prevent the
natural gas industry from offering such flexibility.
Under Order No. 636 the natural gas markets have improved industry
reliability; however, there may be further improvements that could be
made, and at a lower cost. From a competitive perspective, gas
transportation and commodity markets are interconnected. Many commodity
trades cannot occur without the appropriate transportation. Therefore,
the Commission needs to continually assess the operation of the
transportation system to ensure that unnecessary restrictions,
particularly regulatory restrictions, do not impair the functioning of
the commodity market. Are there aspects of interstate pipeline
regulation that could facilitate the emergence of even more efficient
natural gas commodity and transportation markets?
In the aftermath of Order No. 636, the Commission also sees more
competition among interstate pipelines. Nontraditional interstate
service providers, such as intrastate pipelines, Hinshaw pipelines and
local distribution companies, are also competing with interstate
pipelines to provide interstate service. This raises questions
concerning the relative roles of NGPA Section 311 \3\ and NGA Section 7
\4\ in meeting the demand for new interstate services. Increased use of
NGPA Section 311 to provide a wide variety of interstate transportation
services creates questions about applying two different regulatory
regimes.
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\3\ 15 U.S.C. Sec. 3371.
\4\ 15 U.S.C. Sec. 717f.
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In addition, there are longstanding issues respecting pricing and
environmental review for new facilities. Furthermore, given the post-
Order No. 636 evolution of the natural gas industry, there are
questions concerning the Commission's criteria for the certification
and siting of new interstate pipeline facilities.
At the same time, market power issues also remain a concern.
Discrimination, affiliate abuse, and other exercises of market power by
transporters and holders of interstate pipeline capacity (i.e., LDC's,
marketers, producers and endusers) can undermine the goals of open
access and can pose impediments to greater regulatory flexibility.
The Commission remains committed to the fundamental goal of Order
No. 636: ``improving the competitive structure of the natural gas
industry in order to maximize the benefits of wellhead decontrol.'' \5\
To that end, the Commission has already initiated certain regulatory
changes to improve the functioning of the transportation grid. Among
these are the standardization of interstate pipeline business
practices,\6\ which the Commission intends to be a continuing effort.
The Commission also has adopted an alternative ratemaking policy,
including market-based, negotiated, and incentive rates. Further, the
Commission has obtained comments on the appropriateness of also
permitting the negotiation of the terms and conditions of service.\7\
The Commission has also considered capacity turnback issues in specific
cases. The Commission has proposed improvements to the capacity release
rules so that pipeline capacity can be traded more efficiently.\8\ In
addition to these initiatives, the Commission has also been urged to
develop procedures to clarify and expedite the processing of
complaints.
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\5\ Order No. 636 at 30,392 (citation omitted).
\6\ Standards for Business Practices of Interstate Natural Gas
Pipelines, Order No. 587, 61 FR 39053 (July 26, 1996), III FERC
Stats. & Regs. para. 31,038 (1996) (to be codified at 18 CFR Parts
161, 250 and 284).
\7\ Alternatives to Traditional Cost-of-Service Ratemaking for
Natural Gas Pipelines and Regulation of Negotiated Transportation
Services of Natural Gas Pipelines, 74 FERC para. 61,076 (1996).
\8\ Secondary Market Transactions on Interstate Natural Gas
Pipelines, 61 FR 41046 (August 7, 1996), IV FERC Stats. & Regs.
para. 32,520 (proposed July 31, 1996).
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II. Scope of Inquiry
As noted, the Commission is interested in obtaining public comment
as to what should be the Commission's near-term and longer term
regulatory priorities. We request a broad analysis of industry issues
now and in the future, including those deemed the highest priority for
Commission action. Specifically, the Commission would like input on
issues of competition and market power, the general financial outlook
for the industry, and the present and future development of industry
segments (e.e., pipelines, local distribution companies, producers,
marketers, and consumers). We would also like an analysis of whether,
and to what extent, the Commission's current approach to regulation
should be altered. For example, in light of the issues identified, what
procedural innovations should the Commission explore? How can the
Commission more effectively address the issues inherent in a
competitive environment? How should the Commission continue to fulfill
its NGA mandate in an increasingly competitive market? It is the
answers to these kinds of questions that the Commission seeks in this
proceeding.
III. Request for Comments
In order to focus and facilitate the organization of the discussion
at the conference, the Commission requests written comments from
interested participants to be filed with the Commission by April 29,
1997. The Commission requests that the
[[Page 10268]]
participants include executive summaries in their comments, and file
joint comments, wherever possible. Any person who wishes to make a
formal presentation to the Commission should submit a request to the
Secretary of the Commission along with the written comments. The
Commission will issue a separate notice at a later date organizing the
public conference.
An original and 14 copies of comments on these issues should be
submitted to the Office of the Secretary, Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, DC 20426, and should
refer to Docket No. PL97-1-000. All written comments will be placed in
the Commission's public files and will be available for inspection in
the Commission's Public Reference Room during regular business hours.
Commenters are requested to submit a diskette containing the
written comments. If the Commission receives diskettes with the
comments submitted in hard copy, then the Commission will make the
written comments also available on the Commission Issuance Posting
System (CIPS). CIPS is available at no charge to the user and may be
accessed using a personal computer with a modem by dialing 202-208-1397
if dialing locally or 1-800-856-3920 if dialing long distance. To
access CIPS, set your communications software to 19200, 14400, 12000,
9600, 7200, 4800, 2400, or 1200 bps, full duplex, no parity, 8 data
bits and 1 stop bit. The full text of this order will be available on
CIPS in ASCII and WordPerfect 5.1 format. CIPS user assistance is
available at 202-208-2474. CIPS is also available on the Internet
through the Fed World system. Telnet software is required. To access
CIPS via the Internet, point your browser to the URL address: http://
www.fedworld.gov and select the ``Go to the FedWorld Telnet Site''
button. When your Telnet software connects you, log on to the FedWorld
system, scroll down and select FedWorld by typing: 1 and at the command
line and type: /go FERC. FedWorld may also be accessed by Telnet at the
address fedworld.gov.
All questions concerning the format of the conference should be
directed to: Erica J. Yanoff, Office of the General Counsel, Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426, 202-208-0708.
By direction of the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 97-5535 Filed 3-5-97; 8:45 am]
BILLING CODE 6717-01-M
