[Federal Register Volume 61, Number 145 (Friday, July 26, 1996)]
[Rules and Regulations]
[Pages 39053-39070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18623]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 161, 250, and 284
[Docket No. RM96-1-000]
Standards for Business Practices of Interstate Natural Gas
Pipelines; Order No. 587; Final Rule
Issued July 17, 1996.
AGENCY: Federal Energy Regulatory Commission, Energy.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission is issuing a final
rule revising the Commission's regulations to require interstate
natural gas pipelines to follow standardized procedures for critical
business practices--nominations; allocations, balancing, and
measurement; invoicing; and capacity release--and standardized
mechanisms for electronic communication between the pipelines
[[Page 39054]]
and those with whom they do business. The regulations incorporate by
reference the standards issued by the Gas Industry Standards Board
(GISB).
DATES: The regulations are effective August 26, 1996.
The incorporation by reference of certain publications listed in
the regulations is approved by the Director of the Federal Register as
of August 26, 1996.
Compliance with the rule is based on a staggered scheduling with
pro forma tariff filings due in October through December, 1996 and
corresponding implementation in April through June, 1997.
ADDRESSES: Federal Energy Regulatory Commission, 888 First Street,
N.E., Washington, DC 20426.
FOR FURTHER INFORMATION CONTACT:
Michael Goldenberg, Office of the General Counsel, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
(202) 208-2294.
Marvin Rosenberg, Office of Economic Policy, Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, DC 20426, (202) 208-
1283.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in Room 2A, 888 First
Street, N.E., Washington D.C. 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. 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 use
19200, 14400, 12000, 9600, 7200, 4800, 2400 or 1200bps, full duplex, no
parity, 8 data bits, and 1 stop bit. The full text of this document
will be available on CIPS indefinitely in ASCII and WordPerfect 5.1
format for one year. The complete text on diskette in WordPerfect
format may also be purchased from the Commission's copy contractor, La
Dorn Systems Corporation, also located in Room 2A, 888 First Street,
N.E., Washington D.C. 20426.
The Commission's bulletin board system also can be accessed through
the FedWorld system directly by modem or through the Internet. To
access the FedWorld system by modem:
Dial (703) 321-3339 and logon to the FedWorld system.
After logging on, type: /go FERC
To access the FedWorld system, through the Internet:
Telnet to: fedworld.gov
Select the option: [1] FedWorld
Logon to the FedWorld system
Type: /go FERC
Or:
Point your Web Browser to: http://www.fedworld.gov
Scroll down the page to select FedWorld Telnet Site
Select the option: [1] FedWorld
Logon to the FedWorld system
Type: /go FERC
I. Introduction
The Federal Energy Regulatory Commission (Commission) is amending
its open access regulations to standardize business practices and
procedures governing transactions between interstate natural gas
pipelines, their customers, and others doing business with the
pipelines. The standards govern several important business practices--
nominations, allocations, balancing, measurement, invoicing, and
capacity release. They also establish protocols and file formats for
electronic communication with pipelines relating to these business
practices. The regulations incorporate by reference the standards
published by the Gas Industry Standards Board (GISB). The Commission
also is establishing a compliance schedule requiring pipelines to make
pro forma tariff filings in October through December 1996 and to
implement the standards in April through June 1997.
II. Public Reporting Burden
The final rule will affect one existing Commission data collection,
FERC-545, Gas Pipeline Rates: Rate Change (Non-formal), (OMB Control
No. 1902-0154) (FERC-545), and establish a new data collection/
requirement, FERC-549C, Standards for Business Practices of Interstate
Natural Gas Pipelines, (OMB Control No. to be assigned) (FERC-549C).
Under the existing data collection/requirements of FERC-545, there
will be a one-time estimated annual reporting burden of 6,720 hours (80
hours per company) with the adoption of the standards/business
practices as required herein. The initial implementation of the
standards/business practices will require approximately 84 interstate
natural gas pipelines to make tariff filings to conform their tariffs
with the standards/business practices.1 (See FERC-545 burden
detail in estimated burden table below.)
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\1\ Burden estimates in the previously issued Notice of Proposed
Rulemaking (NOPR) in the subject docket were based on 80
respondents. Upon further evaluation by Commission staff prior to
the issuance of the subject final rule, the estimated number of
respondents was increased to 84.
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Under the new data collection/requirements of FERC-549C there will
be a one-time startup annual burden of 1,289,232 hours (15,348 hours
per company). It is expected that any recurring annual burden will be
minimal because of the operating efficiencies which will result with
the adoption of the standards/business practices.
The standards/data requirements contained in this final rule have
been submitted previously to the Office of Management and Budget (with
the NOPR issued in the subject docket) for review under section 3507(d)
of the Paperwork Reduction Act of 1995, (44 U.S.C. 3507(d)). For copies
of the OMB submission, contact Michael Miller at (202) 208-1415.
Interested persons may send comments regarding these burden estimates
or any other aspect of these collections of information, including
suggestions for reductions of burden, to the Desk Officer FERC, Office
of Management and Budget, Room 3019 NEOB, Washington, D.C. 20503, phone
202-395-3087 or via the Internet at hillier__t@a1.eop.gov. Comments
should be filed with the Office of Management and Budget as soon as
possible. A copy of any comments filed with the Office of Management
and Budget also should be sent to the following address at the
Commission: Federal Energy Regulatory Commission, Information Services
Division, Room 41-17, Washington, DC 20426, Attention: Michael Miller.
[[Page 39055]]
ESTIMATED ANNUAL BURDEN
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No. of Total No. of Hours Per Total annual
Affected data collection/ requirement respondents responses response hours
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FERC-549C (New Data Requirement)--Reporting/Data
Requirement Burden............................. 84 84 15,348 1,289,232
FERC-545 (1902-0154)--Reporting/Data Requirement
Burden......................................... 84 84 80 6,720
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Total Annual Hours (All Data Collections/
Requirements)............................ 84 84 15,428 1,295,952
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The above estimates include time for reviewing the requirements of
the Commission's regulations, searching existing data sources,
gathering and maintaining the necessary data, and reviewing and
completing the collection of information. Because the final rule adopts
essentially the same information requirements that were contained in
the proposed rule, we believe that the average filing burden is the
same for the final rule.
Data Collection/Requirement Costs: The Commission expects that the
costs to comply with the required standards for business practices,
data sets, and internet protocol setups will consist principally of
startup costs. Although GISB has reached consensus on using Internet
protocols, it has not finally determined the communication modality
(i.e., public Internet or private network. Adoption of the
communication standards will await GISB's final recommendation.
However, since the costs to implement Internet protocols will not
change significantly regardless of the communication vehicle used, the
burden estimates in the NOPR and in this final rule include these
costs, so that the burden estimates reflect the total cost of complying
with the rule. The Commission estimates that the average annualized
cost per respondent for the first year will be as follows:
Annualized Capital/Startup Costs
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FERC-549C.................................................... $750,118
FERC-545..................................................... 3,910
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Total.................................................. 754,028
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Internal Review: The Commission has reviewed the standards/business
practices and determined that they are necessary to establish a more
efficient and integrated pipeline grid. Requiring such standards on an
industry-wide basis will reduce the variations in pipeline business
practices and will allow buyers to easily and efficiently obtain and
transport gas from all potential sources of supply. The required
standards/business practices conform to the Commission's plan for
efficient information collection, communication, and management within
the natural gas industry. The Commission has assured itself, by means
of its internal review, that there is specific, objective support for
the burden estimates associated with the information requirements.
In response to the NOPR issued April 24, 1995, in the subject
docket, Viking Gas Transmission Company filed comments on the burden
estimates and the associated annualized costs for compliance in the
Notice of Proposed Rulemaking. Viking states that, even if the
Commission's cost estimates are correct, implementing the standards
would impose significant costs on a small pipeline, like Viking. Viking
also maintains that the Commission has underestimated the costs to
comply with the requirements adopted by the final rule and particularly
to implement an information system. Viking contends that the Commission
has used an hourly rate of $50 for computer service consultants by
dividing the total estimated cost ($754,000) by the estimated hours
(15,428). Viking maintains that, based on its experience, a cost of
$100 to $150 per hour is more representative of costs for information
system programmers.
The Commission's hour and cost estimates are not appropriately used
to derive an hourly rate for computer consulting services for
comparison purposes, as Viking has done. The Commission's estimate of
the number of hours for implementing the requirements is not limited to
hours for computer specialists, but covers all employees involved in
implementation. Similarly, the total cost is not solely related to
consulting services, but includes other costs, such as hardware and
hardware installation costs. Moreover, the vast proportion of the costs
involved in complying with the regulations are one-time, start-up
costs, so these are not costs pipelines will have to incur on an
ongoing basis. Most important, the Commission finds that incurrence of
these costs on a one-time basis is necessary to improve the efficiency
with which crucial business transactions are conducted across the
natural gas industry. The increased efficiency produced by these
standards should, in the long run, reduce the costs of all participants
in the market.
III. Background
The process of standardizing business practices in the natural gas
industry began with a Commission initiative to standardize electronic
communication of capacity release transactions.\2\ As a result of this
effort, participants from all segments of the natural gas industry
began the process of developing standards for other business
transactions, such as nominations and flowing gas.
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\2\ Standards For Electronic Bulletin Boards Required Under Part
284 of the Commission's Regulations, Order No. 563, 59 FR 516 (Jan.
5, 1994), III FERC Stats. & Regs. Preambles para. 30,988 (Dec. 23,
1993), order on reh'g, Order No. 563-A, 59 FR 23624 (May 6, 1994),
III FERC Stats. & Regs. Preambles para. 30,994 (May 2, 1994), reh'g
denied, Order No. 563-B, 68 FERC para. 61,002 (1994).
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To formalize the process of developing industry standards, the
industry formed GISB as a consensus standards organization open to all
members of the gas industry.\3\ GISB's procedures require balanced
voting representation from all five segments of the industry--
pipelines, local distribution companies (LDCs), producers, end-users,
and services (including marketers and third-party computer service
providers).\4\ At the Executive Committee level, a consensus
[[Page 39056]]
of the five segments must approve each standard.\5\
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\3\ The scope of GISB's efforts initially was limited to
standards for electronic communication. The industry, under the
auspices of the Interstate Natural Gas Association of America
(INGAA) and the Associated Gas Distributors (AGD), had begun a Grid
Integration Project to consider standards for coordinating pipeline
business practices to simplify the process of shipping gas across
multiple pipelines. After GISB expanded its scope from electronic
standards to encompass business practice standards, the Grid
Integration Project was folded into GISB.
\4\ According to a March 27, 1996 letter from counsel for GISB,
to the Secretary of the Commission (filed in this docket), GISB is
pursuing accreditation by the American National Standards Institute
(ANSI). Accreditation involves ANSI's review of the process and
procedures of the standards-developer to ensure that the standards-
development process is open to all materially affected parties and
that standards are developed by a balanced consensus of the
industry, without domination by any single interest or interest
category.
\5\ To pass the Executive Committee, a standard must be approved
by 17 out of the 25 members, with at least two affirmative votes
from each segment. These standards must then be approved by a vote
of 67% of GISB's general membership to become approved standards.
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Recognizing how important standards are to the development of an
integrated natural gas network, the Commission encouraged the
industry's efforts to develop the needed business standards.\6\ To
evaluate the industry's progress, the Commission held a public
conference on standardization on September 21, 1995, in Docket No.
RM93-4-000.
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\6\ Order No. 563-A, III FERC Stats. & Regs. Preambles, at
31,050.
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Almost all the speakers at the conference acknowledged that the
industry had not achieved the anticipated progress. Even though GISB
had promulgated standards for electronic communication of nomination
and confirmation information, many participants maintained that
standardizing electronic communication did not go far enough to provide
for efficient integration of the pipeline grid. They contended that
electronic communication standards would not increase efficiency
because they failed to standardize the pipelines' disparate underlying
business practices, so that shippers were still faced with having to
learn the idiosyncratic requirements for conducting business on each
pipeline.
On October 25, 1995, the Commission issued an advance notice of
proposed rulemaking (ANOPR) requesting the submission of detailed
proposals from the industry, by March 15, 1996, for standards governing
business processes and electronic communication for ten business
practices identified by the industry as being of the highest priority--
nominations, confirmations, allocated gas flows, customer and contract
imbalances, gas flow at metered points, transportation invoices, pre-
determined allocation methodologies, gas payment remittance statements,
gas sales invoices, and uploads of capacity release prearranged deals.
The Commission also requested proposals for standards needed to
facilitate gas flow across interconnecting pipelines. In the ANOPR, the
Commission concluded that without common business practices and a
common language for communication, the speed and efficiency with which
shippers can transact business across multiple pipelines would continue
to be severely compromised.
On March 15, 1996, GISB filed 140 standards that its Standards
Committee had approved by a consensus vote. These standards cover five
major business areas--nominations and confirmations, flowing gas,
invoicing, capacity release, and the electronic mechanism for
communication between industry participants (the electronic delivery
mechanism (EDM)). On April 12, 1996, GISB then filed data elements
approved by the Standards Committee describing the specific information
that would be used by industry participants to conduct these business
transactions. By letter dated May 22, 1996, in this docket, GISB
informed the Commission that its membership had approved the standards
and datasets by the required 67% vote.
Forty other parties also filed comments addressing the standards
GISB was proposing. On the whole, the commenters found that GISB's
standards would significantly improve the efficiency of the gas market,
but they raised questions with respect to specific standards.
On April 24, 1996, the Commission issued the NOPR proposing to
revise its regulations to incorporate the GISB standards by
reference.\7\ The Commission proposed to require pipelines to comply
with these standards by January 1, 1997. Fifty comments were filed on
the NOPR.\8\
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\7\ Standards For Business Practices Of Interstate Natural Gas
Pipelines, Notice of Proposed Rulemaking, 61 FR 19211 (May 1, 1996),
IV FERC Stats. & Regs. Proposed Regulations para. 32,517 (Apr. 24,
1996).
\8\ The appendix lists those filing comments.
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IV. Discussion
The Commission is requiring interstate pipelines to comply with the
requirements of the GISB consensus standards by incorporating the GISB
standards by reference in section 284.10 of the Commission's
regulations.\9\ Standards for business practices and communication are
important elements in creating an integrated gas pipeline grid to
complement the deregulated market for gas. For a competitive gas market
to truly develop, shippers must have access to all available supply
sources. A prerequisite for access, however, is the ability to move gas
efficiently across multiple pipelines to its ultimate destination.
Thus, shippers and marketers in today's market must conduct business
transactions with multiple pipelines. As the industry has recognized,
shippers cannot conduct multiple pipeline transactions efficiently if
the business practices and communication protocols differ for each
pipeline. For example, as the industry is presently structured,
shippers on multiple pipelines incur added costs and delay from having
to keep personnel up to date with the quirks of, and inconsistencies in
operation between, individual pipeline electronic bulletin boards
(EBBs). Industry-wide standards eliminate this inefficiency by enabling
shippers to use the same procedures and processes to conduct business
on all interstate pipelines.
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\9\ GISB's previously approved standards for capacity release
transactions also will replace the current requirement, in section
284.8(b)(5), that pipelines comply with standardized datasets and
communication protocols. In addition, the EBB requirements of
sections 284.8(b)(4) and 284.9(b)(4) will be moved to section
284.10(a).
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When the Commission sought to restructure business practices in the
industry through Order Nos. 436 and 636, the Commission set out the
broad policy parameters to be accomplished by the rules, but primarily
left the implementation details to individual pipeline filings.
However, subsequent experience clearly has shown that relying on
individual pipeline procedures and operations will not create an
integrated gas pipeline grid. To achieve that goal, the pipelines'
business procedures must be standardized.
The consensus standards significantly reduce the disparities and
inconsistencies among pipeline business practices and communication
modalities and make a meaningful contribution towards the effort to
create a more unified, integrated natural gas transportation network.
For example, the standards will simplify the process of nominating gas
in several respects. They permit all shippers to nominate gas supplies
to a pool so that gas packages can be aggregated. They provide
increased flexibility by permitting shippers at least one intra-day
nomination, so that they can change the amount of gas they receive
during a day to better fit changing needs. Even standards as simple as
establishing a convention for conversions from dekatherms to Gigajoules
and rounding calculations to the nearest dekatherm or Gigajoule can
provide significant integration benefits by enabling shippers and
third-party service providers to deal with all pipelines, as well as to
program their computers, in the same manner, without the inefficiency
of having to deal with incompatible conventions used by individual
pipelines.
At least as important, the standards will permit shippers to
communicate with every pipeline using the same standard set of
information data elements and the same information protocols. Using
these standards and protocols, shippers and third-party service
providers will be able to create
[[Page 39057]]
standard display formats for conducting business with all pipelines,
thus reducing or eliminating the need to use the individual pipeline
EBBs.
While these standards represent a broad consensus of the industry,
the Commission recognizes that not every standard commands universal
support. In a democratic society, unanimity on matters of common
concern is neither expected nor necessary. Standardization, by
definition, requires accommodation of varying interests and needs, and
rarely can there be a perfect standard satisfactory to all. The
Commission is satisfied that GISB's process is open and fair and that
the resulting standards represent broad agreement across all segments
of the industry.
Since it is the industry that must operate under these standards,
deferring to the considered judgment of the consensus of the industry
is both reasonable and appropriate. While the Commission legitimately
has given the GISB standards great weight, it also has reviewed the
standards, and the comments, and finds that the standards are
reasonable and represent a considerable step towards the goal of
creating a unified pipeline grid.
Both GISB and virtually all the comments recommend the Commission
not require implementation on January 1, 1997, as proposed in the NOPR
to reduce the possibility of disruption during the peak winter heating
season. The Commission is accepting the consensus proposal by GISB for
staggered filings and implementation: pro forma compliance filings will
be due in the fall of 1996 with implementation taking place from April
through June, 1997.
Although GISB has approved the data elements for the business
practices and the use of Internet protocols for electronic
communication, it has not yet finalized its communication standards.
For instance, it has not finally determined whether to use the Public
internet or private networks as the standard communication vehicle.
While GISB's Future Technology Task Force filed an interim report on
June 7, 1996, recommending the use of the public Internet, with an HTTP
protocol, that recommendation is still subject to a pilot test program
to be completed by September 30, 1996. At that time, the Future
Technology Task Force plans to issue the final communication standards
and the technical implementation guide.
Until GISB finalizes its communication protocols, issuing a final
order on such standards would be premature. Accordingly, the Commission
will issue a final order on communication protocols after the
submission of GISB's final communication standards. By issuing the
final rule on the remainder of the business practices at this time, the
Commission is providing the industry with sufficient time to make the
tariff changes necessary to meet the October through December
compliance filings. At the same time, delaying the issuance of the
final rule on communication protocols should not effect the ability of
the industry to meet the April 1, 1997 start of implementation. Despite
being fully aware that the communication protocols are not complete,
neither GISB, the Future Technology Task Force, nor the commenters have
suggested that any delay in the April implementation date is necessary.
The Commission recognizes that these standards are not a finished
work. Standards development is not like a sculptor forever casting his
creation in bronze, but like a jazz musician who takes a theme and
constantly revises, enhances, and reworks it. A number of those
commenting on GISB's March 15, 1996 filing and on the NOPR offer
suggestions on additional standards that they believe are needed.
Because many of the issues raised in the comments have merit, the
Commission established a procedure and a schedule under which GISB and
the industry are to submit detailed proposals for handling these issues
by September 30, 1996.
The Commission will address below the comments received on the
NOPR.
A. Implementation Date
On one point, virtually all the commenters are agreed: the
standards should not be implemented on January 1, 1997, as originally
proposed by the Commission.10 All segments of the industry are
concerned that rapid implementation of new operating procedures and
computer technologies may be prone to problems and are particularly
concerned about such problems occurring during the winter heating
season when the pipeline system is under the most stress. GISB states
that due to the interrelation of all the standards, a phased
implementation of groups of standards would be difficult to devise.
Instead, it proposes, with the backing of virtually all commenters, a
staggered implementation plan in which the pipelines are divided into
three groups with tariff filings to comply with this rule being made in
October, November, and December of 1996, and corresponding
implementation of the standards in April, May, and June of 1997.
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\10\ Only one commenter has requested an earlier implementation
schedule.
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The Commission will accept the GISB proposal for staggered filings
and implementation to reduce the risk of implementation complications
and resulting disruption to the industry. Because the development of an
integrated pipeline grid requires uniform pipeline adoption of the
standards adopted in this rule, the Commission finds that pipelines'
existing tariff provisions that are inconsistent with these standards
are unjust and unreasonable under section 5 of the Natural Gas Act. To
determine the just and reasonable practices under section 5, the
Commission is requiring pipelines to make filings to comply with the
standards adopted in the regulations. Accordingly, pipelines must file
pro forma tariff sheets according to the schedule set forth later in
this order to establish their compliance with the regulations.
B. Incorporation of the GISB Standards by Reference
NGC/Conoco/Vastar take issue with the Commission's incorporation of
the GISB standards by reference. They have submitted an alternative set
of standards and contend the Commission has failed to render a reasoned
decision on each of their proposed standards as compared with the
comparable GISB standard. In particular, NGC/Conoco/Vastar contend that
the Commission erred in stating, in the NOPR, that its reliance on the
GISB standards was consistent with Sec. 12(d) of the National
Technology Transfer and Advancement Act (NTT&AA) of 1995 11 and
OMB Circular A-119,12 which require federal agencies to use
private sector consensus standards.
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\11\ Pub L. No. 104-113, Sec. 12(d), 110 Stat. 775 (1996).
\12\ ''Federal Participation in the Development and Use of
Voluntary Standards'' (Oct. 20, 1993) (an earlier version is
available at 47 FR 49496 (Nov. 1, 1992))
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In contrast, other commenters are supportive of the Commission's
reliance on the GISB standards. Brooklyn Union best expresses these
views when it states the Commission should adopt the GISB standards,
without modification, because these standards ``are the product of
countless hours of deliberations by representatives of all segments of
the natural gas industry and reflect a hard fought consensus concerning
the critical business practices addressed.''
[[Page 39058]]
1. Consistency With the National Technology Transfer and Advancement
Act and OMB Circular A-119
NGC/Conoco/Vastar argue that Sec. 12(d) of the NTT&AA does not
require the Commission to adopt the GISB standards. They maintain that
adoption of regulatory standards, such as the GISB business practice
standards, is inconsistent with the Act's focus on adoption of
technical standards.
The Commission agrees that, by its terms, Sec. 12(d) of the NTT&AA
does not require Federal agencies to adopt private sector consensus
standards if the use of such standards is inconsistent with applicable
law or otherwise impractical.13 However, the Commission finds that
adoption of the GISB standards is consistent with the intent of the Act
and OMB Circular A-119.
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\13\ NGC/Conoco/Vastar argue that the Act does not apply to
independent regulatory agencies, like the Commission, citing to a
statement by Senator Rockefeller that Sec. 12 should not apply to
independent regulatory agencies. 142 Cong. Rec. S1081 (daily ed.
Feb. 7, 1996). On its face, the statute specifically applies to
``all Federal agencies and departments,'' and OMB Circular A-119, on
which Sec. 12(d) of the NTT&AA was based, defines executive agency
as including any ``independent commission, board, bureau, office,
agency * * * including regulatory commission or board.'' ``Federal
Participation in the Development and Use of Voluntary Standards''
(Oct. 20, 1993)(an earlier version is available at 47 FR 49496 (Nov.
1, 1992)). See Remarks by Congresswoman Morella and Congressman
Brown (cosponsors), 142 Cong. Rec. H1264, H1226, daily ed. Feb. 27,
1996)(intent of Sec. 12(d) of the NTT&AA to codify OMB Circular A-
119). In addition, Senator Rockefeller's particular concern was
possible conflicts that may result because some independent
regulatory agencies, like the Consumer Product Safety Commission
(CPSC), have statutory requirements regarding the use of private
sector standards. In the absence of such statutory requirements,
however, there seems little reason to distinguish between Federal
departments, like the Food and Drug Administration, with
responsibility for protecting health and safety, and independent
regulatory agencies with like responsibilities. In any event, the
Act does not inhibit the full exercise of agencies' regulatory
authority since agencies are not required to utilize private
consensus standards when the agency determines that the standards
are not adequate for its purpose.
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As NGC/Conoco/Vastar seem to concede, the standardized data
elements and the communication protocols for delivering this
information electronically fall within the Act's definition of
performance-based or design-specific technical specifications.14
And, the business practice standards are directly related to the
communication standards, because, as the industry concluded,
standardizing the technical aspects of communication cannot achieve the
required efficiency without standardization of the underlying business
practices. Even standing on their own, the business practice standards
are akin to management system practices which are included as technical
standards in the Act.15
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\14\ See 142 Cong. Rec. S1081 (daily ed. Feb. 7, 1996) (internet
standards are technical standards covered by the Act) (statement of
Senator Rockefeller).
\15\ See, e.g., 42 CFR 405.2150, 60 FR 48039 (Sept. 18, 1995)
(Health Care Financing Administration incorporation of Association
for the Advancement of Medical Instrumentation business process
standards for reuse of hemodialyzers); 49 CFR Part 659, 60 FR 67034
(Dec. 27, 1995)(Federal Transit Administration incorporation by
reference of APTA rail transit system safety plans); 49 CFR 192.11,
193.2005 (Department of Transportation incorporation by reference of
practice standards relating to transportation of petroleum gas and
LNG); Implementation Guide for use with 10 CFR Part 830.120,
Department of Energy, #G-830.120-Rev. 0 (April 15, 1994)
(incorporating management standards for quality assurance).
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Moreover, regardless whether Sec. 12(d) of the NTT&AA specifically
applies here, the Commission can rely on private sector standards when
it finds that these standards further the Commission's achievement of
its regulatory goals. 16 In this case, GISB's consensus standards
are entitled to great weight since the industry possesses specialized
expertise and knowledge of the relevant business practices and
electronic communication technologies and, in the final analysis, the
members of the industry are the ones that have to conduct business
under these standards.17
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\16\ Passage of Sec. 12(d) of the NTT&AA certainly is not
necessary for the Commission to rely upon private sector standards
when it deems such reliance appropriate to fulfill its regulatory
mission. Even prior to the passage of the Act, the Commission relied
on private standards, as did other agencies which found such
reliance an important means for helping to carry out their mandates.
See Northern Natural Gas Company, 53 F.P.C. 699, 702 (1975) (NFPA
Standard No. 59-A); 16 CFR Material Approved for Incorporation by
Reference, at 483 (1996) (listing standards incorporated by Consumer
Product Safety Commission).
\17\ As Congressman Brown stated:
It is much cheaper and more efficient for the government to rely
on the hard work and experience of these committees rather than
reinventing the world. These groups are better equipped than the
Government to understand all points of view and to keep up with the
state of the art in technical standards.
142 Cong. Rec. H1226 (daily ed. Feb. 27, 1996).
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Questar suggests that to ensure clarity the Commission should not
incorporate the standards by reference, but should restate in the final
rule the standards it specifically adopts. The Commission sees no need
for such a voluminous republication. Incorporation by reference is an
accepted method of adopting private sector standards.18 The
Commission can specifically state in the regulations any changes in the
pipelines' obligations through deletion of, or revisions or additions
to the standards.
---------------------------------------------------------------------------
\18\ 1 CFR 51.7.
---------------------------------------------------------------------------
2. GISB's Consensus Process
NGC/Conoco/Vastar further contend that Sec. 12(d) of the NTT&AA
should not apply because GISB's procedural process was flawed and thus
did not ensure consensus. They contend that the Task Force meetings
(which produced the initial draft standards) were dominated by pipeline
interests, that NGC/Conoco/Vastar's comments on the Task Force
recommendations were shortened in the summary produced for the
Executive Committee, that the Executive Committee did not have
sufficient time to consider all comments, and that the Executive
Committee is structured to disenfranchise independent marketers.19
AF&PA, EMA, and NWIGU, while generally supportive of the GISB
standards, are concerned that the standards may not reflect true
consensus because their members do not have the time and resources to
participate in the GISB process. BGE also expresses concern about the
lack of balance at the Task Force meetings. While BGE believes the
standards filed by GISB on March 15, 1996 are not weighted towards any
one segment, it suggests in the next round, GISB should use balanced
subcommittees to develop its standards.
---------------------------------------------------------------------------
\19\ NGC/Conoco/Vastar maintain that the marketers on the
Executive Committee are affiliated with pipelines and, thus, cannot
represent the marketing interest if it conflicts with the goal of
the dominant pipeline parent.
---------------------------------------------------------------------------
The Commission finds that GISB's process was fair and that its
voting procedures ensure that a broad based consensus of all industry
segments support these standards. All segments are afforded the
opportunity to participate in the process of developing the standards.
Each segment chooses its own representatives on the Board of Directors
and Executive Committee. The requirement for consensus voting at the
Executive Committee level assures that no industry segment can dominate
the process and that the resulting standards do represent an agreement
acceptable to all industry segments. Finally, a super-majority (67%) of
the entire GISB membership approved the standards.20
---------------------------------------------------------------------------
\20\ GISB has established a Process Subcommittee to deal with
recommendations regarding GISB's operating practices. NGC/Conoco/
Vastar cite no complaint to the Process Subcommittee about the Task
Force procedures.
---------------------------------------------------------------------------
What is most crucial, is that the Executive Committee reviewed the
recommendations of the Task Forces, thus ensuring consensus support for
the
[[Page 39059]]
standards.21 The record shows that, for the most part, the
accepted standards received virtually unanimous support from the
Executive Committee members.22 In any large proceeding, such as
the GISB undertaking, comments must be summarized for the
decisionmaker. While the Executive Committee acted quickly to meet the
Commission's deadline, the record of the proceedings shows no evidence
that its members ignored or failed to seek clarification of comments,
or otherwise did not take their responsibilities seriously. The
Executive Committee conducted its public meeting for two full days
working late into the night and had previously conducted several
preliminary sessions to discuss changes to the standards. The Executive
Committee did not act as a mere rubber stamp for the recommendations
made by the Task Forces. Indeed, the evidence is to the contrary. The
Executive Committee reached independent decisions, making significant
changes to the Task Force recommendations. For example, the Executive
Committee changed a number of the Task Force recommendations, such as
changing the 11:00 a.m. nomination deadline proposed by the Task Group
to 11:30 a.m.23
---------------------------------------------------------------------------
\21\ ANSI, for example, does not impose a balance requirement on
subgroups when their role is to assist the standards committee by,
for instance, drafting all or a portion of a standard. American
National Standards Institute, Procedures for the Development and
Coordination of American National Standards, 18 (Sec. A.6(b)) (March
22, 1995).
\22\ See Volume III of GISB's March 15, 1996 filing, Voting
Workpapers.
\23\ Compare Volume II of GISB's March 15, 1996 filing, Tab 2,
proposed Standard 1.3 with the final approved standard 1.3.2. See
also Volume III of GISB's March 15, 1996 filing, Voting Workpapers
(showing that the Executive Committee frequently voted to omit Task
Force proposed standards, change the standards to principles, defer
consideration of standards, and move standards to other sections).
---------------------------------------------------------------------------
The Commission finds NGC/Conoco/Vastar's protestation of GISB
disenfranchisement of independent marketers somewhat enigmatic, since
NGC itself is a member of the GISB Board of Directors. NGC/Conoco/
Vastar have shown no record of any complaint to the Process
Subcommittee or the GISB Board of Directors concerning the
representation of independent marketers, nor have they produced
evidence showing that GISB explicitly excluded independent marketers
from the Executive Committee, such as by showing that an independent
marketer was passed over for a vacancy on the Executive Committee. They
also have not explained why independent marketers' interests are not
adequately represented on the Executive Committee by other independent
interests such as producers (who sell to marketers) or LDCs and end-
users (who buy from marketers).
In a supplemental filing made on June 11, 1996, NGC/Conoco/Vastar
24 contend that the lack of consensus is evident from the number
of parties seeking changes, revisions, or waivers to the GISB
standards. In the first place, given the varied nature of the industry
and the differing interests of individual parties, to expect unanimity
is not realistic. The Commission's pre-GISB Working Group process for
developing capacity release standards often suffered from the need to
achieve virtual unanimity before making a recommendation. The GISB
consensus approach is designed to permit progress, while at the same
time assuring that there is reasonable, although not unanimous,
agreement across the industry on the standards adopted.
---------------------------------------------------------------------------
\24\ This time joined by Tejas Power Corporation.
---------------------------------------------------------------------------
Moreover, considering the diversity of interests in this industry,
the level of agreement with these standards actually appears quite
high. The number of parties objecting is relatively small compared to
the number in the industry (most of whom did not file comments in this
proceeding). Even on the issue--gas day and nomination timeline--that
elicited the largest number of comments, there are only about 10 Mid-
West and West Coast LDCs that object. The vast majority of LDCs
apparently are satisfied with the GISB standards.25
---------------------------------------------------------------------------
\25\ Indeed, all five LDC representatives on the Executive
Committee voted to approve these standards. See Volume III of GISB's
March 15, 1996 filing, Voting Workpapers, Standards 1.3 and 1.10.
---------------------------------------------------------------------------
All parties must make a determination whether active participation
in every aspect of the GISB process serves their corporate interests.
But the benefit of the consensus process, compared with the previous
Working Group process, is that parties need not be present to have
their views represented. Any party can submit comments to the Task
Force and the Executive Committee that these groups must consider. Each
segment chooses its own representatives on the Executive Committee, and
any party can communicate its concerns to its representatives. And,
each segment of the industry has equal voting weight on the Executive
Committee.
The Commission finds that overall the GISB process was fair and
assured a broad consensus supporting the proposed standards. BGE
suggests that, for the future, the Commission should endorse the use of
small balanced subcommittees to better prevent domination by certain
interests. Changes to organizational structure are for GISB and its
membership to determine, and the Commission, therefore, will not
dictate the use of any particular process for conducting Task Force
meetings in the future.
3. Commission Oversight of the GISB Process
NGC/Conoco/Vastar contend that the Commission, by relying on the
GISB standards, has abdicated its responsibility to make a reasoned
decision on each of the proposed standards. They suggest that, upon
review, implementation of some of these standards will put at risk some
of the progress already achieved over the last decade in creating
competitive markets. They cite to the following statement from the
Commission's OASIS rule dealing with communication protocols for the
electric industry:
However, we reject entirely the notion that the Commission need
not approve the Standards and Protocols and that these matters can
be left to the industry for implementation and self-policing.
Although we continue to seek industry consensus, the Commission must
reserve final decisions to itself. We cannot turn over the process
of approving and enforcing OASIS requirements to the industry. The
Commission does not believe that resolution of the outstanding
issues or future changes will occur more quickly without Commission
oversight. Nor do we believe that merely by announcing broad policy
guidelines we would be creating a mechanism that would be sufficient
to allow the Commission to revise regulations quickly. Accordingly,
we will not abdicate our responsibility to decide these issues
ourselves; nor shall we delegate responsibility for making these
decisions to anyone else. 26
\26\ Open Access Same-Time Information System (formerly Real-
Time Information Networks) and Standards of Conduct, Order No. 889,
61 FR 21737 (May 10, 1996), III FERC Stats. and Regs. Preambles
para.31,035, at 31,591 (Apr. 24, 1996).
---------------------------------------------------------------------------
NGC/Conoco/Vastar further cite to Justice Department statements that
improperly conducted standards activities may inhibit, rather than
facilitate competition, in arguing that the Commission should not
abdicate its responsibility to review each of the proposed standards.
The Commission's action here is entirely consistent with its
approach in the OASIS rule as well as the Commission's former rule
establishing capacity release standards. In the portion of the OASIS
rule cited by NGC/Conoco/Vastar, the Commission was responding to a
request that the Commission abandon its intention to approve standards
and, instead, authorize an industry group to set and enforce detailed
standards under broad
[[Page 39060]]
policy guidelines. The Commission rejected this request in the OASIS
rule and is not delegating comparable authority to GISB in this
proceeding. The Commission has noticed the GISB standards and is
explicitly adopting those standards into its regulations. While GISB
can modify or add to its standards if it chooses, those changes are not
automatically incorporated into the Commission's regulations. The
Commission is adopting a specific version of the GISB standards;
pipelines will not be required to abide by subsequent versions of the
standards issued by GISB unless and until the Commission incorporates
the new version into the regulations.
Just as in OASIS and the capacity release proceedings, the
Commission here determined that standardization of certain practices is
required and detailed the areas in which such standards are needed. In
each of the proceedings, the Commission then sought a consensus from
the industry as to the technical standards needed, which, after review,
the Commission adopted.
Indeed, NGC/Conoco/Vastar, for the most part, do not take issue
with the GISB standards themselves; rather, they contend the Commission
has not addressed their concerns that some of GISB's standards do not
go far enough or that additional standards are necessary. They suggest,
for instance, that GISB's requirement that pipelines establish at least
one pooling point needs to be enhanced by additional standards, such as
requirements for pipelines to offer firm pools and to provide the same
priority to pool volumes as the take-away transportation agreement to
which they are nominated.
The Commission has not ignored NGC/Conoco/Vastar's suggestions for
additional standards. NGC/Conoco/Vastar do not contend that the GISB
standards cannot be implemented in their present form, only that these
standards can be improved. Many of NGC/Conoco/Vastar's points may have
merit.27 However, the Commission finds no reason to delay the
significant benefits that can be achieved from implementation of the
current standards while these issues are resolved. The Commission has
established a schedule which will permit GISB and the industry to
devise the appropriate means of handling these issues. Establishing
procedures that give the industry the first opportunity to solve these
problems is far preferable to the Commission's attempting to decide at
this stage what changes are needed.
---------------------------------------------------------------------------
\27\ The Commission has, for example, found that customers
should not lose priority as a result of pooling and that priority
from receipt point to pooling point generally should be based on the
take-away customers transportation agreement. Koch Gateway Pipeline
Company, 75 FERC para. 61,283 (1996). Implementing these general
principles may well require the establishment of firm pools as
suggested by NGC/Conoco/Vastar, and the Commission expects GISB to
consider these issues for its September 30, 1996 filing.
---------------------------------------------------------------------------
The Commission is fully aware of the potential for private sector
standards committees to inhibit competition, particularly if one
interest can block the adoption of a necessary standard.28 GISB's
rules provide that at least two votes from each industry segment are
needed to approve a standard. While such a rule is important to
ensuring that any approved standard commands a consensus of the
industry, the rule also can permit one industry segment voting as a
block to defeat a needed standard.
---------------------------------------------------------------------------
\28\ Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S.
492 (1988).
---------------------------------------------------------------------------
That is precisely why the Commission has not previously, and is not
now, delegating to the industry the responsibility to develop the
needed standards. The Commission took, and is still taking, an active
role in identifying the business areas needing standardization. The
Commission provided the industry the opportunity to apply its expertise
to craft solutions that command broad agreement throughout the
industry, and has appropriately given these consensus solutions great
weight. In those areas where additional consideration of modifications
or enhancement of the standards may be warranted, the Commission has
established a schedule for the industry to consider refinements. And,
the Commission stands ready to resolve issues if necessary.29
---------------------------------------------------------------------------
\29\ For example, in the EBB Rulemaking Proceeding in Docket No.
RM93-4, the industry was unable to reach consensus on a proposal to
establish an Index of Customers. The Commission ultimately
determined the data elements to be included in the Index. Revisions
to Uniform System of Accounts, Forms, Statements, and Reporting
Requirements for Natural Gas Companies, Order No. 581, 60 FR 53019,
53053 (Oct. 11, 1995), III FERC Stats. & Regs. Preambles para.
31,026, at 31,505 (Sept. 28, 1995).
---------------------------------------------------------------------------
The Commission would not implement these standards if to do so
would undermine or inhibit accomplishment of the goals of Order No.
636. In fact, as noted earlier, it is the very lack of standardization
in pipeline implementation of Order No. 636 that may impede the full
realization of the competitive market that the Commission sought to
create in Order No. 636. These standards make a decided improvement in
the current system, and, accordingly, the Commission will accept them.
4. Incorporation of GISB's Principles
In the NOPR, the Commission did not propose to incorporate by
reference GISB's principles, because the principles do not purport to
establish obligations for pipelines. GISB comments that it views the
principles as being of equal importance to the definitions, standards,
and datasets, and NGSA recommends that the Commission also incorporate
the principles, given their interrelationship with the definitions,
standards, and datasets. Some commenters also suggest that the
Commission redesignate certain principles as standards.
The Commission will incorporate the principles, since they are a
part of the GISB documentation and provide guidance as to the intended
meaning of the standards. Pipelines, however, will not be expected to
comply with the principles unless they are officially adopted as
standards.
C. Additions to or Revisions of the Standards
1. Need for a Standard for Nominations Outside of the Nomination
Schedule
In the NOPR, the Commission proposed to adopt GISB's uniform
nomination timetable for the entire country: a 9 a.m. central clock
time (CCT) 30 gas day and the 11:30 a.m. start to the nomination
process. A number of comments on GISB's March 15, 1996 filing claimed
this nomination schedule lacked sufficient flexibility. The Commission
solicited comments on whether the GISB standards provide some of the
increased nomination flexibility requested by shippers because, as long
as a pipeline has unscheduled capacity available, shippers can nominate
gas even if the 11:30 a.m. nomination deadline has passed or they have
not previously submitted a nomination for that day. If the GISB
standards did not provide this flexibility, the Commission asked
whether an additional standard is needed to require pipelines to
process nominations outside of the nomination schedule if they have
available capacity.
---------------------------------------------------------------------------
\30\ Central clock time adjusts for daylight savings time.
---------------------------------------------------------------------------
GISB states that its standards provide for flexibility and that the
Commission's suggested standard is unnecessary because, under its
standards, a pipeline is not prevented from accepting nominations at
any time and has an incentive to do so in order to increase throughput.
Other commenters assert that the GISB standards do not require
pipelines to schedule capacity outside the standard nomination
deadlines even
[[Page 39061]]
if they have unscheduled capacity. Some contend that pipelines should
not be required to accept such out-of-time nominations, because the
pipelines are not yet ready for a continuous 24-hour-a-day nomination
process. Imposing such a requirement, they assert, would impose
additional administrative burdens and cost on the pipelines. Other
commenters assert that imposition of such a requirement would be
beneficial.
The commenters misconstrued the Commission's inquiry. The
Commission was not suggesting that pipelines necessarily should be
required to move immediately to 24-hour-a-day nominations. Rather,
within normal and regular business hours, the Commission saw little
reason that pipelines with available capacity could not accept late
nominations.31 Accepting such late nominations would not affect
other shippers (since capacity was available) and should not impose
significant cost or administrative burdens on pipelines, while it could
provide the additional flexibility requested by shippers. Given the
responses, the Commission will not draft an additional standard, but it
fully expects pipelines with available capacity to provide nominating
flexibility outside of the standard schedule. The Commission and the
industry can evaluate the pipelines' response in the future to
determine whether an additional standard needs to be imposed.
---------------------------------------------------------------------------
\31\ See the comment by Columbia Gas/Columbia Gulf, stating that
pipelines should be able to insist that nomination changes be made
during normal business hours.
---------------------------------------------------------------------------
2. Changes or Revisions Suggested by Commenters
The issues that drew the largest number of comments (but still only
14) concerned various aspects of GISB's uniform nomination timetable:
the 9 a.m. CCT gas day and the 11:30 a.m. start to the nomination
process. Some contend that requiring all nominations to be submitted at
the same time impedes efficiency because, they argue, varied schedules
would permit parties bumped on one pipeline to renominate on other
pipelines.32 Mid-West LDCs complain that GISB's 9 a.m. gas day
reduces their nomination flexibility compared with the 12 noon gas day
currently used by some of their pipelines.33 AF&PA, however,
suggests that the gas day should coincide with the standard day in the
electric industry, which begins at midnight, because of the close
interrelation between the gas and electric markets. PG&E, a combination
LDC and electric utility, and Edison, an electrical utility, on the
West Coast, contend that the 11:30 a.m. start for the nomination
process is too early.34 SoCalGas, a large West Coast LDC, however,
does not recommend a change to the starting nomination time in the GISB
standard. On the other hand, National Fuel Distribution contends the
timeline is too late for East Coast shippers, requiring them to work
beyond their normal business hours. NGC/Conoco/Vastar and AF&PA suggest
that a staggered nomination timeline with upstream pipelines going
first would be more efficient, while PG&E and Edison suggest a regional
nomination timeline.
---------------------------------------------------------------------------
\32\ See the comments of NGC/Conoco/Vastar, AF&PA, CGM, and
Natural.
\33\ The Mid-West LDCs are CILCO, Illinois Power, National Fuel
Distribution, NDG/Minnegasco, Peoples/North Shore/Northern Illinois.
\34\ PG&E, for instance, claims that national weather service
data are not received until 8:30 a.m. to 9:00 a.m. Pacific time
(9:30 to 10:00 a.m. daylight savings time) and that shippers cannot
process these data in time to meet the GISB 11:30 CCT timeline and,
thus, would have to rely on stale weather data.
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Some pipelines (but not all that filed comments) 35 and other
shippers 36 complain about the use of CCT because of the expense
involved in having to change their metering twice a year and the
inconvenience of having to deal with a 23 and 25 hour day. WINGS points
out that many gathering companies use standard time, not clock time,
and contends that standard time will provide for better integration.
---------------------------------------------------------------------------
\35\ See the comments of CIG/ANR, Natural, PGT, Viking, WINGS,
and Williston Basin.
\36\ See the comments of SoCalGas and Peoples/North Shore/
Northern Illinois.
---------------------------------------------------------------------------
GISB responds that the standard nomination timeline allows a
shipper whose transaction spans more than one pipeline the certainty
that the transaction will really ``work'' as contemplated. GISB states
that as the industry currently operates, staggered nomination deadlines
can leave a shipper with one scheduled pipeline and one unscheduled
pipeline. In contrast, the standard nomination deadline gives a shipper
assurance that each link in its transaction chain can be scheduled at
one time. GISB also points out that its standards provide for
flexibility, for instance, by permitting shippers one intra-day
nomination. Brooklyn Union contends the Commission should not ``water
down'' industry-wide standards by adopting regional solutions, because
such regional solutions would perpetuate the existing system of
conflicting definitions and mutually inconsistent standards that has
thwarted the effort to establish an integrated pipeline grid.
The adoption of standards obviously requires changes and sacrifices
by all parties and, the Commission recognizes that the effects may not
always be spread equally among everyone in the industry. But the
question is not whether an alternative solution may work better for
some parties, but, what is best for the entirety of the interstate
pipeline grid. There can be no perfect or correct solution. None of the
commenters opposing the standard nomination schedule have submitted
data or other evidence to show that their approaches would necessarily
create a better result for the entire industry than the approach
supported by the consensus of the industry.
The Commission accepts the consensus agreement that a standard
nomination timeline is necessary to provide certainty and security for
nomination and scheduling. For example, an integrated pipeline grid
means that an East Coast LDC can nominate gas from a producer located
in any time-zone on the North American continent. If an upstream-
downstream system or a regional system were used, the LDC would not get
confirmation of the first leg of the journey until well after it gets
confirmation of the final downstream leg (which is probably well after
the close of its business day). In addition, as NGSA and others point
out, all these standards must work together as an integrated whole.
Thus, while using central standard, as opposed to clock time, may
reduce some pipeline costs, it also could exacerbate some of the timing
problems addressed by the West Coast shippers by making the nomination
deadlines more out of synch with individuals' business day. Adoption of
clock time for the pipeline industry also is likely to lead other
industry participants, like gatherers, to adopt a similar schedule to
maintain the efficiency of the market. While ultimately, coordination
of the gas and electric markets should be considered both industries
should be involved in determining the best method of achieving such
integration. GISB and the electric OASIS Working Groups should
establish liaisons to explore how best to coordinate business and
electronic standards to promote efficiency in the overall energy
market.
For the West Coast and Mid-West shippers, the standards provide
sufficient flexibility to make adjustments to nominations. The ability
to use intra-day nominations provides shippers with the flexibility to
adjust their nominations to respond to changes in circumstances. In
addition, as discussed previously, pipelines with uncommitted capacity
should provide
[[Page 39062]]
shippers with flexibility to submit late nominations within reasonable
time frames, so that shippers bumped on one pipeline can reroute their
capacity on other pipelines.
CILCO contends that, if the Commission retains the nation-wide
nomination timetable, it should at least establish a standard for
intra-day nominations permitting a shipper submitting an intra-day
nomination for firm receipt and delivery points to bump shippers using
these as secondary or interruptible points. 37 While providing
bumping rights for primary points would enhance primary firm shippers'
flexibility, such bumping rights could upset the expectations of firm
shippers using secondary points and interruptible shippers that had
received confirmed nominations for their nominated points. The
Commission will not resolve the balance between these interests at this
time, since it understands that GISB is considering intra-day
procedures for its September 30, 1996 filing.
---------------------------------------------------------------------------
\37\ AF&PA, EMA, and NGC/Conoco/Vastar also request a similar
clarification of bumping rights.
---------------------------------------------------------------------------
Natural asks for clarification that as long as no one is adversely
affected by a deviation, parties can agree on a different gas day to
meet operating needs. For the most part, the Commission discourages
changes to the standards because the very purpose of standardization is
for all parties to use the same processes and procedures. However, as
discussed in the next section, GISB envisions that pipelines may be
able to exceed the standards so long as these deviations do not
adversely effect other parties. Thus, in some circumstances, pipelines
and individual shippers may be able to agree to additional flexibility
in nomination procedures, subject to the important caveat that the
change does not degrade the rights of other shippers.
Commenters also suggest changes to a variety of other specific
standards, generally with only one or a very few commenters challenging
each standard. As merely one example, NGC/Conoco/Vastar, AF&PA, and EMA
contend that the period for resolving invoicing disputes should be two
years, while the consensus of the industry was that expedition in
handling disputes was important and agreed on a six-month period. In
this case, as in the other challenges to the consensus standards, the
issue is not susceptible to factual resolution; it is a matter of
judgment as to what approach is most efficient and will best serve the
needs of the entire industry. The Commission's goal in this proceeding
was to achieve a set of standards that the majority of the industry
could support. After having reviewed the comments and the GISB
standards, the Commission concludes that the industry consensus
standards effect a sound balance between the needs of all segments and
areas of the country and accepts these standards.
These standards also are not the final word. As experience is
gained operating under these standards, changes or revisions may be
needed. The industry and GISB need to be alert to such possibilities
for improving standards, and GISB has a procedure by which parties can
submit requests for changes to standards. 38
---------------------------------------------------------------------------
\38\ GISB Procedures For Adopting Standards, Sec. 2.1. Indeed,
GISB has received a request for changes to Nomination Standard 1.3.1
dealing with the standard gas day. GISB Standards Action Bulletin,
June 15, 1996, Vol. 2, Number 10, at 2.
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D. Requests for Clarification
1. Pipelines Exceeding the Standards
In the NOPR, the Commission requested clarification of GISB's
statement that all of its standards should be considered minimums and
that parties are encouraged to exceed these standards. The Commission
was unsure whether some standards should be considered inviolate,
because any change would have adverse repercussions for non-agreeing
parties.
GISB responds that its intent is to permit pipelines to exceed
standards, so long as the changes do not have a negative impact on
contracting and non-contracting parties. For example, it states that a
pipeline may accept a nomination outside the nomination deadline if
doing so will not affect service to those who submit nominations on
time. Brooklyn Union, Tenneco Energy, and ECT support the principle
that GISB's standards should be considered minimums. ECT suggests that
pipelines should be able to exceed the standards, so long as shippers
can operate on the pipeline under the minimum standard. Southern
supports the concept that pipelines can exceed the GISB standards and
suggests that the Commission make this point clear, by revising
Sec. 284.10 to remove the requirement that pipelines ``comply with''
the GISB standards and substitute the phrase that pipelines must ``meet
or exceed'' the standards. NGC/Conoco/Vastar argue that whether
pipelines can exceed standards varies, depending on the standard in
question and whether shippers need to rely on that standard or whether
the so-called improvement is detrimental to some parties.
The Commission endorses the principle that pipelines can exceed the
GISB standards. In some cases, this principle is easy to apply. For
example, pipelines can permit more than one intra-day nomination
because the pipeline will still be complying with the requirement to
provide at least one intra-day nomination.
However, in some cases application of the principle will be more
difficult. For example, Peoples/North Shore/Northern Illinois point to
Nomination Standard 1.3.19, which states that ``overrun quantities
should be requested in a separate nomination.'' They comment that the
pipelines they use employ a superior procedure by permitting overrun
nominations to be included as part of the regular nomination.
In this case, permitting the change would appear to violate the
underlying premise of standardization--that shippers can use the same
procedures on all pipelines without having to know the individual
proclivities and rules of each pipeline. Shippers may need to count on
the standardized practice of submitting overrun nominations as a
separate nomination, without having to determine whether different
overrun procedures apply on different pipelines. In some instances,
rather than simply changing a standard, pipelines may be able to offer
an additional option to shippers, provided that those shippers that
want to conduct business according to the standards can still do so.
The general principle is that a pipeline's enhancement to the
standards is acceptable when the revision provides increased
flexibility, but does not affect shippers' ability to utilize the
standard procedure or adversely affect the rights of those not a party
to the revision. Some of these issues may have to be resolved when
pipelines make their compliance filings and shippers file comments on
the filings. In making their compliance filings, pipelines, therefore,
must specifically note in their statement of the nature, reasons, and
basis all proposed changes that purport to exceed the standards so that
shippers can comment on these changes. The Commission also notes that,
under GISB's procedures, any person may seek an interpretation of a
standard, and receive a response within 90 days of the
submittal.39 The use of this procedure to obtain clarification of
issues (that can be anticipated based on the filings here or at GISB)
could prove useful when the Commission considers the compliance filings
to implement the standards.
---------------------------------------------------------------------------
\39\ GISB Procedures for Adopting Standards, Sec. 5.0.
---------------------------------------------------------------------------
The Commission will not revise the regulation, as suggested by
Southern, to read ``meet or exceed,'' rather than ``comply,'' because,
even if pipelines
[[Page 39063]]
may exceed the standards in certain circumstances, they must still
comply with the standards. As pointed out earlier, a pipeline
permitting more than one intra-day nomination will be complying with
the standard for providing at least one such nomination. Moreover, as
discussed above, pipelines cannot exceed the standards by adopting what
they consider a superior methodology if adherence to the GISB standard
---------------------------------------------------------------------------
is necessary to ensure uniform procedures across the pipeline grid.
2. Clarification of Other Issues
In the NOPR, the Commission stated that it expected pipelines to
implement these standards as broadly as possible to provide customers
with the services needed in an integrated market. The Commission
reasoned that many of the clarification requests could be resolved
through consultations between the pipelines and their shippers, and, if
they were not, the Commission could address them when pipelines file
revised tariffs to incorporate the standards or through the complaint
process.
National Fuel supports the Commission's position in the NOPR that
implementation details should be worked out in individual proceedings.
Other commenters, however, request clarification of a number of
standards. While not exhaustive, the following provides an example of
the clarification requests. Several commenters seek clarification of
the standard requiring pipelines to provide intra-day nominations, such
as clarifying intra-day bumping rights (as mentioned previously), the
pipelines' ability to establish set times for intra-day nominations,
\40\ and whether intra-day nominations should apply to all
services.\41\ NWIGU, however, maintains that the manner in which intra-
day nominations are implemented should be determined on a pipeline
specific basis. Other commenters request clarification of issues
relating to specific pipelines or services, such as scheduling priority
for late nominations if the particular service provides for priority
nomination rights or how to deal with Florida Gas Transmission
Company's receipt and delivery gas days.\42\ Still others request
clarification of terms, such as National Fuel Distribution's concern
that ``mutual mistake of fact'' in Flowing Gas Standard 2.3.26 could be
so broad as to cover all billing mistakes \43\ or Viking's request for
clarification of the term ``quick response'' in Nomination Standard
1.3.2.
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\40\ See the comment of Tenneco Energy.
\41\ See the comments of ECT and Peoples/North Shore/Northern
Illinois.
\42\ See the comments of Peoples/North Shore/Northern Illinois
and Peoples Gas.
\43\ Flowing Gas Standard 2.3.26 provides for a 6 month period
to resolve allocation disputes unless a mutual mistake of fact is
involved.
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As the Commission stated in the NOPR, clarification issues involve
issues specific to certain pipelines, and thus are not susceptible to
generic resolution. Similarly, terms used in standards need to be
defined with reference to specific situations, using standard rules of
interpretation, such as common usage, and the principles and intent of
the standards.44 These issues are best addressed when pipelines
make their compliance filings in light of the comments made on those
filings. By the time pipelines make their compliance filings,
additional clarification on some of these issues, such as intra-day
nominations, also may be provided through the September 30, 1996
filings. Moreover, as pointed out earlier, none of these standards are
immutable. Trial and error may reveal the need for further
standardization in some areas and perhaps less in others.
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\44\ Mutual mistake of fact is a common expression used in
contract law where both parties have a mutual misunderstanding of a
basic assumption of the contract. Thus, all that Flowing Gas
Standard 2.3.26 provides is that the time periods for dispute
resolution will not apply where the parties are seeking to resolve a
problem that both misunderstood at the time. The term ``quick
response'' refers to the immediate response of errors in
nominations. See Nomination Standard 1.4.2.
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CIG/ANR request clarification of what the Commission intends by the
consultive process. They argue that implementation of these standards
is essentially ministerial and that extensive consultation could lead
to further redefinition of the standards.
Implementation of many of the standards is likely to be the purely
ministerial task CIG/ANR envisages. There may be some issues, however,
where shippers are concerned about the method of implementation.
Accordingly, pipelines should circulate advance copies of their
proposed compliance filings among shippers for comments to help iron
out the implementation details before filing with the Commission.
When individual trading parties have agreed to changes in the
electronic data requirements, GISB's definition 1.2.22 requires parties
to present mutually agreeable data elements to GISB for technical
implementation.\45\ Peoples/North Shore/Northern Illinois object to
this definition, because they are concerned about the possible delay
this requirement may introduce. ECT, on the other hand, supports the
standard, arguing that unless data elements required to implement
service revisions are mapped to GISB's ASC X12 formats, individual
pipeline-by-pipeline interpretation of where the data should be placed
would defeat the goal of standardization.
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\45\ To ensure that changes to data elements do not undermine
the goal of providing standardized communication across pipelines,
Standard 1.2.2 provides that other shippers cannot be required to
adopt any additional data elements in order to achieve a desired
level of service.
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The GISB requirement that the pipelines inform GISB of any data
element changes is reasonable since it ensures that a standard
industry-wide dataset is readily available. The Commission fully
expects GISB to process such filings as quickly as possible.\46\
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\46\ Commission approval of the data elements appears
unnecessary because they involve only agreements between individual
trading partners and will not affect other shippers' use of the
standards. If the change involves the substance of the standards or
pipelines' obligations to other shippers, then Commission acceptance
would be necessary prior to implementation.
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E. Requests for Waivers
Some commenters support the granting of waivers based on individual
circumstances if the waivers would not unreasonably interfere with gas
flow across the pipeline grid.\47\ NGSA and COPAS argue that waivers
should be granted sparingly because all the standards are interrelated
and waivers take away the certainty that standards are designed to
promote. Williston Basin requests waivers of some of the GISB
requirements. It claims that it should not have to comply with the EDM
requirements because only two third-parties on its system now use
Electronic Data Interchange (EDI) to download capacity release
information.\48\ It also is concerned that meeting GISB's invoicing
timetable would be too onerous because of its remote meter locations.
El Paso contends that it (and GISB) should not have to implement a new
dataset to permit uploads of pre-arranged deals for full requirements
customers.
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\47\ See the comments of NGT/MRT, Montana-Dakota, CNG, and
National Fuel.
\48\ EDI generally refers to the exchange of information between
computers using telephone lines and standardized file formats.
---------------------------------------------------------------------------
The Commission, as a general matter, finds that waivers are at odds
with the goal of adopting uniform procedures in order to achieve the
greatest efficiency in transporting gas across the integrated pipeline
grid. Thus, waivers will not be favored. However, the Commission will
consider waiver requests on a case-by-case basis.
Although the Commission previously granted waivers of the EDI
requirement to some small pipelines, the prior requirements cover only
capacity release, which may have been
[[Page 39064]]
insignificant on these pipelines. In contrast, these standards cover
the entire gamut of ongoing business transactions with the pipeline.
Thus, a previous lack of interest in EDI for capacity release does not
necessarily suggest a similar lack of interest in these standards.
Even for small pipelines, making what is essentially a one-time
investment to adopt a standardized industry-wide technology seems
preferable to continued investment in EBB or other non-standard
communication technologies. The Commission also would expect that
third-party vendors that will be creating formats for customers to
transact business with pipelines can, at reasonable cost, use or modify
the formats to enable pipelines to transact business with customers.
Thus, before granting waivers of the electronic communication
standards, the Commission will expect pipelines to provide full, and
accurate documentation of the costs of implementing such standards on
their systems. At this point, El Paso has not demonstrated why
implementation of uploads for pre-arranged deals for its full
requirements customers would be so onerous, since it already provides
for downloads of such information and will be providing for uploads of
other information.
F. Capacity Release
The GISB standards address procedures for implementing releases of
capacity and the electronic methods of communicating capacity release
information. The standards will require some modification of the
mechanics of the pipelines' capacity release procedures. The principal
change, at least for some pipelines, will be the standardized timeframe
for processing release transactions. Under this schedule, for instance,
pipelines must establish procedures to process pre-arranged deals, not
subject to bidding, within one hour of receipt so that the replacement
shipper can nominate the same day. For deals subject to bidding, the
pipelines must process the transactions within one day. The
communication standards require pipelines to process file uploads of
pre-arranged deals, which will permit shippers and third-party capacity
trading service providers to conclude pre-arranged deals and
efficiently transmit the results of the deals to the pipeline, without
having to use the pipelines' EBBs as is the current practice.
While most commenters find the GISB changes to be beneficial, a
number comment that they do not obviate the need for changes in
fundamental capacity release policies, such as the requirement for
bidding on deals longer than 31 days and the prohibition on releases
above the pipeline's maximum rate. Proliance and BGE also find the GISB
standards an improvement over past practice, but they believe pipeline
interruptible service has a competitive advantage over capacity release
because the standards fail to provide comparability between the
procedures for obtaining released capacity and those for obtaining
pipeline interruptible capacity.\49\
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\49\ Proliance points to differences between capacity release
and interruptible procedures in posting, bidding, creditworthiness,
EBB and contract procedures, scheduling, and nominations. BGE points
out that interruptible nominations are made on the same day as
acquisition of capacity as compared with up to a two-day delay under
GISB standards when bidding is required.
---------------------------------------------------------------------------
Two pipelines, CIG/ANR and CNG, suggest that the Commission not
require pipelines to redesign their capacity release programs until
after the Commission issues its promised NOPR on capacity release.\50\
CNG is particularly concerned about having to make investment in
redesign of its electronic systems if the Commission is going to make
further changes to the program.
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\50\ Trunkline Gas Company, 75 FERC para. 61,064, at 61,213
(1996).
---------------------------------------------------------------------------
The Commission does not want to change the industry's consensus
standards until the industry has a further opportunity for
consideration and comment through GISB's continuing process or any NOPR
on capacity release. On the other hand, the Commission finds no reason
for not implementing the standards at this point.
The procedural changes involve mostly revisions to tariff
procedures, which should not involve significant burdens. The
requirement for pipelines to speed-up the processing of capacity
release transactions is consistent with the Commission's goal of
ensuring comparability between capacity release and pipeline short-term
services.
The only change in electronic communication is the requirement to
process uploads of pre-arranged deals; all of the other standards for
electronic communication of capacity release information have been in
place for some time. Adding uploads of pre-arranged deals should not
impose significant additional burden or expense, since pipelines
already will be implementing upload capability for the other GISB
standards. The ability to upload pre-arranged deals already has been
delayed, and the Commission does not want to introduce any further
delay, because such a capability is crucial for shippers and third-
party capacity trading service providers to communicate efficiently
with the pipelines. Moreover, the Commission is convinced that whatever
changes the Commission may make in the fundamental policies of the
capacity release program, the pipelines will have to provide the
capability for shippers and third-party capacity trading services to
efficiently transmit pre-arranged transactions to the pipelines.
In the NOPR, the Commission asked whether Capacity Release Standard
5.3.11 required pipelines to accept electronic file uploads of
replacement shippers' or their agents' confirmation of the terms of
pre-arranged deals (on those pipelines that require confirmation). The
Commission was concerned that the efficiency created by requiring
standardized uploads of pre-arranged deals would be lost if shippers or
third-party capacity trading services cannot use electronic uploads of
confirmations to confirm their deals.
GISB, El Paso, and Tenneco Energy confirm that the intent of
Capacity Release Standard 5.3.11 is for transportation service
providers to accept and process pre-arranged deal confirmations using
EBBs, file uploads, as well as other electronic means to which the
parties mutually agree. They point out that the Capacity Release
Standards include datasets requiring pipelines to provide for uploads
of confirmations as a mandatory business conditional field,\51\ which
means that pipelines requiring confirmation must support such
uploads.\52\ Tenneco Energy, however, raises questions about the
conditions under which agents can confirm. It suggests that any such
requirement be deferred until completion of the work of GISB's
Contracts Task Force. Peoples/North Shore/Northern Illinois opposes a
requirement for pipelines to support uploads of confirmations unless
the costs exceed the benefit.
---------------------------------------------------------------------------
\51\ See Capacity Release Datasets 5.4.12, and 5.4.19.
\52\ See Nomination Standard 1.2.2 for the definition of
mandatory and business conditional.
---------------------------------------------------------------------------
The Commission supports the requirement for pipelines to accept
uploads of confirmations, because such uploads improve the efficiency
of the process by allowing shippers and third-party capacity trading
service providers to conclude pre-arranged deals without having to use
the pipeline EBBs to transmit such deals to the pipeline. With respect
to Tenneco Energy's comment, GISB has adopted a principle
[[Page 39065]]
that agents must be recognized in conducting electronic
communication.\53\ This principle is particularly important in the
capacity release arena because the only way that third-party capacity
trading service providers can effectively provide trading services is
if they can communicate the results of such transactions to the
pipelines on behalf of their clients. Thus, the Commission expects
pipelines to recognize agents for the purpose of submitting pre-
arranged deals and confirmations of such deals as well as for other
purposes.
---------------------------------------------------------------------------
\53\ Electronic Delivery Mechanism Principle 4.1.7. The capacity
release datasets also contain a field entitled authorization code,
which informs the receiver of a transaction that the sender is
authorized to submit the transaction for the contractual party.
---------------------------------------------------------------------------
G. Electronic Delivery Mechanism
GISB's standards specify that Internet protocols (TCP/IP with a PPP
connection) should be used for electronic communication. In the NOPR,
the Commission requested comment on whether additional standards for
Internet connection are needed, such as the use of file transfer
protocols (FTP).
In its comments, GISB explains that, although it has determined to
use Internet protocols for communication, it has not yet reached a
final determination on whether the public Internet provides sufficient
security for business transactions or whether private networks should
be the communication vehicle. On June 7, 1996, GISB's Future Technology
Task Force issued an interim report recommending the use of the public
Internet as the communication vehicle. The report finds that security
issues with the use of the public Internet can be satisfactorily
resolved through commercially available software. However, the Future
Technology Task Force has established a pilot test (to be completed by
September 30, 1996) to permit a full examination of the technology. If
the public Internet ultimately is not chosen, GISB states whatever
communication vehicle (intranets/networks) is chosen would support its
standard protocol of TCP/IP with a PPP connection.
AGA and CIG/ANR suggest that the Commission not prejudge the
adoption of the public Internet as the communication vehicle, but wait
for the recommendation by the Future Technology Task Force. BGE and EMA
support the use of the public Internet, while ECT, National Fuel
Distribution, and Peoples/North Shore/Northern Illinois are concerned
about the security of using the public Internet and support the use of
private intranets. NYMEX/Enersoft and WINGS request clarification that
the Commission is not adopting the public Internet as the exclusive
means of communication and that third-parties can offer products which
are not on the public Internet.
The Commission will reserve final judgment on the use of the public
Internet until the final report by the Future Technology Task Force.
The Commission is not entirely clear as to the concerns expressed by
NYMEX/Enersoft and WINGS. All pipelines will have to provide data
according to the protocol (whether public Internet, intranet, or other
protocol) that is specified. Whatever protocol is adopted for pipelines
should not affect the manner in which third-parties use or transmit
that data to their customers. A third-party would be entirely free to
establish its own private intranet to communicate data with its
customers.
NYMEX/Enersoft and WINGS may be asking whether pipelines can agree
to provide information to shippers or third-party computer service
providers according to protocols that differ from the chosen one (e.g.,
providing a direct connection to the third-party). In the OASIS
rulemaking, the Commission required the utilities to provide direct
connection on an equal basis to all those requesting such a connection
as long as the utility is compensated for making, and given sufficient
time to make, the connection.54 The Commission found that
providing direct connections would assist private networks and third-
party services in offering additional valuable services to the
industry. The Commission anticipates following the same course here
when it adopts the final communication standards.55
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\54\ III FERC Stats. and Regs. Preambles para. 31,035, at
31,618-19.
\55\ The Commission also anticipates that pipelines should
design tariff procedures to ensure that the first party seeking a
direct connection is not disadvantaged (relative to latercomers) by
having to bear the costs of establishing the connection. Thus,
pipelines should consider procedures to reimburse the first
applicant, and charge subsequent applicants, for the fixed common
costs of establishing the direct connection.
---------------------------------------------------------------------------
NGC/Conoco/Vastar recommend that all electronic information
disseminated by pipelines should be done on the public Internet. They
further contend that pipelines should no longer be required to provide
information on EBBs, nor should they be able to provide preferred
connections to their EBBs. If pipelines want to continue to provide
services on an EBB, NGC/Conoco/Vastar suggest that EBB service should
not be subsidized by having its costs recovered as part of rate base,
but should compete on an equal footing with other ventures using the
pipeline information.
The Commission agrees the goal of the industry should be to replace
the individual pipeline EBBs, characterized by their unique log-on and
access procedures and distinctive look and feel, with a uniform method
of communicating all electronic information now provided on the EBBs.
Standardization of electronic communication would permit shippers and
third-party service providers to easily capture all relevant
information and provide a single display format covering all pipelines.
In the course of their deliberations on the future of electronic
communication in the gas industry, GISB and the industry participants
should give consideration to the following issues. First, they should
consider whether the Commission should mandate that pipelines provide
additional information in electronic format (other than that required
by this rule or other Commission regulations).
Second, they need to consider whether pipelines should be required
to replace their EBBs with a standardized, interactive format (such as
interactive, Internet world-wide-web displays). The display format
would be in addition to providing for uploads and downloads in
standardized file format.56 Alternatively, the pipelines could be
pure data providers and recipients, with no requirement to provide
individual display formats. This approach would leave the creation of
display formats to the shippers and to competition among software
vendors and third-party providers (that could include pipeline EBBs
that would not be covered within the pipelines' cost-of-service).
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\56\ In the OASIS rulemaking, the utilities were required to
provide both for file downloads and uploads of data as well as
providing the required information through internet HTML display
formats. III FERC Stats. and Regs. Preambles para. 31,035, at
31,616-17.
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Third, the industry needs to consider the concern raised by NGC/
Conoco/Vastar over connection standards, such as whether pipelines can
provide for preferential connections either to their own EBBs or third-
parties (including pipeline affiliates). For example, if the standard
requires pipelines to provide data over the public Internet and the
pipeline uses a third-party to operate its Internet server, should
pipelines be able to provide direct connections to their own in-house
computer system as now occurs with the pipelines' EBBs? Or, should all
direct connections be to the Internet server in order to provide
[[Page 39066]]
everyone with comparable access to the data.57
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\57\ The OASIS rule did not permit the utilities to provide
preferential direct connections. See III FERC Stats. and Regs.
Preambles para. 31,035, at 31,619 (direct connections to the
utility's computer are not permitted when another party is
responsible for the Internet connection).
---------------------------------------------------------------------------
Finally, GISB and the industry participants should explore making
information available, on a real time basis, on the availability of
capacity on the mainline and at individual receipt and delivery points.
GISB has recognized that its nomination scheduling is an interim step
to continuous and contiguous scheduling.58 Moreover, as discussed
earlier, pipelines must now permit intra-day nominations, and the
Commission expects pipelines to schedule capacity within reasonable
business hours when they have available capacity. As the industry
continues its move to more flexible intra-day nominations, such efforts
must be accompanied by real-time information. Some of the needed
information can be obtained through compliance with the existing
Operationally Available and Unsubscribed Capacity datasets.59 As
such, the Commission will continue taking steps to ensure compliance
with the requirements of those data sets. However, improvements are
needed. Current data is not available on a real time basis. It does not
reflect capacity scheduled during the day. Moreover, information is not
available on whether gas can be scheduled into or out of a particular
zone. Finally, the information is often not delivered in a user
friendly format. For instance, a person should be able to request
information which changed after a specified date and time, i.e. the
quantity of available capacity at individual locations which changed
due to a newly scheduled quantity.
---------------------------------------------------------------------------
\58\ Nomination Principle 1.1.2.
\59\ Standards for Electronic Bulletin Boards Required Under
Part 284 of the Commission's Regulations, Order No. 563, III FERC
Stats. & Regs. Preambles, at 31,007; Order No. 563-A, III FERC
Stats. & Regs. Preambles, at 31,040 (posting of operationally
available capacity).
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H. Consideration of Additional Standards
A number of commenters on GISB's March 15, 1996, filing argued that
the GISB standards did not go far enough and that additional standards
needed to be developed. While not meaning to provide a definitive list,
the Commission distilled from the comments the following areas for
consideration of modifications or additions to the standards: expansion
of Internet protocols to include all electronic information provided by
the pipelines (discussed above), title transfer tracking, allocations
and rankings of gas packages, treatment of compressor fuel, operational
balancing agreements, routing models, imbalance resolution, operational
flow orders, multi-tiered allocations and confirmations, and additional
pooling standards. Because of the importance of the issues raised, the
Commission requested detailed proposals for standards in these and
other related areas by September 30, 1996.
Several commenters argue that the areas listed are among the most
contentious and most difficult to resolve and maintain that the
September 30, 1996 date does not provide the industry or GISB with
adequate time to develop consensus. NGC/Conoco/Vastar, however,
maintain that precisely because these issues are complex and
contentious, GISB will be unable to reach a reasonable consensus, so
that the Commission should resolve the issues. The Commission also
takes notice that, after the NOPR, GISB has established a schedule
leading to the development of standards (but not necessarily detailed
datasets) by the September 30, 1996 date.
The Commission does not share NGC/Conoco/Vastar's dire view of
GISB's prospects for resolving these issues. But the Commission still
needs to monitor the progress of these considerations, so that, if they
do stalemate, the Commission can begin technical conferences or other
proceedings to resolve them. Accordingly, the Commission will not
revise the September 30, 1996 date for submission of standards
proposals. By September 30, 1996, the Commission expects that standards
for many of these issues will be developed and that, for other issues,
the filings will permit the Commission to assess whether GISB is on
track to resolve them or whether the Commission needs to establish
additional procedures. For issues that are not resolved, the reports
should be sufficiently comprehensive that they fully describe the
problems faced by the industry, the proposals being considered, whether
any proposal is preferred over others, and an analysis of the benefits
and disadvantages of the proposed solutions.
I. Cost Recovery
Viking and Iroquois request the Commission to establish a method of
recovering the costs of implementing the standards. Viking maintains
that a full section 4 case is not an appropriate mechanism because of
the difficulty in predicting up-front and ongoing compliance costs
needed to prepare a test-year cost-of-service study. Both Iroquois and
Viking suggest using limited section 4 cases, and Viking also suggests
other options, such as deferred accounting, similar to procedures used
for the recovery of costs related to implementation of FASB 106 (post-
employment benefits other than pensions).
The Commission finds no need to establish special procedures for
handling cost recovery. There is no evidence that the costs of
compliance are so significant or so out-of-the ordinary that special
procedures are necessary. Moreover, implementation of many of the
standards may result in changes to operations and maintenance expenses
or other cost-of-service categories, which can be effectively
considered only in the context of a full section 4 proceeding. With
respect to Viking's concern about predicting future costs, Commission
regulations permit pipelines to include in rate filings costs that are
known and measurable at the time of the filing.60
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\60\ 18 CFR 154.303.
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V. Implementation Schedule
GISB proposes a staggered schedule for pipeline compliance filings
and implementation in which pipelines are divided into three groups.
The first group would make tariff filings October 1, 1996 and implement
the standards April 1, 1997 with the other two groups filing in
November and December 1996 and implementing in May and June 1997. The
pipeline groupings are based on three factors: pipeline willingness to
implement in the first groups; implementation by downstream pipelines
no earlier than their major feeder pipelines; and geographic balance
with each group including pipelines from various regions of the
country. GISB did not include deadlines for small pipelines, stating
that they could choose their implementation date.
GISB also explains that the standards will govern business
beginning with the implementation date. For example, in order to have
gas scheduled to flow at the beginning of the gas day on April 1, 1997,
the pipeline actually would begin implementing the related standards,
such as Nomination Standard 1.3.2 (Nomination Timeline) in March 1997.
Likewise, for pipelines with an April 1, 1997 implementation date, the
invoices for April deliveries would be prepared and sent to the
customer in May 1997 in compliance with the standards.
The Commission is accepting the GISB schedule for the pro forma
compliance filings and the
[[Page 39067]]
implementation of the standards as set forth below. Smaller pipelines
are included in the third group, but any pipeline may file or implement
earlier than its effective date. The Commission is providing that
interventions, protests, or comments are due 21 days after the date of
the pipeline's pro forma tariff filing.
Pro Forma Tariff Filing Date: October 1, 1996--Standards Implementation
Date: April 1, 1997
Algonquin Gas Transmission Company
El Paso Natural Gas Company
Florida Gas Transmission Company
Mojave Pipeline Company
National Fuel Gas Supply Corporation
Northern Border Pipeline Company
Northern Natural Gas Company
Panhandle Eastern Pipe Line Company
Texas Eastern Transmission Corporation
Transwestern Pipeline Company
Trunkline Gas Company
Pro Forma Tariff Filing Date: November 1, 1996--Standards
Implementation Date: May 1, 1997
Canyon Creek Compression Company
Colorado Interstate Gas Company
East Tennessee Natural Gas Company
Midwestern Gas Transmission Company
Mississippi River Transmission Corporation
Natural Gas Pipeline Company of America
NorAm Gas Transmission Company
Stingray Pipeline Company
Tennessee Gas Pipeline Company
Trailblazer Pipeline Company
Williams Natural Gas Company
Wyoming Interstate Company, Ltd.
Pro Forma Tariff Filing Date: December 2, 1996--Standards
Implementation Date: June 1, 1997
Alabama-Tennessee Natural Gas Company
Algonquin LNG, Inc.
ANR Pipeline Company
ANR Storage Company
Black Marlin Pipeline Company
Blue Lake Gas Storage Company
Caprock Pipeline Company
Carnegie Interstate Pipeline Company
Chandeleur Pipe Line Company
CNG Transmission Corporation
Columbia Gas Transmission Corporation
Columbia Gulf Transmission Company
Cove Point LNG Limited Partnership
Crossroads Pipeline Company
Equitrans, Inc.
Gas Transport Inc.
Gasdel Pipeline System, Inc.
Granite State Gas Transmission, Inc.
Great Lakes Gas Transmission Limited Partnership
Gulf States Transmission Corporation
High Island Offshore System
Iroquois Gas Transmission System, L.P.
K N Interstate Gas Transmission Co.
K N Wattenberg Transmission Limited Liability Company
Kentucky-West Virginia Gas Company
Kern River Gas Transmission Company
Koch Gateway Pipeline Company
Louisiana-Nevada Transit Company
Michigan Gas Storage Company
Mid Louisiana Gas Company
MIGC, Inc.
Mobile Bay Pipeline Company
Nora Transmission Company
Northwest Pipeline Corporation
Oktex Pipeline Company
Overthrust Pipeline Company
Ozark Gas Transmission System
Pacific Gas Transmission System
Pacific Interstate Offshore Company
Paiute Pipeline Company
Petal Gas Storage Company
Questar Pipeline Company
Richfield Gas Storage System
Riverside Pipeline Company, L.P.
Sabine Pipe Line Company
Sea Robin Pipeline Company
South Georgia Natural Gas Company
Southern Natural Gas Company
T C P Gathering Co.
Tarpon Transmission Company
Texas Gas Transmission Corporation
Texas-Ohio Pipeline, Inc.
Transcontinental Gas Pipe Line Corporation
Tuscarora Gas Transmission Company
U-T Offshore System
Viking Gas Transmission Company
Western Gas Interstate Company
Western Transmission Corporation
Westgas Interstate, Inc.
Williston Basin Interstate Pipeline Company
Young Gas Storage Company, Ltd.
VI. Regulatory Flexibility Act Certification
The Regulatory Flexibility Act of 1980 (RFA) 61 generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The proposed regulations would impose requirements only on interstate
pipelines, which are not small businesses, and, these requirements are,
in fact, designed to reduce the difficulty of dealing with pipelines by
all customers, including small businesses. Accordingly, pursuant to
section 605(b) of the RFA, the Commission hereby certifies that the
regulations proposed herein will not have a significant adverse impact
on a substantial number of small entities.
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\61\ 5 U.S.C. 601-612.
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VII. Environmental Analysis
The Commission is required to prepare an Environmental Assessment
or an Environmental Impact Statement for any action that may have a
significant adverse effect on the human environment.62 The
Commission has categorically excluded certain actions from these
requirements as not having a significant effect on the human
environment.63 The action taken here falls within categorical
exclusions in the Commission's regulations for rules that are
clarifying, corrective, or procedural, for information gathering,
analysis, and dissemination, and for sales, exchange, and
transportation of natural gas that requires no construction of
facilities.64 Therefore, an environmental assessment is
unnecessary and has not been prepared in this rulemaking.
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\62\ Order No. 486, Regulations Implementing the National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs. Preambles 1986-1990 para. 30,783 (1987).
\63\ 18 CFR 380.4.
\64\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5), 380.4(a)(27).
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VIII. Information Collection Statement
In the NOPR, the Commission requested emergency Office of
Management and Budget (OMB) clearance procedures under 5 CFR 1320.13 of
OMB's regulations to avoid delays beyond the proposed January 1, 1997,
target implementation date. Virtually all of the comments filed
(including those filed with OMB by Viking) express concern about the
Commission's target implementation date of January 1, 1997, due to
concerns about complications arising during the peak winter heating
season. GISB, with support from almost all commenters, has proposed,
and the Commission is adopting, a staggered implementation of the
standards during the spring of 1997.
OMB's regulations in 5 CFR 1320.11 require that it approve certain
reporting and recordkeeping requirements (collections of information)
imposed by an agency. Upon approval of a collection of information, OMB
shall assign an OMB control number and an expiration date. Respondents
subject to the filing requirements of this Rule shall not be penalized
for failing to respond to these collections of information unless the
collections of information display valid OMB control numbers.
Title: FERC-545, Gas Pipeline Rates: Rate Change (Non-formal)
Action: Data Collection/Requirements
OMB Control No.: 1902-0154
Respondents: Interstate Natural Gas Pipelines (Not applicable to small
businesses.)
Frequency of Responses: One-time tariff filings (First year)
Title: FERC-549C, Standards for Business Practices of Interstate
Natural Gas Pipelines
Action: Data Collection/Requirements
OMB Control No.: To be assigned by OMB
Respondents: Interstate Natural Gas Pipelines (Not applicable to small
businesses.)
Frequency of Responses: One-time capital/startup new business
procedures (First year)
Necessity of Information: The final rule adopts standards incorporated
by reference and submitted by the Gas Industry Standards Board (GISB).
[[Page 39068]]
These standards govern four major business practices--nominations;
allocations, balancing, and measurement; invoicing; and capacity
release--as well as the mechanism for electronic communication between
the pipelines and those doing business with the pipelines. Without the
Commission's adoption of these standards that institute common business
practices and a common language for communication, the speed and
efficiency with which shippers can transact business across multiple
pipelines would be severely compromised. Under the final rule, all
pipelines will adopt a standard set of information covering the ten
high priority data elements, so that shippers will be able to
communicate using the same information for the same transactions
regardless of the pipelines with which they deal. In addition, all
pipelines will ultimately support a standard Internet connection for
communications with their customers, which will eliminate the disparity
in log-on procedures and user interfaces faced by customers using the
individual pipeline electronic bulletin boards.
The information collection requirements in this final rule will be
reported directly to the industry users and later be subject to audit
by the Commission. The implementation of these data requirements will
help the Commission carry out its responsibilities under the Natural
Gas Act and coincide with the current regulatory environment which the
Commission instituted under Order No. 636 and the restructuring of the
natural gas industry. The Commission's Office of Pipeline Regulation
will use the data in rate proceedings to review rate and tariff changes
by natural gas companies for the transportation of gas and for general
industry oversight.
Because the subject final rule is not significantly different from
the NOPR, and OMB has not provided any comments on the proposed rule,
the Commission is submitting a copy of this final rule to OMB for
informational purposes only. Interested persons may obtain information
on the reporting requirements by contacting the Federal Energy
Regulatory Commission, 888 First Street N.E., Washington, DC 20426
[Attention: Michael Miller, Information Services Division, (202)208-
1415] or the Office of Management and Budget [Attention: Desk Officer
for the Federal Energy Regulatory Commission (202)395-3087].
IX. Effective Date
These regulations are effective August 26, 1996. The Commission has
determined, with the concurrence of the Administrator of the Office of
Information and Regulatory Affairs of OMB, that this rule is not a
``major rule'' as defined in section 351 of the Small Business
Regulatory Enforcement Fairness Act of 1996. The incorporation by
reference of certain publications listed in the regulations is approved
by the Director of the Federal Register as of August 26, 1996.
List of Subjects
18 CFR Part 161
Natural gas, Reporting and recordkeeping requirements.
18 CFR Part 250
Natural gas, Reporting and recordkeeping requirements.
18 CFR Part 284
Continental shelf, Natural gas, Reporting and recordkeeping
requirements; Incorporation by reference.
By the Commission.
Lois D. Cashell,
Secretary.
In consideration of the foregoing, the Commission amends Parts 161,
250, and 284, Chapter I, Title 18, Code of Federal Regulations, as set
forth below.
PART 161--STANDARDS OF CONDUCT FOR INTERSTATE PIPELINES WITH
MARKETING AFFILIATES
1. The authority citation for part 161 continues to read as
follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.
Sec. 161.3 [Amended]
2. In Sec. 161.3, paragraph (h)(2) is amended by removing the
phrase ``Sec. 284.8(b)(4)'' and adding, in its place, the phrase
``Sec. 284.10(a)''.
PART 250--FORMS
1. The authority citation for part 250 continues to read as
follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.
Sec. 250.16 [Amended]
2. In Sec. 250.16, paragraph (c)(2) is amended by removing the
phrase ``Sec. 284.8(b)(4)'' and adding, in its place, the phrase
``Sec. 284.10(a)''.,
PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES
1. The authority citation for part 284 continues to read as
follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C 7101-7532; 43
U.S.C 1331-1356.
2. In Sec. 284.8, paragraphs (b)(4) and (b)(5) are removed,
paragraph (b)(6) is redesignated (b)(4), and paragraph (b)(3) is
revised to read as follows:
Sec. 284.8 Firm transportation service.
* * * * *
(b) * * *
(3) An interstate pipeline that offers transportation service on a
firm basis under subpart B or G of this part must provide all shippers
with equal and timely access to information relevant to the
availability of such service, including, but not limited to, the
availability of capacity at receipt points, on the mainline, at
delivery points, and in storage fields, and whether the capacity is
available directly from the pipeline or through capacity release. The
information must be provided on an Electronic Bulletin Board with the
features prescribed in Sec. 284.10(a) and as required by
Sec. 284.10(b).
* * * * *
3. In Sec. 284.9, paragraph (b)(4) is removed, paragraph (b)(5) is
redesignated (b)(4), and paragraph (b)(3) is revised to read as
follows:
Sec. 284.9 Interruptible transportation service.
* * * * *
(b) * * *
(3) An interstate pipeline that offers transportation service on an
interruptible basis under subpart B or G of this part must provide all
shippers with equal and timely access to information relevant to the
availability of such service. The information must be provided on an
Electronic Bulletin Board with the features prescribed in
Sec. 284.10(a) and as required by Sec. 284.10(b).
* * * * *
4. Section 284.10 is added to read as follows:
Sec. 284.10 Standards for Pipeline Business Operations and
Communications.
(a) Electronic Bulletin Boards. An interstate pipeline that is
required by this chapter or by its tariff to display information on an
Electronic Bulletin Board must provide for the following features on
its board:
(1) Downloading by users;
[[Page 39069]]
(2) Daily back-up of information displayed on the board, which must
be available for user review for at least three years;
(3) Purging of information on completed transactions from current
files;
(4) Display of most recent entries ahead of information posted
earlier; and
(5) On-line help, a search function that permits users to locate
all information concerning a specific transaction, and a menu that
permits users to separately access the notices of available capacity,
the marketing affiliate discount information, the marketing affiliate
capacity allocation log, and the standards of conduct information.
(b) Incorporation by Reference of Business Practice and Electronic
Communication Standards. (1) An interstate pipeline that transports gas
under subpart B or G of this part must comply with the following
business practice and electronic communication standards promulgated by
the Gas Industry Standards Board, which are incorporated herein by
reference:
(i) Nominations Related Standards (Version 1.0, June 14, 1996);
(ii) Flowing Gas Related Standards (Version 1.0, June 14, 1996);
(iii) Invoice Related Standards (Version 1.0, June 14, 1996); and
(iv) Capacity Release Related Standards (Version 1.0, June 14,
1996).
(2) This incorporation by reference was approved by the Director of
the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part
51. Copies of these standards may be obtained from the Gas Industry
Standards Board, 1100 Louisiana, Suite 4925, Houston, TX 77002. Copies
may be inspected at the Federal Energy Regulatory Commission, Public
Reference and Files Maintenance Branch, 888 First Street, NE.,
Washington, DC 20426 and at the Office of the Federal Register, 800
North Capitol St., NW., Suite 700, Washington, DC.
Note.--The following appendix will not appear in the Code of
Federal Regulations.
Appendix--RM96-1-000
Comments Filed
------------------------------------------------------------------------
Commenter Abbreviation
------------------------------------------------------------------------
Alabama-Tennessee Natural Gas Company.. Alabama-Tennessee.
American Forest & Paper Association.... AF&PA.
American Gas Association............... AGA.
American Public Gas Association........ APGA.
Associated Gas Distributors............ AGD.
Baltimore Gas and Electric Company..... BGE.
Brooklyn Union Gas Company............. Brooklyn Union.
Central Illinois Light Company......... CILCO.
CNG Transmission Corporation........... CNG.
Coastal Gas Marketing Company.......... CGM.
Colorado Interstate Gas Company and ANR CIG/ANR.
Pipeline Company.
Columbia Gas Transmission Corporation Columbia Gas/Columbia Gulf.
and Columbia Gulf Transmission Company.
Council of Petroleum Accountants COPAS.
Society.
El Paso Natural Gas Company............ El Paso.
Energy Managers Association............ EMA.
Enron Capital & Trade Resources ECT.
Corporation..
Equitrans, L.P......................... Equitrans.
Foothills Pipe Lines Ltd............... Foothills.
Gas Industry Standards Board........... GISB.
Illinois Power Company................. Illinois Power.
Interstate Natural Gas Association of INGAA.
America..
Iroquois Gas Transmission System, L.P.. Iroquois.
Montana-Dakota Utilities Company....... Montana-Dakota.
National Fuel Gas Distribution National Fuel Distribution.
Corporation.
National Fuel Gas Supply Corporation... National Fuel.
Natural Gas Clearinghouse, Conoco, Inc. NGC/Conoco/Vastar.
and Vastar Gas Marketing, Inc.
Natural Gas Pipeline Company of America Natural.
Natural Gas Supply Association......... NGSA.
NorAm Energy Services, Inc............. NES.
NorAm Gas Transmission Company and NGT/MRT.
Mississippi River Transmission
Corporation.
Northern Distributor Group and NDG/Minnegasco.
Minnegasco.
Northwest Industrial Gas Users......... NWIGU.
NYMEX Technology Corporation and NYMEX/Enersoft.
Enersoft Corporation.
Pacific Gas and Electric Company....... PG&E.
Pacific Gas Transmission Company....... PGT.
PanEnergy Corporation (Texas Eastern PanEnergy Companies.
Transmission Corporation, Panhandle
Eastern Pipe Line Company, Trunkline
Gas Company, Algonquin Gas
Transmission Company).
Peoples Gas System, Inc................ Peoples Gas.
Piedmont Natural Gas Company, Inc...... Piedmont.
ProLiance Energy LLC................... ProLiance.
Questar Pipeline Company............... Questar.
Southern California Edison Company..... Edison.
Southern California Gas Company........ SoCalGas.
Southern Natural Gas Company........... Southern.
Tenneco Energy......................... Tenneco Energy.
[[Page 39070]]
The Peoples Gas Light and Coke Company, Peoples/North Shore/Northern
North Shore Gas Company, and Northern Illinois.
Illinois Gas Company.
TransCapacity Limited Partnership...... TransCapacity.
United Distribution Companies.......... UDC.
Viking Gas Transmission Company........ Viking.
Williams Interstate Natural Gas System. WINGS.
Williston Basin Interstate Pipeline Williston Basin.
Company.
------------------------------------------------------------------------
[FR Doc. 96-18623 Filed 7-25-96; 8:45 am]
BILLING CODE 6717-01-P
