NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES
R E S O L U T I O N
Urging the Federal Energy Regulatory Commission
To Incorporate NASUCA Concerns Regarding Consumer
Needs In Its Rulemakings on Short-Term and Long-Term
Transportation Services, Docket Nos. RM98-10 and RM98-12
WHEREAS, the Federal Energy Regulatory Commission (FERC) has issued two complementary notices: 1) Docket No. RM98-10, a Notice of Proposed Rulemaking (NOPR) entitled “Regulation of Short-Term Natural Gas Transportation Services”; and 2) Docket No. RM98-12, a Notice of Inquiry (NOI) entitled “Regulation of Interstate Natural Gas Transportation Services,” which concerns the FERC’s policies governing the long-term market for transportation;
WHEREAS, the Notices propose a radical restructuring of the regulation of interstate pipelines, which will have a dramatic impact upon the ability of Local Distribution Companies (LDC’s) to obtain interstate pipeline transportation services at just and reasonable rates;
WHEREAS, in Order 636-C, the FERC provided an important consumer protection by allowing current firm capacity holders (the majority of which are LDC’s) the ability to retain firm capacity at the end of the current contract term by exercising a right of first refusal to match any competing bid up to the pipeline’s maximum rate for a term of five years;
WHEREAS, the FERC has proposed to eliminate a firm transportation capacity holder’s ability to exercise a right of first refusal in renewing transportation contracts, which will limit the ability of LDC’s to retain firm capacity under long term contracts necessary to serve their customers after the expiration of current transportation contracts;
WHEREAS, the FERC has expressed concerns that its current regulations may bias shippers against long term contracts with interstate pipelines and favor short term contracts;
WHEREAS, there is substantial uncertainty at this time concerning the status of retail unbundling efforts in the various states that leads to uncertainty as to whether LDC’s should enter into contracts with terms as long as five years;
WHEREAS, allowing current firm capacity holders to use their right of first refusal to obtain contracts of varying terms, from one to five years will enhance a firm capacity holder’s ability to enter into long term contracts;
WHEREAS, an important factor that serves to lower the extraordinarily high cost of long term firm capacity is the ability to obtain revenues from the release of capacity, receipt and delivery points on electronic bulletin boards;
WHEREAS, the FERC has proposed to revise its rules and policies relating to scheduling, nominations and flexible receipt and delivery points to make released secondary capacity more comparable to short-term firm primary capacity offered by interstate pipelines;
WHEREAS, the FERC has proposed to eliminate price regulation for all types of short term transportation transactions (long term capacity released as secondary capacity, short-term firm primary capacity and interruptible capacity) and to allow the prices for these transactions to be set by a mandatory auction rather than regulation;
WHEREAS, in order to protect against the potential abuse of market power by interstate pipelines, the FERC should continue to set a price cap for short term transportation controlled by the interstate pipeline (short term firm capacity and interruptible capacity);
WHEREAS, in order to provide a mechanism for determining prices below the price cap for short term transportation controlled by interstate pipelines, short term firm and interruptible capacity should be subject to the mandatory auction procedure;
WHEREAS, a necessary step before the price caps on short term firm and interruptible capacity can be eliminated is a finding by the FERC that the interstate pipeline does not possess market power in the relevant geographic market;
WHEREAS, NASUCA has consistently supported the elimination of the FERC’s current policy of placing price caps on released secondary capacity; and
WHEREAS, a policy that makes released capacity comparable with short term primary capacity and eliminates the price cap on released capacity will allow LDC’s to maximize revenues from their released capacity.
THEREFORE BE IT RESOLVED, that the National Association of State Utility Consumer Advocates (NASUCA) calls upon the FERC to include the following provisions in its policies governing natural gas transportation services: a) retain the right of first refusal for current firm capacity holders, b) allow current firm capacity holders to use their right of first refusal to obtain contracts of varying terms, c) revise its rules and policies to make released secondary capacity comparable to short term firm capacity, d) continue to set price caps on short term firm and interruptible capacity, e) subject short term firm and interruptible capacity to a mandatory auction, f) only lift the price caps on short term firm and interruptible capacity after a finding that the interstate pipeline does not possess market power.
BE IT FURTHER RESOLVED, that NASUCA calls upon the FERC to incorporate the concerns of NASUCA as expressed in this and other resolutions and in the comments to be filed setting forth NASUCA’s positions in Docket Nos. RM98-10 and RM98-12.
BE IT FURTHER RESOLVED, that NASUCA authorizes the Executive Committee to develop specific positions and to take appropriate actions consistent with the terms of this resolution. The Executive Committee shall advise the membership of any proposed action prior to taking such action if possible. In any event, the Executive Committee shall notify the membership of any action taken pursuant to this resolution.
Approved by NASUCA:
Submitted by: NASUCA Gas Committee
November 11, 1998