FERC OKs capacity release rule, supply options

Nick Snow
Washington Editor

WASHINGTON, DC, June 20 -- The US Federal Energy Regulatory Commission approved a final rule removing price caps on short-term releases of natural gas pipeline capacity. The action was designed to enhance competition in secondary gas markets and make asset management agreements more flexible under FERC's capacity release rules, it said.

The final rule will give shippers more options for obtaining gas supplies and will improve access to interstate gas pipelines, said FERC Chairman Joseph T. Kelliher. "The rule also will provide more accurate price signals on the market value of pipeline capacity," he indicated.

Asset management arrangements are a relatively new development in the gas industry, according to FERC. They are contractual arrangements where a party agrees to manage gas supplies and deliveries, including transportation and storage capacity, for another entity, it said.

The new rule adopts and clarifies a provision proposed in November to permanently remove the rate cap on capacity release transactions of 1 year or less, but retains the rate cap on long-term capacity releases of more than 1 year and on primary sales of capacity by pipelines, FERC said.

It also modifies policies and regulations to facilitate and accommodate use of asset management arrangements under which a capacity holder releases some or all of its pipeline capacity to an asset manager who agrees either to purchase gas from the capacity holder or supply its gas needs, the federal energy regulator said.

It said the final rule clarifies the definition of asset management arrangements to relax the replacement shipper's delivery obligations and to permit supply side asset management arrangements. It also clarifies that short-term asset managements may be rolled over without bidding and that the price ceiling does not apply to any consideration an asset manager provides to the releasing shipper as part of an asset management arrangement, FERC said.

Contact Nick Snow at nicks@pennwell.com.

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