Two views of Cantwell's gas pipeline reform proposal

A proposal by US Sen. Maria Cantwell (D-Wash.) to amend a section of the Natural Gas Act so interstate gas pipelines would be subject to the same refund procedures as electricity suppliers has drawn differing reactions.

"Simply put, the current system is broken. It favors pipelines over consumers by allowing pipelines to keep overcharges rather than giving consumers their money back when their rates are shown to be excessive," the American Public Gas Association and 19 other groups said in an Apr. 6 letter to Senate Energy and Natural Resources Committee Chairman Jeff Bingaman.

The issue is much more complex, the Interstate Natural Gas Association of America said on Apr. 2. It goes to the core of the relationship between gas pipelines and federal regulators, the ability to raise private capital to expand systems, and the importance of such investments to US energy, environmental and economic goals, INGAA President Donald F. Santa Jr. said.

"The natural gas model of regulation embodied in the NGA is not broken . . . The current regulatory system for natural gas pipelines works well," he said in his own letter to Bingaman.

Key difference

APGA and the other groups said that the Federal Power Act gives the Federal Energy Regulatory Commission authority to order refunds from electricity suppliers from when the complaint was filed. They said that NGA Section 5 states that a gas pipeline rate reduction can occur only after FERC issues an order, which can be years later.

"It makes no sense to allow pipelines to continue to keep billions of dollars of consumers' money, especially in the current economic climate. Instead of going to the pipelines' shareholders, these dollars should be rightfully returned to consumers," they argued.

Santa pointed out that the refund authority which was added to the FPA in 1988, and amended in 2005, was a direct response to complaints about wholesale electricity prices which can increase dramatically and fluctuate due to market volatility.

'Largest portion'

Interstate gas pipeline rates reflect only the cost of transporting the gas, he said. "The largest portion of the consumer bill is the unregulated cost of the gas itself, which would be unaffected by the results of a complaint against an interstate pipeline," he said.

While overall gas pipeline transportation costs are low, delivery system bottlenecks can significantly affect prices and volatility, Santa continued. Interstate gas pipelines are, by their very nature, capital-intensive projects where investors depend on rate certainty to recover their financial commitments, he said.

"A growing number of energy experts advocate using the NGA as a model for reforming the FPA to facilitate expansion of the electric transmission grid. It is easy to understand why," he added. According to FERC, approximately 1,000 miles of high-voltage electric transmission have been built in the US since 2000, compared to more than 10,800 miles of gas transmission pipeline, Santa said.

Contact Nick Snow at nicks@pennwell.com

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