The US Federal Energy Regulatory Commission has adjusted its regulatory framework governing the interstate gas market and transportation grid.
FERC says the rule, under consideration for 2 years, will improve the efficiency of the gas transportation market place. It will take effect in about 30 days.
The rapid development of competitive markets following the agency's Order 636, which unbundled gas pricing, has dated its regulations, says FERC.
Chairman James Hoecker said the new rule "points the commission's regulatory approach in a new direction, recognizing that ensuring fairness and efficiency in these changing gas markets will be a continuing task.
"If the structural concept of `unbundling' is associated with Order 636," he said, "the measures adopted today will be remembered as important enhancements to the market's performance."
Changes
The final rule removes price ceilings for short-term, secondary market capacity releases. FERC will reevaluate that action about Sept. 30, 2002.
The rule allows pipelines to propose peak and off-peak rates to coordinate rate regulation with the seasonal demands of the market and allocate revenue responsibility between short-term and long-term markets.
FERC will allow pipelines to use term-differentiated rate structures in contracts.
It revised regulations regarding scheduling procedures, capacity segmentation, pipeline penalties, and the right of first refusal. And it revamped the information that pipelines must report to FERC, with the goal of obtaining "more transparent" pricing data.
FERC was considering other issues, such as negotiated terms and conditions of service, rate design changes, discount adjustment and rate reviews, capacity auctions, and more market-based rates.
The commission ordered its staff to develop gas market-monitoring capability and to discuss emerging market issues with gas industry groups.
Reactions
The American Gas Association said that the rule would promote competition in the gas industry while protecting many utilities that sign contracts with pipelines for capacity.
Roger Cooper, AGA executive vice-president for policy and planning, said, "This is a significant victory for natural gas utilities, who will now be able to serve homes and businesses better by operating more flexibly while saving money.
"FERC has taken a number of actions that will give gas utility operations greater flexibility in managing their pipeline contracts, thus enhancing the value of the capacity they hold on interstate pipelines. We welcome the opportunity to participate in the new FERC process that will continue its systematic evaluation of the future of natural gas regulation."
AGA said the rules will change the way gas utilities can resell the capacity they hold on interstate pipelines. Previously, FERC had imposed a cap on the price utilities could charge for the capacity sold in the "secondary" market. Also, federal regulations made it difficult for the utilities to sell excess capacity quickly to others who needed it.
Cooper said, "By lifting the price cap and implementing streamlined procedures for released capacity, FERC has ensured that local utilities will be compensated more fairly for the valuable capacity they hold. And, as demand increases for natural gas, pipeline capacity will be used more efficiently."
AGA said FERC compromised on seasonal rates. Some interstate lines had said they might lose money if utilities and other customers bought capacity for only part of the year at a price based on a "levelized" monthly amortization of the full year's costs.
FERC will let pipelines file for peak and off-peak rates to accommodate seasonal demand of certain segments of the market. AGA said, "The 50-50 crediting of excess revenue from the seasonal rates provides benefits to gas utility customers who pay for pipeline capacity throughout the year."
The Interstate Natural Gas Association of America did not comment on the substance of the rule.
