NGSA, AGA respond to FERC's pipeline flow data posting proposals

The Natural Gas Supply Association and American Gas Association responded differently to proposed new federal requirements requiring the daily posting of the scheduled flow of natural gas on pipelines.

NGSA said in comments filed with the Federal Energy Regulatory Commission on Aug. 31 that the requirements will provide market participants with enhanced insight into supply and demand fundamentals influencing price formation.

“FERC has taken a constructive approach that enhances transparency without distorting competition or efficiency in the market,” said David Murphy, NGSA’s analyst for energy markets and government affairs. “With implementation of requirements on posting pipeline flow data, the commission will achieve the final step in facilitating transparency in the physical natural gas market.”

In separate comments, AGA expressed concern that the proposed posting requirements could not only fail to accomplish FERC’s transparency goals, but would potentially yield confusing, and false or misleading market information if applied to the local distribution companies which make up AGA’s membership.

“The ability of an LDC to deliver gas at any point on its system downstream of its city-gates is a function almost exclusively of the actual consumption by end-use customers behind that point. Thus, the amount of capacity that may be ‘available’ for an LDC to receive or deliver at any given point on its system beyond its city-gates is driven by end-user demand, not the size of the pipe in the ground, gas quantities flowing through a meter, contractual entitlements, or certificated volumes,” it said.

‘False or misleading’

“Therefore, the commission’s mathematical equation of ‘Posted Capacity minus Scheduled Volumes equals Available Capacity’ underlying the proposed rules does not hold true for LDCs and can often yield false or misleading market information when applied to LDCs,” AGA maintained. It recommended that FERC exempt LDCs from the posting requirement as originally proposed.

NGSA noted that the new flow posting requirements were imposed in FERC Order No. 720 as part of the commission’s efforts to further expand information about physical market transactions and fundamentals. The flow data complements the annual transaction data collected in FERC’s new Form 552 earlier this year and extensive market data already available on the commission’s Web site, the natural gas producers’ trade association said.

In its filing, NGSA also asked FERC to consider adopting a standard conversion factor of 1,000 British thermal units per standard cubic foot for the threshold determination of whether a point must post, increase the de minimis flow threshold on certain pipelines to 12,000 MMBtu per day in recognition of divergence between actual flow and design flow capacity, and confirm that the posting obligation is for aggregated flow information and consider adopting an exemption procedure to protect confidentiality concerns in locations with a single market participant.

Overall, NGSA praised FERC’s decision to require the posting of scheduled pipeline flow data. “In addition to providing the market with important information regarding underlying supply and demand fundamentals, the availability of pipeline flow information will have the added benefit of spurring new innovative services resulting in more efficient pipeline grid utilization and infrastructure development decisions,” it said in its filing.

Other AGA points

In addition to urging FERC to exempt LDCs from the posting obligation as originally proposed, AGA also recommended that LDCs which the commission might require to comply with the proposed regulations be required to post scheduled volumes only at their city-gates.

“No wholesale price formation occurs downstream of an LDC’s city-gates. Price index publishers provide city-gate index prices but do not report prices at any points downstream of an LDC’s city-gates because there is no wholesale trading of gas downstream of an LDC’s city-gates. Information regarding volumes delivered on LDC systems beyond an LDC’s city-gate would not meaningfully contribute to the understanding of supply and demand fundamentals that affect wholesale natural gas price formation,” it said.

AGA also recommended that FERC clarify that the threshold for reporting of a non-physical point is reached when the point has a maximum volume scheduled to it equal to or greater than 15,000 MMBtu/day on any day within the three preceding calendar years.

It also urged the commission to permit LDCs to treat the non-contiguous portions of their systems on a facility-by-facility basis for purposes of determining whether they meet the threshold requirement for posting and whether they qualify for the end-use delivery company exemption.

Contact Nick Snow at[email protected]