U.S. GAS PIPELINES RESPOND TO FERC ORDER 636

U.S. pipelines are continuing to examine and react to the Federal Energy Regulatory Commission's Order 636.

Among the latest responses:

Bill Vititoe, president and chief executive officer of ANR Pipeline Co., a subsidiary of Coastal Corp., Houston, said his company's recently proposed comprehensive service restructuring and rate settlement basically is consistent with Order 636.
Paul M. Anderson, executive vice-president of Panhandle Eastern Corp., Houston, said Order 63 likely will increase reliance on long term gas sales contracts and shrink or eliminate spot market sales.

ANR VIEW

Vititoe said the settlement package is a carefully balanced, market based proposal derived from 2 years of development that included input from nearly 140 producers, marketers, end users, local distribution companies, state public service commissions, and industry associations.

As a result, he said, ANR expects FERC to approve the proposal quickly with few changes (OGJ, Apr. 13, p. 32).

"Modifications wouldn't serve any purpose and could very easily upset the entire apple cart," Vititoe said.

ANR has asked FERC for expedited approval of the settlement to smooth transition for customer supply planning.

"Our customers need to begin injecting storage gas soon," Vititoe said.

Vititoe praised FERC's avoidance in Order 636 of industry-wide specificity, leaving much of the fine tuning to individual restructuring proceedings.

He said many of Order 636's regulatory goals are reflected in ANR's proposed settlement. At the same time, ANR proposes to offer a menu of market responsive services.

Vititoe said ANR's restructuring provisions will allow the pipeline to offer rebundled, no notice, city gate gas delivery service based on a comprehensive delivery rate or to sell system gas as a separate commodity.

Sales customers may reduce or convert 100% of current entitlements to various service alternatives. ANR's firm sales service will allow customers the option of purchasing as much as 50% of requirements in any month directly from producers, marketers, or brokers.

The company's proposed delivery service will be based on a no notice transportation contract packaged with ANR gas supply and a negotiated gas inventory charge and commodity rate. ANR customers buying gas from other sellers also may choose unbundled transportation or storage service.

Vititoe said ANR's tariff does not preclude Order 636 mandates for establishing market centers. Although FERC's order does not require gas markets to use pooling points, ANR's settlement proposes a comprehensive pooling program with pooling points at Eunice, La., and Greensburg, Kan.

"We also intend to make fin-n capacity we hold on upstream pipelines available to converting sales customers and then - first come, first served - to other shippers,' Vititoe said.

ANR's settlement proposal includes provisions for:

Capacity adjustments in which customers can assign or trade certain capacity rights.
Switching the basis of ANR's rate design from modified fixed variable to enhanced fixed variable-rather than straight fixed variable-for purposes of billing firm transportation customers.
A dispute resolution process allowing all those included in the settlement to assure that services continue to be comparable and market responsive.

PRICE SPIKE?

"The shrinking spot market will reintroduce long term perspective and rational business strategy to the gas industry," Panhandle Eastern's Anderson said. "Watch for an upward swing in the gas price pendulum."

Anderson said renewed regulatory stability will generate new demand for gas among customers connected to Panhandle's interstate system. New interconnects allow gas from the Hugoton field to reach customers outside the Midwest in the U.S. Northeast, Canada, and Mexico.

"Everyone benefits, from producers and local economies to end users in traditional and new markets," he said. "In a nutshell, we see the futures of Panhandle, the U.S. gas industry, and production area economies are very bright."