Rep. Phil Sharp (D-Ind.), House energy and power subcommittee chairman, plans hearings on how Federal Energy Regulatory Commission Order 636 will affect the U.S. gas market.
He said FERC's rule will shift more costs of the national pipeline system to firm customers, mainly gas utilities and their home heating and small business customers that use about 40% of the nation's gas.
He noted the Bush administration says the action will dramatically lower gas bills by possibly $3-6 billion/year for the next several years for the 50 million homes that heat with natural gas.
Sharp said, "I would certainly support such savings, and there are plenty of procompetitive changes in the new FERC rule that seem to make sense."
But he said the initial effect of the order seems to be a large increase, not a decrease, in costs for captive gas consumers such as homeowners.
Sharp also said FERC has not backed up the administration's claims for savings for homeowners, and a number of state utility commissions, consumer groups, and small utilities disagree with the claims.
He said 636 does not impose transition costs created by the order, which may run into billions of dollars, on all segments of the gas market-just on captive consumers.
"We seem to have two multibillion dollar misunderstandings here," Sharp said. "We need a responsible review to assure that state and federal regulators are serving the public's interest in fair pipeline pricing and free market producer competition."
ATTACK ON PRICE SYSTEM
Meanwhile, Rep. Tom Bevill (D-Ala.), House energy and water appropriations subcommittee chairman, has become a critic of the straight fixed variable pricing system.
Order 636 requires pipelines to use the straight fixed variable cost tariff classification method unless FERC approves another method.
Small producers had complained that current use of the modified fixed variable rate method shifts a significant portion of a U.S. pipeline's fixed costs into the commodity cost rate component, making it hard for them to compete with Canadian gas imports.
Canada uses a fixed variable rate design that keeps fixed costs on the demand charge component.
At first, Bevill threatened to take action against the straight fixed variable method in an appropriations bill but instead has urged Rep. John Dingell (D-Mich.), energy and commerce chairman, to block implementation of Order 636 until the General Accounting Office can study its effects.
Bevill said, "Despite the magnitude of the final rule, FERC has not provided Congress with an adequate analysis of the economic impact of the order. In fact, no impartial economic analysis of this order has been produced by any source in the public or private sectors."
To appease Bevill's constituents, FERC officials held a public hearing in Huntsville, Ala., last week to explain the shift to straight fixed variable.
FERC estimated the restructuring rule will produce benefits ranging from $15 billion to $42 billion during a 7 year period but cost only $292-584 million for compliance. It also said the order could boost supplies by 180-480 bcf/day during the heating season.
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