Gas producer associations have urged the US Federal Energy Regulatory Commission to hold a forum to help resolve "significant problems" in natural gas pipeline ratemaking practices.
R. Skip Horvath, Natural Gas Supply Association president, said the Pipeline Transportation Customer Co- alition wants FERC to establish a mechanism to ensure that pipeline rates are kept current.
Horvath said, "Rate refreshment, or reviewing the rates charged by pipelines for their services, is nothing more than a good government approach to balancing the interests of pipelines and other industry stakeholders."
The coalition had filed comments in response to a FERC review of interstate gas transportation services. Coalition members include NGSA, Independent Petroleum Association of America, American Public Gas Association, Ohio Consumers Counsel, Domestic Petroleum Council, and Texas Independent Producers & Royalty Owners Association.
Horvath said, "Rate refreshment is needed today and becomes increasingly important, if pipelines are given the opportunity to deviate from traditional cost-based ratemaking. If pipelines are provided such opportunities, permitting deviations ought to be conditioned upon the pipelines' agreement to refresh their rates.
"This will be a big step toward maximizing total efficiencies to all segments of the industry from the wellhead to the burnertip.
"As we get farther from the anchor of a rate case, rates could lose their relationship to costs. That concerns us, because we appear to be wandering into a hybrid ratemaking system that is partly cost-based and partly something else."
The Interstate Natural Gas Association of America, which represents interstate gas pipelines, said the coalition had "an inaccurate view of the industry."
INGAA Pres. Jerald Halvorsen said, "It is a myth that pipeline rates are not 'fresh.' We looked at 25 pipelines and found that each has filed at least one rate case or settlement since complying with FERC Order No. 636. Pipelines have been compelled to do so by market forces and contract expirations."
Halvorsen said pipelines face large stranded costs due to turned-back capacity and competition from other lines and are trying to make their services more flexible and reduce their costs in an attempt to find new markets for that capacity.
"A periodic rate case requirement deprives pipelines of these market tools and necessitates the reallocation of capacity turnback costs to the shippers," he said.