The Gas Research Institute, Chicago, has reduced its 1996 budget about 20%, cutting staff and restructuring the research, development, and commercialization (RD&C) programs it operates for the U.S. gas industry and gas consumers.
GRI's revised 1996 budget of $170-$175 million is about $45 million less than the $218.8 million budget the Federal Energy Regulatory Commission approved last October. GRI operates on gas transportation surcharges that FERC regulates.
In April, GRI's board is expected to approve similar cuts for the 1997 and 1998 programs and file them with FERC at midyear.
Stephen Ban, GRI president and CEO, said, "Due to major discounting within the gas industry, we did not collect the level of revenues anticipated last year.
"When we project collections under the current funding mechanism, it is obvious our revenue problems will worsen in 1996 and 1997, requiring us to make program budget reductions to match much lower revenue totals."
Restructuring
GRI plans to announce a restructuring plan early in March reflecting across the board cuts in 10 research, development, and commercialization program sectors and a corresponding reduction in operating expenses and staff.
It has cut its staff 16 positions to 247 since last summer through a hiring freeze, and plans to eliminate 25-35 more jobs by Apr. 1.
GRI said it is trying to resolve undercollection problems in the current surcharge mechanism, which has been in place since 1994 and FERC has extended through 1997. That system is designed to collect half of GRI's revenues from demand charges and half from volumetric charges.
Ban said, "The current funding mechanism needs to be adjusted for use in a marketplace where standard practices increasingly include negotiated rates for gas purchases and transportation, capacity turnback, and discounting from full cost of service.
"These and related business practices are being widely adopted, making it clear that we should move toward changes in the funding mechanism that will improve RD&C program planning and stability in 1997 and beyond."
GRI's directors have discussed new funding approaches and asked management to seek cofunding and more active financial aid from members and others. GRI said, "These efforts will include the possibility of moving toward a partially subscription based program."
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