The Gas Research Institute has asked the Federal Energy Regulatory Commission to approve a new funding mechanism, effective Jan. 1, 1998, for its research, development, and commercialization (RD&C) program.
GRI said the new mechanism would improve its ability to develop funding for the program, spread the burden of collection, and unbundle the base program into supply, transmission, and distribution/end-use subprograms.
Funding of the supply and transmission subprograms would be through a FERC-approved discountable volumetric surcharge collected from shippers on interstate pipelines.
The surcharge would apply when the volumetric rate being charged equals or exceeds the filed volumetric tariff rate. That is essentially the same as the commodity component of the current funding mechanism, in effect since Jan. 1, 1994.
Funding for the distribution operations and end-use subprograms would be through a FERC-approved interstate delivery charge assessed on all volumes delivered to local distribution companies (LDCs) and intrastate pipelines for redelivery.
GRI said the delivery charge mechanism includes a provision for discounting but establishes a discounting floor on total volumes.
"This part of the funding mechanism would fund a program of interest that is primarily in end use, distribution, and related environment and safety areas, plus a share of operating expenses.
"The charge would be determined annually using a volumetric-based mechanism and would be based on total annual deliveries to LDC delivery points, with allowances for some degree of discounting. LDCs and intrastates would be billed each month by interstate pipeline members."
GRI hopes FERC will approve the funding mechanism by March so that the 1998 RD&C program application can be filed by midyear. It proposes the new funding mechanism be in place for 1998 and 1999.
Stephen Ban, GRI president and CEO, said, "The proposed funding mechanism is the product of a consensus that evolved after a great deal of discussion with all elements of the gas industry and its constituents, and I am pleased we've been able to develop strong industry support."
John Riordan, president and CEO of MidCon Corp. and GRI chairman, said, "The natural gas industry supports the continuation of a cooperative R&D program. However, the market is changing and the method of funding R&D must change. The GRI proposal is a dramatic departure from previous funding approaches and reflects major changes in the way gas is transported and sold."
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