The Federal Energy Regulatory Commission has reaffirmed its decision to allow natural gas pipelines to recover 100% of their gas supply realignment costs caused by industry restructuring.
FERC also reaffirmed the core elements of its open access rules for the nation's power grid and approved the first merger of a natural gas company with an electric utility under its new policy (OGJ, Mar. 3, 1997, Newsletter).
Gas restructuring
FERC reconsidered its gas supply realignment (GSR) costs because the District of Columbia Circuit Court of Appeals, when it upheld FERC's landmark Order 636 last July, directed the commission to review several issues.
FERC said that GSR costs, unlike those involved with take or pay issues in Orders 500 and 528, stemmed from the commission's regulatory actions under Order 636, with recovery limited to costs caused by the order.
It said the U.S. Supreme Court has required regulatory agencies to recognize prudently incurred expenses in establishing just and reasonable rates.
And FERC noted Orders 500 and 528 only required pipelines to absorb a share of take-or-pay costs if they chose an alternative recovery mechanism.
In response to the appeals court's questions, FERC modified its requirement that pipelines allocate 10% of their GSR, or transition costs, to interruptible transportation customers. Now pipelines will be free to propose a percentage in light of their particular circumstances.
The commission modified its right- of-first-refusal policy requiring existing capacity holders to match any bid of as much as 20 years to keep their capacity, adopting a 5-year term instead.
It reaffirmed its decision to require customer-by-customer mitigation of the effects of the straight-fixed variable rate design.
It modified its no-notice policy by lifting restrictions so that such service may be available to all customers on a nondiscriminatory basis in the future.
And FERC reaffirmed its decision to establish the eligibility of downstream pipelines' customers for the upstream pipelines' one-part, small-customer rate on a case-by-case basis.
Merger policy
Enron Corp., primarily a natural gas firm, and Oregon's Portland General Corp., an electric utility, are the first firms to take advantage of FERC's new merger policy (OGJ, Jan. 6, 1997, p. 26).
FERC decided that the stock swap, valued at $2.1 billion, would not hurt competition in the wholesale electricity market, and thus is in the public interest.
The commission said it found no evidence that a consolidation of power generation resources would lead to electric market power problems, because Enron's generation is insignificant when compared to the amount of generation in the relevant geographic markets.
The commission also said Enron's ability to restrict gas service for competing electric generators would be limited, because they could turn to other open-access pipelines in Enron's service territory.
And the commission noted that the two companies pledged there would be no new wholesale rate increases for at least 4 years and that they would not pass merger costs on to customers.
FERC said there is no cause for concern that the merger would create regulatory problems. It noted the Oregon Public Utility Commission is reviewing the effects of the merger on the state's retail customers and is expected to issue a decision within about a month.
Electric restructuring
FERC also reaffirmed the core elements of its open access rules for the nation's power grid, Order 888, which it issued in April 1996.
Responding to various rehearing requests, the commission retained key elements of the rule, including open-access transmission, comparability of service, and recovery of stranded costs for utilities that lose customers in the competitive market.
But it made some minor changes. It asserted authority over the recovery of stranded costs for municipal utilities that expand their customer territory and said it would require utilities offering discounts for transmission space to publicize them on their electronic bulletin boards.
FERC said the order is being implemented rapidly. All of the 166 utilities required to file open-access tariffs or seek waivers by July 9, 1996, have done so, and FERC has acted on all of them.
It has hearings under way on 80 rate cases and has ruled on more than 70 filings involving jurisdiction, waivers, and reciprocity.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
