FERC asked to solve GRI funding woes

U.S. natural gas industry representatives have urged the Federal Energy Regulatory Commission to adopt a permanent funding solution for the Gas Research Institute. GRI, which conducts an array of industry research, development, and commercialization, is funded through surcharges on U.S. interstate pipeline shipments. Last year GRI asked FERC to approve a new funding mechanism, effective next Jan. 1, that would unbundle the program into supply/transmission and distribution/end use subprograms

March 31, 1997

3 min read

U.S. natural gas industry representatives have urged the Federal Energy Regulatory Commission to adopt a permanent funding solution for the Gas Research Institute.

GRI, which conducts an array of industry research, development, and commercialization, is funded through surcharges on U.S. interstate pipeline shipments.

Last year GRI asked FERC to approve a new funding mechanism, effective next Jan. 1, that would unbundle the program into supply/transmission and distribution/end use subprograms (OGJ, Dec. 16, 1996, p. 19).

Funding of the supply/transmission programs would be through a volumetric surcharge collected from shippers on interstate pipelines, similar to the commodity component of the current funding mechanism.

Funding for the distribution/end-use subprograms would be through a charge on all volumes interstate lines deliver to local distribution companies and intrastate pipelines for redelivery.

AGA view

Jim Dodge, chairman, president, and CEO of Providence Gas Co., testified at a recent FERC hearing on behalf of the American Gas Association.

He said, "The industry and the commission must develop a permanent solution for funding GRI programs. A simple extension of an interim proposal is not acceptable.

"GRI must be moved in one of two directions: either adopt a mandatory, non-discountable, volumetric surcharge collected by the pipeline; or go to a completely voluntary program funded by subscription from the GRI membership."

Dodge said the surcharge should be spread across the industry, and there may be cases where state regulatory treatment of costs may put local distribution companies (LDCs) at risk for recovery of the GRI surcharge.

But Dodge said AGA is committed to continuing gas industry research.

Research needed

"RD&D (research, development, and demonstration) funding is a matter of critical importance. In a competitive industry like the natural gas industry, the ultimate beneficiary of RD&D dollars is the consumer."

John Riordan, MidCon Corp.'s chairman and CEO, said pipelines account for a declining portion of the total gas revenues between wellhead and burner tip.

"For this reason, we support the 'shared funding,' concept proposed by GRI, in which both the pipelines and the LDCs are responsible for a portion of the total program funding collection obligation."

Riordan said GRI's research has been well-targeted and effectively managed.

"However, based on my work (on the GRI board) with other pipelines, LDCs, municipal firms, producers, and users, we have found developing a consensus on future RD&D funding to be extremely difficult, because of the increasing levels of discounting prevalent in the market today, new rate designs, competition, regional differences, and the growing levels of uncontracted capacity available to interruptible and other customers."