NGSA URGES UNBUNDLING OF LINES' FUNCTIONS

The Natural Gas Supply Association has some ideas for the Federal Energy Regulatory Commission as it considers U.S. pipeline rate reform. Nicholas Bush, NGSA president, said his group's proposals, if adopted by FERC, "would build a highly competitive and efficient interstate pipeline system, a long sought goal of producers and consumers of natural gas. Failing to achieve comparable and competitively priced transportation service risks a return to monopoly transactions." In its white paper
July 16, 1990
2 min read

The Natural Gas Supply Association has some ideas for the Federal Energy Regulatory Commission as it considers U.S. pipeline rate reform.

Nicholas Bush, NGSA president, said his group's proposals, if adopted by FERC, "would build a highly competitive and efficient interstate pipeline system, a long sought goal of producers and consumers of natural gas. Failing to achieve comparable and competitively priced transportation service risks a return to monopoly transactions."

In its white paper on reform, NGSA urges the unbundling of pipelines' merchant and transportation functions.

"With many producers and marketers competing with the pipelines' merchant business, it is important for the customer to be given the option of purchasing gas from the pipeline or from another merchant," NGSA said.

"To make that choice, the customer needs to be able to distinguish what it pays for the gas as a commodity, apart from what it pays for all other services rendered by the pipeline. Hence, it is appropriate to separate the pipeline's transportation and related services from its merchant services."

NGSA said when appropriate and feasible, certain services such as storage, upstream pipeline transportation, and production and gathering should be unbundled and offered as separate contract services. Customers would pay only for services wanted or used.

"If the transportation function is separated from the merchant function, the other potential merchants of gas on the pipeline will seek access to transportation related services the pipeline otherwise makes available to its sales customers on a bundled basis.

"To this end, NGSA supports the concept of comparability of service as the foundation for access to the markets serviced by the pipeline. Absent comparability of service, only the pipeline will be able to offer a superior form of merchant service that other merchants will be prevented from matching, thus foreclosing effective competition.

"When comparability of service is coupled with the opportunity for customers to reduce their sales contract demand by conversion to firm transportation, the customer will have access to a variety of sources and types of supply. The customer thus will be able to match its gas demands with the level of service it desires from several potential merchants."

NGSA said its views on transportation rate design issues are substantially aligned with FERC's policy statement on the subject.

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