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Just in Time: EDI for Gas Nominations

Fortnightly Magazine - February 1 1996

under Sony's bear hug. But once JVC took root with its open-license technology agreement, the content providers became willing to support what many acknowledged as an inferior technology simply because it would remain open. The decision to go with VHS would not end up as a dead-end, career-limiting decision. Managers making the decision could report that they had gone with the technology that was supported by 20 to 30 manufacturers all over the world, none of whom would be able individually to restrict opportunities for content providers to bring their product to market.

The case of Beta v. VHS holds lessons for natural gas about

using EDI to manage pipeline nominations.

Introduce the Coordinating Nomination

When it comes to nominating gas volumes for transportation through the pipeline system, it's the shippers that have all the information, not the pipelines. Of course, the pipelines determine if and when a deal should go through. And to flow the gas they need to know all about the arrangements made by upstream and downstream pipelines.

Yet it's the shippers that know from whom and where the gas is coming, and to whom and where it is going. Not the pipelines. The shipper actually knows more about the upstream supplier (and at an earlier date) than anyone, especially the transporter. The pipeline (em the transporter (em is the last to know and the least knowing of all the players in a given deal.

One way to improve this system might be to revise the nomination deadline. But merely changing the deadline will simply compress the chaos; it won't eliminate the problem. Instead, why not create a coordinating nomination? And just what is a coordinating nomination?

First, a shipper working with an EDI intermediary executes a GISB Model Trading Partner Agreement with all the pipelines that interconnect with the shipper's transporting pipeline. Second, when the shipper transports gas from or to an interconnecting pipeline, it sends a "coordinating nomination" to the interconnecting pipe(s). This coordinating nomination tells the upstream and/or downstream pipeline(s) that the shipper has nominated gas on the transporting pipeline (em that the shipper is taking gas from upstream shipper "A," on upstream pipeline "B," under contract "C," in quantity "D," at location "E," during time "F." Upstream shipper "A" sends the same type of coordinating nomination to the forementioned transporting pipeline. Once these two shippers have nominated and coordinated, the two pipelines each have all the information they need to make the flows.

So the question arises: How do we create incentives to encourage shippers to work in this manner?

I suggest two approaches. First, the industry could move the deadline for EDI-delivered nominations forward (postpone it) by one hour, just as pipelines moved the EBB deadline forward to move people away from faxes. As we all know, the market will move to support a new way of conducting business as soon as it perceives a dealmaking advantage (such as later deadlines). Second, give shippers that make coordinating nominations certainty of flow. This means that if you coordinate your nominations, and those up- and downstream