You've heard talk lately about the convergence of electricity and natural gas. That idea has grown as commodity markets have matured for gas and emerged for bulk power.
An LDC Caucus report, An Issue Paper Regarding Future Unsubscribed Pipeline Capacity, forecasts an increase in reduced subscriptions of firm capacity due to a combination of factors:
s Shifting patterns of gas purchasing will reduce the need for transportation over certain pipeline corridors.
s Single-fixed-variable rate design makes capacity reservation costly for LDCs with low load factors.
s Increased availability of new pipeline connections, storage facilities, and sophisticated capacity-management services creates lower-cost options as alternatives to year-round capacity reservations.
s The threat of bypass and potential for state-ordered unbundling increases risks associated with LDCs that contract for firm transportation.
Using two methods of calculation, the report analyzes the regional potential for significant LDC reductions in capacity reservations by 2000. California and the Great Lakes states exhibit the highest potential. Substantial potential also exists for states in the northern mid-continent area west of the Mississippi River, in southern states immediately west of the Appalachian Mountains and in New England.
The report suggests that customers and pipelines respond with agreements that encourage market as well as regulatory solutions while the pipeline industry changes to a mix of government and market constraints. As part of the Federal Energy Regulatory Commission's restructuring of the gas industry, pipelines may need to bear more of the economic responsibility for marketing unsubscribed capacity. As time passes, interstate pipelines should take increasing responsibility for the cost of unsubscribed capacity and should receive reasonable opportunities for financial rewards for their marketing efforts.
The Interstate Natural Gas Association of America (INGAA) finds the report consistent with its own findings in The Effect of Restructuring on Long-Term Contracts for Interstate Pipeline Capacity, released last September. INGAA predicts a 13-percent reduction in long-term firm contracts for interstate pipeline capacity by 2002. t
Lori A. Burkhart, an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.
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