As this snapshot look at the seven utility mergers announced since January 1995 demonstrates, traditional patterns are no longer being followed. A number of the announced transactions did not fit...
Decontracting: Stranded Costs for Interstate Pipelines?
pipeline must have an incentive to recover the costs of its unsubscribed capacity from new markets."
-Natural Gas Pipeline Co. of America, Dkt. Nos. RP95-326-000 et al., Oct. 11, 1995, 73 FERC (pp 61,050.
But risk-sharing may qualify:
FERC OKs settlement for cost-sharing through 2001 of some $51 million from capacity turnback by Southern California Gas Co. (457 MMBtu/day, relinquished effective Nov. 1, 1996). Says settlement, which also protects certain customers from rate hikes for 10 years, "is crafted so as to fairly share the costs and burdens."
-Transwestern Pipeline Co., Dkt. Nos. RP95-271-000, July 27, 1995, 72 FERC (pp 61,085.
Recent Proposals-Flexible Pricing
The FERC acknowledges that gas pipelines need more pricing flexibility in today's market. In January, it asked for comment on three proposals:
. Eligibility depends on antitrust analysis, showing no market dominance
. Pipeline must not be able to maintain a 10-percent price increase without losing market share
. "Closer scrutiny" applies when HHI exceeds 0.18 (1,800)
. FERC will rule case by case
Incentive (performance-based) rates:
. Pipelines eligible despite market power
. Rates divorced from cost; no cap
. Prospective and voluntary
. Efficiency gains shared between consumers and stockholders
. Benefits need not be quantified
Negotiated rates with recourse to default rate:
. Mutual agreement between pipeline and individual shipper
. Shippers have access to cost-of-service-based recourse rate as alternative to negotiated contracts
. Pipelines must allocate capacity to recourse shippers during constraints
. Recourse shippers not solely responsible for cost of unsubscribed capacity
-Alternatives to Trad. Cost-of-Service Ratemaking for Nat. Gas Pipelines, Dkt. No. RM95-6-000, Jan. 31, 1996; Regulation of Negotiated Transp. Services of Nat. Gas Pipelines, Dkt. No. RM96-7-000, Jan. 31, 1996.
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