[BETA] Fortnightly

The Pennsylvania Public Utility Commission (PUC) has issued final regulations to guide the restructuring of intrastate transportation services offered by natural gas local distribution companies (LDCs) in the state. The PUC issued the new rules as a "tentative order" to allow additional comments from interested parties because of ongoing changes in the gas industry, and because over two years had passed since it issued proposed rules. The PUC also noted, however, that the fundamental principles underlying its existing regulations remain unaffected by the recent transition to a more competitive national gas market. These principles include ensuring that transportation service remains available to a wide range of customers and that transportation customers bear their appropriate share of costs and obligations.

The new regulations require all LDCs to unbundle service to offer separately tariffed transportation and balancing services. The PUC revised its current margin-based pricing rule for transportation services by requiring new tariffs based on a "uniform cost of service." The PUC declined to implement a ratemaking presumption that discounting retail sales unlawfully discriminates against gas merchants competing for the sales customer's business. The PUC explained that public utility law does not generally recognize the right of noncustomers to complain about the indirect effect of utility rates on their business.

The new regulations also set out general standards for LDC balancing services. According to the PUC, properly structured balancing charges and penalties can resolve the problem of fairness between different classes of gas consumers in a changing industry. While LDCs are no longer primarily "passive resellers of gas provided by interstate pipelines, they still operate systems originally designed for retail sales." LDCs cannot control conditions of imbalance imposed by transportation customers except after the fact, the PUC noted. Properly structured balancing charges are needed because transportation customers that are out of balance at any time of the year, whether or not they precipitate an individual interstate pipeline penalty, are using LDC services and facilities for free at the expense of other customers. Transportation customers "should understand at the outset what they are bargaining for, what risks are inherent in the bargain, and the costs of that bargain." Re Gas Transportation Tariffs, Docket No. L-00930084, May 9, 1996 (Pa.P.U.C.)

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