Frontlines

Fortnightly Magazine - October 15 1996
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One thing that adds some fun to my job (notice, I did not say that my job is fun) is the chance to compare similarities between the gas and electric markets. If you can be sure of anything, it's that any mistake committed first in the gas business is never so unique that it cannot be replicated later for the electric industry.

Rooting Out Market Power

These days, the Federal Energy Regulatory Commission (FERC) finds itself hard at work pulling on both ends of the same rope (em trying to create competition by prescribing conduct, instead of just letting go.

On the gas side, the FERC finds itself hard at work redesigning rules for a market in pipeline transportation that was considered a model for deregulation not so very long ago. It is now acting on applications filed by interstate gas pipelines (at the FERC's invitation) to participate in a pilot program to relax the price ceiling that applies to certain released pipeline capacity and pipeline sales of interruptible and short-term firm capacity.

The idea is to test whether pipelines can exert market power when competing with shippers that release capacity for short-term transactions, because the time it takes to process a capacity release places releasing shippers at a disadvantage when competing against short-term capacity offered initially by the pipeline (which serves as a product substitute for released capacity). Also, the FERC wants to test whether distributors enjoy market power in selling gas to buyers behind the city gate, because the buyers are limited in their choice of delivery points. See, Secondary Market Transactions on Interstate Natural Gas

Pipelines, FERC Dkt. Nos. RM96-14-000, RM96-14-001, July 31, 1996,

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