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Gas Regulatory Outlook: Are Rules Changing for the Better?

Fortnightly Magazine - April 15 2000

be prepared to take the risks associated with that and not look to the commission to in some way correct and reward them if they make a mistake.

: All those issues came up when I was chair of the American Gas Association. I would agree with siting on a market-responsive basis where [customers] enjoying the new capacity are basically taking the risk. That is something that the gas distributors favor heavily.

On Capacity Auctions: .

What is your view of capacity auctions?

: The good part of it is an additional way to price services, but it is something, depending on the boundary limits - it still has something artificial about it.

On Seasonal Rates:

: I am in favor of anything that makes whatever regulatory structure we have more market-responsive. This isn't a judgment as to the merit of each of them; it is a permission to propose alternate rate structures.

If we are going to have a market-responsive system, you at least want to have the ability to propose alternative rate structures. I am a big fan of whatever we can do to continue opening up the whole gas system to more market-responsive rates. Everybody knows that capacity in the winter is worth more than [during] the summer.

What is left for FERC to do with regard to natural gas?

: We need to make some additional progress in terms of our ability to build facilities quickly to respond to the market quickly.

It seems to me that we continue to need to make progress in our ability to negotiate terms and conditions of service [and] pricing with customers because customers are going to represent the largest component of growth in demand, which will likely be power generators. Their needs are very different and they don't have the model that the traditional LDC has of having statistically predictable demand necessarily, nor do they have a regulatory mechanism where that cost is automatically passed to a consumer group. They have more risk associated with their investments. They are going to be willing to take less risk in regard to their contracting practices. We need to be able to be flexible. We need to be able to put pricing in that is responsive to their needs. We need to be able to be responsive in the creation of the types of capacity that they will require to operate.

That means responsive both in the willingness to invest but [also] the ability to invest in a timeframe that meets their needs. If we can't do that, gas will not enjoy the market share that it could based on the size of the resource base and based on the environmental qualities that it has.

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