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Mitigating Volatility Or Inviting Market Power?

FERC lowers the bar for obtaining market- based rates for natural-gas storage.

Fortnightly Magazine - September 2006

has been conducted, to periodic market-power reviews ensuring that abuses do not develop. After considering the many comments filed by industry participants on this topic, FERC finds that a generic periodic market-power review is not necessary for market-based rates to be granted by FERC, because FERC can meet the periodic review requirement through regular monitoring and taking appropriate action under Section 5 of the NGA either sua sponte or in response to a complaint. However, FERC does retain the right to require storage providers with a market share greater than 10 percent to submit to additional reporting requirements if the facts presented in the relevant case so warrant.

The revisions to FERC’s regulations regarding market-based storage rates clearly will make it easier for existing storage providers and greenfield storage developers to obtain market-based rates for new or expanded natural-gas storage service. It is yet to be seen how many storage providers will take advantage of the new rules, but there should be an increase in the number of storage projects launched over the next few years as a result of these changes as well as increased demand for natural-gas storage in the United States.