Stephen P. Reynolds
President & CEO
Pacific Gas Transmission Co.
Standardization has been an issue in every industry since the beginning of the Machine Age. As products continue to evolve, we need something like GISB to help find a prudent and appropriate level of standardization. We should take care, however, not to let standardization stifle product development or business opportunities.
Something like GISB creates the forum for industry debate on what needs to be done. What we don't need is a series of edicts telling the industry what it has to do.
Beverly A. Wharton
President, Gas Division
MidAmerican Energy Co.
We agree with the FERC that a standardization of EBBs is necessary, but feel that progress so far has been slow and unfocused. The pipelines to date have been pursuing individual paths, which has caused confusion, incompatibility, and additional administrative effort for interested parties. The problem appears to be resolved to some extent by commercial services that offer a one-stop call for access to various pipeline EBBs. Standardized EDI is still needed to link existing pipeline bulletin boards for efficient and effective operation of the natural gas industry. The FERC needs to step up its efforts to get GISB and other industry players to advance in this area quickly.
Bernard J. Kennedy
Chairman, President, & CEO
National Fuel Gas Co.
As a customer of five pipelines, National Fuel can see how further standardization would decrease the amount of time required for pipeline transactions. It would clearly improve our efficiency if we did not have to maintain familiarity with the unique features of five separate bulletin boards or, for that matter, five separate tariffs. However, further standardization would entail additional costs for the pipelines, and these costs are ultimately absorbed by their customers. The details of the transportation and storage services offered by the pipelines differ in significant respects, and pipeline investment in information systems to support these various services is in some cases substantial. The issue is therefore quite complex.
But is the game worth the candle, or more accurately, is the balance of the game worth the candle? As a general matter, we do not believe that the FERC should attempt to assess the relative costs and benefits of each of the many opportunities for further standardization of EBBs and EDI. Nor should the FERC mandate its conclusions. GISB, which emerged out of the various working groups established under FERC oversight, is in a position to make a significant contribution to the industry, albeit in an advisory capacity. For the most part, however, the amount of progress we see toward standardization, and the pace of that progress, will be determined by the market (em as it should be. Competitive pressure will force the pipelines with the least efficient systems to modify them or devise new ones, and to develop systems that are more compatible with each other. Meanwhile, third parties will offer services that make it easier for pipeline customers to transact business with multiple pipelines. This is clearly happening now. In the marketplace, inefficiency creates opportunity, so what needs to be done? Simply let the market work.
Senior Vice President
C.C. Pace Resources, Inc.
The electronic exchange of pipeline information has come a long way during the past 18 months. Substantial challenges have been overcome and many initial worries have not materialized. The people involved in the process should be thanked for their efforts.
Unfortunately, the challenge of modernizing the gas industry has just begun. Integrated pipeline and supply information will be essential to the industry's ability to tap into its potential in the electric sector. Having multiple pipelines running their own bulletin boards will not suffice for the long term, and the work of GISB to improve this situation will be essential to the health of the industry.
The challenge will lie in adopting standards and using information that is in the common good but potentially at odds with individual objectives. The gas industry has had a history of fighting over self-interest while opportunities pass by. Hopefully we are on a different track this time and will reap the rewards of a common challenge.
Chairman & President, National Registry of Capacity Rights, Inc.
President, TransCapacity Limited Partnership
The family sleeps soundly through the cold December night. In the basement, the natural gas used that day is measured according to a preset timer. Then, silently and reliably, that information is transmitted and soon becomes part of an automated purchase, nomination, confirmation, delivery, and billing process that covers all the gas used to fire the furnace, heat the water, run the dryer, cook the food, and light the lantern at the end of the lane. Tomorrow morning, mom will punch the display button, view the gas bill, look at the coupon from yet another gas company urging her family to switch for savings, and remember the cozy feeling TV ad as she decides to arrange to switch to a different gas vendor.
Farfetched? Not really. Clearly, consumer choice at the homeowner level is a prerequisite. Once consumers in any city or state have the opportunity to deal directly with even one gas supplier other than the local gas company, consumer choice at the retail level will be irreversibly established. The impediments that prevented an individual from perfectly reproducing, by contract, the firm, flexible gas service they currently receive from the LDC no longer exist. It's no longer technology. It's no longer the federal government. It's now the local contracts and tariffs.
Once things get moving, consumers of gas, like consumers of every other thing, will want information. In this age of home shopping, cell phones, ATMs, VANs, Nets, and Webs, the consumer will logically look to any number of online, independent, accurate, timely information and transaction service providers, such as the National Registry/TransCapacity strategic partnership.
Can the gas industry handle this? Almost. The hottest topic in the gas business today is a standard gas purchase and sale agreement, complete with an EDI term sheet and provisions for electronic signatures. The next hottest topic is EDI (em short for everybody's doing it: purchase orders, confirmations, scheduled volumes, statements of account, invoices and remittances, all done electronically, in common format. The gas industry did not invent EDI, and it would be hard to imagine that consumers already well versed in bar code scanners at supermarkets, charge card gas pumps, ATM cash, auto-deposit payrolls, programmable answering machines, and home security systems would have trouble with EDI underpinning the purchase of gas at
The only missing link is a bit of soft business-process engineering on the part of the interstates. If the industry were to move to a take-and-replace system in which firm suppliers provide pipeline linepack up front, flow gas every day, and order gas for the next 24 hours to replace what the consumer took in the last 24 hours, then this morning's meter reading would, indeed, be sufficient for mom to buy gas today.
Who wins? Everybody benefits. Consumers have firm, reliable service they understand and can afford. LDCs that have reserved interstate capacity can sell to the customer exactly what they need and lay off the rest, as is being done (albeit in a much more complicated series of market maneuvers) now. In fact, under certain circumstances, LDCs serving homeowners through behind-the-gate aggregators may be better off shedding the price risk associated with gas sales and selling offpeak capacity as a compliment to the sale of onpeak capacity. More potential customers means more opportunity for marketers and aggregators. Interstate pipelines would finally be able to reconcile on the basis of gas in-gas out, leave the old guess-and-go games behind, and focus on providing quality transportation service. Producers that get into the game will find that the millions in corporate image advertising spent to woo mom's taxi to the gas pumps can get her to pick that brand of natural gas, too.
Eugene R. McGrath
Consolidated Edison Co. of New York, Inc.
After a rocky start, the industry and regulators appear to be making good progress toward standardizing EDI. More work is needed in the pipeline EBB area. Once the FERC ordered EBBs as part of 636, each pipeline company developed its own proprietary system. To clear up the resulting confusion, the FERC's EBB working groups worked hard to bring together the many market segments with different interests. In the past year, the new GISB, of which Con Edison is a strong supporting member, has taken the work of the EBB working groups and promulgated a number of industry standards for EDI. EDI will replace the multiple proprietary bulletin boards and allow users (LDCs, marketers, or end-use customers) to nominate and confirm gas transactions directly with the pipeline. For smaller companies that lack the inhouse expertise to develop these EDI systems, several competing service providers are developing "front-end systems" that will coordinate the many pipeline systems onto one screen or set of screens and move the data in accordance with standards established by GISB. I think that the gas industry has come a long way toward standardization in a relatively short time.
President & CEO
American Gas Association
Excellent progress has been made on creating standards for electronic communications. The FERC's EBB working groups did a great job in creating standards for capacity-release transactions, especially considering that the business process for capacity release had not been fully designed when they started. Agreement has been reached on a common coding system for gas transaction points and a list of priorities for future standardization efforts. GISB has done a very good job organizing the industry for the implementation of electronic standards. GISB is also developing a model trading partner agreement that should facilitate the development of electronic commerce, and has issued all of the FERC capacity-release standards.
A.G.A. is hopeful that as GISB continues to issue standards for transactions such as invoicing and imbalances, the level of interest in EDI throughout the industry will increase greatly. A.G.A. believes that the gas industry, not the government, is in the best position to determine what standards are necessary. And A.G.A. believes all parties should contribute to the future costs of standardization.
Dean T. Casaday
President & CEO
Pennsylvania Gas and Water Co.
Although progress is slow on standardizing gas pipeline EBBs and EDI, a dedicated group of industry professionals is working very diligently on developing standards for the natural gas industry. The FERC attempted to revolutionize the industry with a fast-track implementation of FERC Order 636, and considering all the players involved, it did a good job. Unfortunately, some of the pipelines got too far ahead when developing their EBBs, and were somewhat reluctant to change in mid-stream to accommodate industry standards. Since the implementation of FERC Order 636, however, the EDI industry has developed tremendously, and Windows technology has been a boon to the development of a more standard EBB. The stage is set for implementation of a uniform EBB, but successful implementation can only be accomplished if it is endorsed by all the players in the natural gas industry.
Jerald V. Halvorsen
President, Interstate Natural Gas Association of America
I am pleased with the role that INGAA and the pipelines have played in both GISB and the EDI process. It is important to make the distinction that the pipelines support, and have been working to promote, the standardization of information, not systems. There is a big difference. To standardize systems would be to take away a crucial element of competition (em choice.
Pipelines are constantly updating their EBBs. As with any new technology there is a learning curve. The pipelines are now moving forward to use the knowledge gained so far to help incorporate both nominations and confirmations, the heart of the transportation business. But, to be frank, there are some segments of the natural gas industry that haven't been participating in the development process and, therefore, do not understand the progress we have made.
Robert B. Catell
President & CEO, Brooklyn Union Gas Co.
Chairman, American Gas Association
Overall, I think progress in the areas of standardization has been quite good. Of course, there have been bumps along the way, but the creation of GISB is a huge step forward. GISB provides the natural gas industry with a forum to create standards for electronic communications. These standards will improve the efficiency of the natural gas industry and make natural gas more marketable to potential large-volume users, such as electric utilities. We expect that GISB will allow the industry, through the input of all segments, to create voluntary standards that are beneficial in a competitive environment that is not burdened by excessive regulation.
However, the FERC is missing an opportunity to improve the overall efficiency of the pipeline system by not changing its rules to allow direct assignment of capacity. This approach should be allowed to supplement trading on the EBBs. An after-the-fact record of transactions can provide the FERC with the necessary information to address any legitimate complaint of market abuse. One of the biggest problems today is that an LDC wanting to sell capacity to an end user or other purchaser cannot close the deal directly, but must go through the EBBs. If the transaction involves capacity on multiple pipeline systems, then multiple EBBs are involved. Direct assignment would benefit both buyer and seller; the system would be more efficient and cost-effective, resulting in a lower cost to the end user.
Charles E. Zeigler, Jr.
Chairman, President, & CEO
Public Service Co. of North Carolina, Inc.
We believe standardizing the gas pipeline EBB and EDI system is an excellent objective as long as quality is not sacrificed to standardization. Obviously, almost everyone would like to be farther down the road. While we believe current efforts need to be continued, if not intensified, we hope that independent developers will also be encouraged in any development efforts. Creating a competitive environment with the appropriate rewards for the best products could very well increase the speed of this process while enhancing the quality of the final products.
William E. Davis
Chairman and CEO
Niagara Mohawk Power Corp.
Niagara Mohawk Gas is a member of GISB, and thus far we are pleased with the progress being made in standardizing EBBs and EDI. We are concerned, however, that all costs for EBBs and the like are currently being covered by LDCs in the form of interstate pipeline rates. After all, each segment of the industry benefits from these services (em from producers to marketers and brokers. We believe each of these groups should pay its fair share.
Corbin A. McNeill, Jr.
President & CEO
PECO Energy Co.
Yes, PECO Energy Co. is satisfied with the efforts to date to standardize gas pipeline EBBs and EDI. PECO Energy is a member of GISB. Our company, both individually and as a member of Associated Gas Distributors and the A.G.A., has participated in the planning and formation of GISB. In its initial stage, GISB instituted an organizational structure and promulgated standards for capacity release and electronic communications for business transactions within the natural gas industry. Considering the changes and activity precipitated by FERC Order 636, we think the results to date are commendable. We must now take these initial standards and incorporate them into our daily business as we manage the growing complexity of the industry. t
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