The Federal Energy Regulatory Commission (FERC) has set for hearing a request by Koch Gateway Pipeline Co. (KGP) to charge market-based rates for firm and interruptible natural gas transportation services (Docket No. RP95-362-000). First, however, the FERC must conclude Docket No. RM95-6-000, which will delineate the circumstances under which it may approve market-based rates. Alternatives to Traditional Cost-of-Service Ratemaking for Natural Gas Pipelines, 70 FERC 61,385 (1995).Koch asked that its firm and interruptible customers be divided into two classes: those with
alternatives, and those without alternatives. The former would purchase firm and interruptible transportation services at market-based rates; the latter would purchase at cost-based rates, but would enjoy a number of other options as well.
KGP's analysis in support of market-based rates focused on 1,588 individual station location numbers (SLNs), or meter stations, across its system. If a third-party pipeline was located within a five-mile radius of an SLN, the SLN was considered a point with an alternative. Of the 1,588 SLNs examined, KGP stated that 1,325 had alternatives.
To determine KGP's right to implement market-based rates, the FERC will evaluate the pipeline's market power. (A staff paper issued in Docket No. RM95-6-000 stated that the FERC has flexibility under the Natural Gas Act in selecting ratemaking methods.) The FERC accepted the filing as a request for a declaratory order and will set the matter for hearing no later than October 1, 1996, when Docket No. RM95-6-000 should be completed.
Commissioner James J. Hoecker said that