GAS PIPELINES. Noting a move toward shorter-term contracts since Order 636, the FERC on July 29 issued an "integrated package" of reform proposals for the natural gas pipeline industry: (1) specific measures in a notice of proposed rulemaking on short-term transportation (transactions shorter than one year); plus (2) an open-ended request for comments in a broader notice of inquiry. RM98-10-000, 84 FERC ¶61,985 [NOPR]; RM98- 12-000, 84FERC ¶61,087 NOI].
The proposals all evoke a single theme - reduce prices and risk in long-term markets, while letting prices climb for short-term deals. The FERC would correct a so-called "asymmetry of risk" - shippers signing long-term contracts face uncertainty in price and supply, but can avoid risk by turning to short-term markets, where they pay no price premium and can actually lock-in rights as long as five years through the right of first refusal.
Proposals in the 190-page NOPR:
• no price cap on released capacity;
• end cost-based regulation in short-term market;
• retain cost-based regulation in long-term market;
• new procedures on nominations and scheduling;
• more flexible receipt and delivery points;
• mandatory auctions for all sales of short-term capacity;
• more flexibility in pipeline-shipper contracts;
• review pipeline penalty provisions and operational
• kill five-year term-matching cap in the right of
• consider term-differentiated rates.