NOPR

FERC's Mandatory Gas Auctions: Are We Bidding the Right Product?

Auctioning gas imbalances offers advantages over bidding on available pipeline capacity.

In a Notice of Proposed Rulemaking issued last summer, the Federal Energy Regulatory Commission proposed a series of auctions for all unutilized short-term rights in pipeline capacity, with the most frequent auction being for transmission rights for the next day. All transporters and the pipeline would be required to release available short-term capacity rights to be auctioned. (See FERC Docket RM98-10-000, Regulation of Short-term Nat. Gas Transp.

News Digest

FERC

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].

News Analysis

In an ideal world, legislation would have already happened."

That was Elizabeth Moler, deputy secretary of energy, testifying as the first witness at a Feb. 20 public conference at the Federal Energy Regulatory Commission. The forum attempted to address how to ensure access to transmission as the electric industry builds a new framework to maintain system reliability.

Having just stepped down from the top spot at the FERC, Moler knew what to expect. She understood the limits of the FERC's statutory authority and its budget.

ISO Pricing: Let's Not Socialize Transmission Rates

Flow-based pricing ends

subsidies inherent in grid-wide,

postage-stamp rates.

I

n Order 888, the Federal Energy Regulatory Commission suggested 11 principles for forming an independent system operator, or ISO. In its third principle, the FERC offered this guidance on transmission pricing:

An ISO should provide open access to the transmission system and all services under its control at non-pancaked rates pursuant to a single, unbundled, grid-wide tariff that applies to all eligible users in a non-discriminatory manner.

Perspective

Let's hope that by now we all prefer market solutions to government mandates. Markets are generally more efficient and equitable. Recent experiences with deregulation for airlines and telecommunications have vindicated Adam Smith's notion that the "invisible hand" can prove superior to regulation.

Unfortunately, this knowledge offers little comfort today to natural gas pipelines (em even to those companies not saddled with a surplus of transportation capacity.

Frontlines

On Monday, January 6, the Board of Trustees of the North American Electric Reliability Council (NERC) voted unanimously to require mandatory compliance from its regional and affiliate councils with all reliability "policies" adopted by NERC. Previously, the regional councils (MAPP, ERCOT, ECAR, etc.) were only required to give their "best efforts" to comply.

As the board explains, "Compliance with NERC rules needs to be insured, but peer pressure will not be sufficient."

This new vote stems from "A Call to Action," mailed out on October 28 by Richard J.

Stranded Cost Recovery: All FERC'ed Up

Stranded-

Cost

Recovery: All FERC'ed Up

By Michael T. Maloney, Robert E.

McCormick, and Chad A. McGowan

The "lost-revenues" approach in Order 888 ignores the fact that cash flow drives

asset valuation . . .

. . . the key to measuring uneconomic investment.

OASIS: A Mirage of Reliability

A Mirage of ReliabilityBy John C. Hoag

The Internet doesn't suit companies

that are vulnerable to security or financial risk (em

like electric transmission providers.

THE RUSH IS ON TO SET OASIS IN MOTION.

Generation, Deregulation, and Market Power: Will Antitrust Laws Fill the Void?

Monopoly rents? Not in the short run. The real enemy is a price war, fueled by indifference to stranded costs. And when that happens, antitrust laws won't offer much help.Competition has formally begun in the electric service industry. The Federal Energy Regulatory Commission (FERC) has issued Order 888, giving generators access to wholesale loads throughout the nation.