[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Rules and Regulations]
[Pages 8859-8870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5164]



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[[Page 8860]]


DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 201 and 284

[Docket No. RM95-4-001; Order No. 581-A]


Revisions to Uniform System of Accounts, Forms, Statements, and 
Reporting Requirements for Natural Gas Companies; Order on Rehearing

Issued February 29, 1996.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final Rule; Order on rehearing.

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SUMMARY: The Federal Energy Regulatory Commission is issuing an order 
on the requests for rehearing of Order No. 581, the final rule amending 
the Commission's Uniform System of Accounts, its forms, and its reports 
and statements for natural gas companies. In the final rule, the 
Commission sought to simplify and streamline its requirements to reduce 
the burden of respondents. The revisions here address issues raised and 
clarifications requested by parties in this proceeding.

DATES: The revised regulations will become effective April 5, 1996.

FOR FURTHER INFORMATION CONTACT: Erica J. Yanoff, Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 208-0708.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of 
this document, excluding Appendices A (Revised Pages of FERC Form No. 
2) and B (Revised Pages of FERC Form No. 2-A) in the Federal Register, 
the Commission also provides all interested persons an opportunity to 
inspect or copy the contents of this document during normal business 
hours at 888 First Street, NE., Washington, DC 20426.
    The Commission Issuance Posting System (CIPS), an electronic 
bulletin board service, provides access to the texts of formal 
documents issued by the Commission. CIPS is available at no charge to 
the user and may be accessed using a personal computer with a modem by 
dialing (202) 208-1397 if dialing locally or 1-800-856-3720 if dialing 
long distance. To access CIPS, set your communications software to 
19200, 14400, 12000, 9600, 7200, 4800, 2400, or 1200 bps, full duplex, 
no parity, 8 data bits, and 1 stop bit. The full text of this document 
will be available on CIPS indefinitely in ASCII and WordPerfect 5.1 
format. The complete text on diskette in Wordperfect format may also be 
purchased from the Commission's copy contractor, La Dorn Systems 
Corporation, also located in the Public Reference Room at 888 First 
Street, NE., Washington, DC 20426.

Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A. Bailey, 
James J. Hoecker, William L. Massey, and Donald F. Santa, Jr.

I. Introduction

    On September 28, 1995, the Federal Energy Regulatory Commission 
(Commission) issued Order No. 581, amending its Uniform System of 
Accounts, its forms, and its reports and statements for natural gas 
companies. 1 In Order No. 581, the Commission, with respect to the 
Uniform System of Accounts, addressed the treatment of gas in 
underground storage reservoirs and in pipelines, and of revenues and 
gas supply expenses, eliminated all accounts for Nonmajor respondents, 
and redesignated accounts used only by Major respondents for use by all 
respondents. The Commission also modified various forms, reports, and 
statements in an effort to create documents that reflect the current 
regulatory environment of unbundled pipeline sales for resale at 
market-based prices and open-access transportation of natural gas. This 
included changes to, and deletions from, the FERC Form No. 11 (Form No. 
11), ``Natural gas pipeline company monthly statement,'' the FERC Form 
No. 2 (Form No. 2), ``Annual report of Major natural gas companies,'' 
and the FERC Form No. 2-A (Form No. 2-A), ``Annual report of Nonmajor 
natural gas companies.''

    \1\ Revisions to Uniform System of Accounts, Forms, Statements, 
and Reporting Requirements for Natural Gas Companies, 60 FR 53019 
(October 11, 1995), II FERC Stats. & Regs. para. 20,000 et seq. 
(1995) (regulatory text), III FERC Stats. & Regs. para. 31,026 
(1995) (preamble). This order on rehearing is a companion to the 
order on rehearing, issued concurrently in Docket No. RM95-3-001, 
which concerned amendments to the form and composition of interstate 
natural gas pipeline tariffs and the filing of rates and charges for 
the transportation of natural gas. See Filing Requirements for 
Interstate Natural Gas Company Rate Schedules and Tariffs, Order No. 
582, 60 FR 52960 (October 11, 1995).
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    The Commission also sought to simplify and streamline its 
requirements to reduce the burden on respondents. Hence, the Commission 
eliminated certain reporting requirements (as well as a few non-
reporting requirements) that were outdated or nonessential in light of 
current regulation, or were duplicative of other reporting 
requirements. This included the deletion of the Form No. 8, 
``Underground Gas Storage Report.'' At the same time, the Commission 
imposed new reporting requirements, too, most notably, the electronic 
Index of Customers.
    All of the revisions, especially of Form No. 2, were designed to 
provide financial, rate, and statistical information on transactions 
that is more useful than what is currently available to regulatory 
agencies and other users of the financial statements and reports of 
natural gas companies.
    ANR Pipeline Company and Colorado Interstate Gas Company (ANR/CIG), 
jointly, and the National Registry of Capacity Rights, Inc. (Registry) 
request rehearing of Order No. 581. 2 Columbia Gas Transmission 
Corporation and Columbia Gulf Transmission Company (collectively, 
Columbia) also request rehearing, but do so alternatively, if the 
Commission does not clarify Order No. 581 as they request. The 
Interstate Natural Gas Association of America (INGAA), the Natural Gas 
Supply Association (NGSA), and the PEC Pipeline Group 3 each filed 
a request for clarification of Order No. 581.

    \2\ ANR/CIG's request is titled ``Request for Rehearing and 
Clarification.''
    \3\ The ``PEC Pipeline Group'' refers, collectively, to 
Panhandle Eastern Pipe Line Company, Trunkline Gas Company, Texas 
Eastern Transmission Corporation, and Algonquin Gas Transmission 
Company.
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    Generally, the issues raised and clarifications requested by these 
parties concern Order No. 581's holdings with respect to storage 
accounting in the Uniform System of Accounts, the lack of receipt and 
delivery point information in the Index of Customers, and the 
disclosure of commercially sensitive information in the Index of 
Customers and the discount rate report. In addition, Louis Dreyfus 
Energy Corp. (Louis Dreyfus) filed a petition for reconsideration of 
Order No. 581's elimination of the Form No. 8.
    This order grants in part, and denies in part, the rehearing 
requests, denies Louis Dreyfus' petition for reconsideration, and 
clarifies Order No. 581.

II. Uniform System of Accounts

A. Storage Accounting

1. Accounting for Use of System Gas Under Fixed Asset Model
    ANR/CIG request rehearing with respect to the Commission's 
treatment of new Account 117.4, ``Gas Owed to System Gas.'' In the 
final rule, the Commission permitted pipelines to account for system 
gas using either the inventory method or the fixed asset method. For 
pipelines using the fixed asset method, the Commission adopted 
accounting provisions which require 

[[Page 8861]]
that future encroachments on system gas, resulting from transportation 
imbalances, no-notice transportation, and other operational needs, be 
credited to Account 117.4 at the then-current market price of gas, with 
a corresponding charge to Account 808.1, ``Gas Withdrawn From Storage-
Debit.'' The Commission stated that if the volumes withdrawn are used 
to meet transportation imbalances, Account 806, ``Exchange Gas,'' will 
be credited and Account 174, ``Miscellaneous Current and Accrued 
Assets,'' will be debited simultaneously with the entries to the system 
gas account. 4

    \4\ III FERC Stats. & Regs. at 31,454-55.
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    ANR/CIG argue that this accounting treatment will result in a 
fluctuating balance for Account 117 (the sum of Accounts 117.1, 117.2, 
117.3, and 117.4), which is designated as a fixed asset. In order to 
treat the balance in Account 117 as a fixed asset, and prevent 
potential monthly fluctuations, which ANR/CIG assert is inconsistent 
with the nature of a fixed asset, ANR/CIG urge the Commission to 
establish an additional contra account within the Account 117 series, 
instead of using the current asset Account 174.
    The Commission will not adopt ANR/CIG's suggestion for the 
following reason. Although the receivable may have originally been 
generated by the encroachment of system gas, the settlement of the 
receivable is not dependent on the replacement of the system gas 
volumes. For example, a customer may ``cash-out'' his receivable with 
the pipeline in one month, while the pipeline replaces the volumes into 
storage in another month. The amount of the receivable may also differ 
from the amount of the encroachment if, e.g., the pipeline revalues its 
encroachments. Because of the lack of one-to-one correspondence between 
the receivable and the replacement of the encroachment volumes, the 
Account 117 series would become misstated if we were to allow recording 
of the receivable within them. It would also not be appropriate to mix 
one type of asset (i.e., a receivable) with a completely different type 
of asset (i.e., system gas volumes).
2. Losses on Settlement of Imbalances
    In explaining how the simplified recordkeeping requirements under 
the fixed asset method should mitigate CNG Transmission Corporation's 
concerns over the recordkeeping required to calculate imbalance gains 
or losses, the Commission stated:

    For imbalances in which the pipeline has delivered more than the 
shipper injected at the receipt point, gains (or losses) will be the 
difference between the cash-out price and the pipeline's purchase 
cost of replacement gas volumes. For cashed-out imbalances in which 
the pipeline has delivered less than the shipper has tendered into 
the pipeline, the gain (or loss) will be the difference between the 
cash-out price paid by the pipeline and the current price of volumes 
recorded in Account 117.4. 5

    \5\ III FERC Stats. & Regs. at 31,459.
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INGAA asserts that this accounting treatment assumes that all pipelines 
that elect the fixed asset model use a monthly cash-out, and purchase 
replacement volumes concurrently. However, INGAA states that some 
pipelines roll imbalances over month-to-month after assigning a dollar 
value to the imbalance, and that pipelines do not necessarily purchase 
or track replacement volumes on a transaction-by-transaction basis.
    INGAA argues that it appears that the intended accounting 
treatment, based on other statements in the final rule under ``Use of 
System Gas, Fixed Asset Method,'' 6 and on the Account 174 and 242 
definitions, is for the gain or loss to equal the difference between 
the cash out (or the current value of gas physically received or 
delivered) and the imbalance receivable or payable balance. Therefore, 
INGAA requests that the Commission modify the wording under ``Losses on 
Settlement of Imbalances'' to be consistent with the intended 
accounting.

    \6\ Id. at 31,455.
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    The Commission will not clarify Order No. 581 as requested by 
INGAA. The final rule correctly stated that the difference between the 
cash-out price and the pipeline's purchase costs of replacement gas 
volumes is the amount of the gain or loss on imbalances involving cash-
out settlements. Such gain or loss consists of two components: (1) Gain 
or loss on the settlement of receivables/payables (i.e., the difference 
between the recorded amount of the receivable/payable and the actual 
cash-out amount); and (2) gain or loss on the difference between the 
injection price and the actual cost of replacement gas.
    Contrary to INGAA's assertion, the accounting requirements for 
storage imbalances do not assume that all pipelines settle cash-outs 
concurrently with the replacement of system gas; the prescribed 
accounting is designed to accommodate different cash-out settlement 
dates and replacement dates. For example, if a pipeline recorded a $100 
imbalance receivable in month one, and rolled it over to month two, in 
which it had an additional $200 imbalance receivable, it could settle 
the $300 receivable (or any part of it) by debiting cash and crediting 
the receivable, and would recognize a gain or loss on the difference 
between the recorded amount of receivable and the settlement amount. If 
the pipeline replaced the gas in month six, it would recognize a gain 
or loss on the difference between its cost of replacement gas and the 
accounting value of the storage injection. The gain or loss on the 
settlement of the receivable and the replacement activity would be 
reflected in the gain or loss accounts in the period in which they 
occur. There would be no tracking of gains or losses on transactions 
for individual customers.
3. Pricing of Losses of System Gas
    The Commission stated in Order No. 581 that, under the fixed asset 
model, ``losses of system gas should be priced at the same rate used to 
price withdrawals in the month in which the gas loss is recognized 
(i.e., the current market price of gas available to the utility).'' 
7 According to Columbia, this is appropriate for accounting for 
losses of working gas, but not for accounting for losses of cushion 
gas.

    \7\ III FERC Stats. & Regs. at 31,459-60.
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    In support, Columbia argues that losses of system gas often occur 
over long periods of time, and are recognized only after extensive 
periods of analyses of storage fields. A pipeline may choose not to 
replace cushion gas losses. Additionally, Columbia maintains that in 
instances where a pipeline accrues a reserve for cushion gas losses, it 
would be inappropriate to use a value which differs from the actual 
cost of the gas. Thus, Columbia requests that the Commission clarify 
that losses of cushion gas must be recorded at book value, not at the 
present market value, or in the alternative, grant rehearing on this 
issue.
    Columbia also reiterates its recommendation in its initial comments 
that the Commission add another subaccount or provision to Account 
117.1 to allow for recognition of extraordinary gas storage losses as a 
reduction of the asset which has incurred the loss. Columbia states 
that the Commission did not address this issue in the final rule, and 
therefore, requests rehearing.
    The Commission will not clarify Order No. 581 to permit losses of 
cushion gas to be recorded at book value. Under the fixed asset model, 
losses of both working gas and cushion gas are accounted for in the 
same manner--Account 117.4 is credited (and Account 823 is charged) 
with the current market value of the lost gas. The 

[[Page 8862]]
underlying presumption is that all encroachments of system gas 
(including gas losses) will be replaced in order to maintain authorized 
system gas levels.
    However, the Commission will grant rehearing, in part, and allow 
pipelines to credit the system gas accounts (i.e., Account 117.1 or 
117.2) directly with the historical cost of the decrease in authorized 
system gas volumes in the unusual situation where a pipeline 
determines, and the Commission authorizes, a decrease in system gas 
volumes (due to, for example, extraordinary storage losses, changes in 
system operational needs, etc.). The Commission does not believe that 
it is necessary, though, to create a separate subaccount under Account 
117, or include another provision in the regulations to accommodate 
these unusual occurrences. Because Commission approval is required to 
change authorized system gas levels, a pipeline should not record 
permanent reductions in authorized system gas volumes prior to 
receiving Commission approval. Instead, prior to receiving Commission 
approval, a pipeline should credit Account 117.4 with the market value 
of the losses.
4. Use of Customer-Owned Storage Quantities for Balancing
    In Columbia's comments to the NOPR, Columbia sought confirmation 
that entries to Account 117.4 to record encroachments by customers 
resulting from imbalances, no-notice transportation, and other 
operational needs should be made only after Columbia has exhausted 
other options for resolving the encroachments, such as using customer-
owned storage quantities. Columbia stated that Account 117.4 should be 
used only after the balance of all customer gas has been withdrawn, and 
the only remaining gas belongs to the pipeline. In Order No. 581, the 
Commission responded:

    Columbia is permitted to borrow the gas from storage because of 
an arrangement between Columbia and its customers that, consistent 
with Columbia's tariff, allows Columbia to use its customer's gas 
for balancing purposes. Thus, Columbia and any other similarly 
situated pipeline would record amounts in Account 117.4 only after 
customer gas available to the utility for system balancing purposes 
has been exhausted. This accounting is appropriate because the 
pipeline is using its customers' gas to meet imbalances on its 
transportation system.8

    \8\ III FERC Stats. & Regs. at 31,460.
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    Columbia now requests clarification that the Commission's holding 
in Order No. 581 with respect to the use of customer gas for storage 
withdrawals, above, will not require Columbia to make revisions to its 
present tariff. It states that the Commission's language could be 
interpreted to require that Columbia's present accounting methodology 
for gas imbalances be conditioned upon specific tariff provisions. 
Columbia further states that the storage accounting it employs is based 
upon its system operations as reviewed and accepted by the Commission 
in its restructuring proceeding. Thus, Columbia seeks confirmation that 
Order No. 581 approved its storage accounting, and was not intended to 
require Columbia to revise its current tariff.
    Order No. 581 allows Columbia, and similarly situated pipelines, to 
recognize that gas borrowed from storage (to the extent that there is 
customer gas in storage) to meet imbalances belongs to the storage 
customers. This recognition is permissible where there are arrangements 
between the pipeline and its customer(s), consistent with the 
pipeline's tariff, that permit the pipeline to use its customer's gas 
for balancing purposes. In Columbia's case, Rate Schedule FSS 
specifically provides for customers' storage to be used for 
extinguishing imbalances arising under the customers' various service 
agreements:

    Buyer's FSS Inventory under this Rate Schedule shall be 
increased or decreased by any actual imbalances (actual receipts 
compared to actual deliveries) created under any other Service 
Agreement(s) Buyer has with Seller and the imbalance shall be 
removed from such other Service Agreement(s). Such increase or 
decrease shall be deemed to be a storage injection or withdrawal 
under Buyer's FSS Service Agreement.9

    \9\ Substitute Original Sheet No. 165, Second Revised Volume No. 
1 of Columbia's FERC Gas Tariff.
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It was this and similar provisions in Columbia's tariff which prompted 
the Commission's response in Order No. 581.
    However, we clarify that where the pipeline's retained system gas 
is used for balancing, no-notice service, or other uses associated with 
maintaining efficient transmission operations, entries to Account No. 
117.4 are necessary. Columbia's tariff contains two rate schedules, 
Rate Schedules NTS and SIT, which rely on Columbia's retained 
storage.10

    \10\ See orders addressing Columbia's compliance filings, 
Columbia Gas Transmission Corporation, 65 FERC para. 61,344 at 
62,726 (1993) and 64 FERC para. 61,060 at 61,528 (1993).
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    Further, in the restructuring proceeding, Columbia asserted that 
retained storage would be used for balancing purposes. As described by 
the Commission:

    Columbia avers the allocation of retained storage costs to FTS 
service is appropriate to recognize the use of storage for 
operational balancing agreements (OBAs) with upstream pipelines. 
Columbia also argues its retained storage handles the hourly swings 
of customers and imbalances within tolerance levels. Allocation of 
retained storage costs thus recognizes system balancing for all 
services.11

    \11\ 64 FERC para. 61,060 at 61,528 (1993).
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    Therefore, Columbia (and any similarly situated pipeline) must 
comply with the applicable Uniform System of Accounts instructions for 
recording system gas injections and withdrawals whenever it uses its 
own system gas for balancing, no-notice, or other uses associated with 
maintaining efficient transmission operations.
    Columbia additionally asks the Commission, assuming arguendo, that 
the Commission finds that storage encroachments by customers must be 
recorded in Account No. 117.4 before all customer gas has been 
physically withdrawn, to expand the instructions in Account 117.4 to 
address the accounting treatment of gas resulting from a net overtender 
position (i.e., when shippers put more gas into the system than they 
take out). Columbia seeks clarification of the accounting entries 
required when customers are in an overtendered position, which 
physically requires an injection of gas into storage.
    The Commission believes that overtendered gas should be treated the 
same as customer contract gas physically held by the pipeline. That is, 
records of stored volumes should be maintained, but no formal 
accounting recognition of dollar amounts should be given to the 
overtendered volumes.
5. Conforming Corrections to Regulation Text
    Several parties have identified instances in which the findings and 
rulings of the Commission, as described in Order No. 581, are not 
reflected in the text of the new regulations. In those instances, 
discussed below, the parties maintain that the Part 201 regulations 
need to be amended accordingly. Also identified below are minor 
typographical errors.
    INGAA and the PEC Pipeline Group state that the use of Account 
117.2 to credit withdrawals of storage gas under the inventory method, 
as permitted by Order No. 581, is not specified in the instructions for 
Account 808. The Commission will conform the instructions for Account 
808.1, Gas 

[[Page 8863]]
Withdrawn from storage-Debit, and Account 808.2, Gas Injected into 
storage-Credit, to reflect withdrawals and injections of gas under the 
inventory method of accounting.
    INGAA states that the changes in the final rule that explicitly 
require that storage losses be charged to Account 823 are not reflected 
in the Part 201 instructions. The Commission will modify the 
instructions to the text of Account 823, Gas Losses, and the Special 
Instructions to Accounts 117.1, 117.2 and 117.3, to require losses of 
gas stored in underground reservoirs to be charged to Account 823.
    INGAA and the PEC Pipeline Group state that in the Special 
Instructions to Accounts 117.1, 117.2, and 117.3, (b) Fixed Asset 
Method, the first sentence of the fourth paragraph is incomplete, and 
should be revised to: ``When replacement of the gas is made, the amount 
carried in Account 117.4 for such volumes must be cleared with an 
offsetting entry to Account 808.2.'' The Commission agrees, and will 
revise the instruction accordingly.
    INGAA and the PEC Pipeline Group state that the last sentence of 
the instructions to Account 117.4, Gas Owed to System Gas, must be 
corrected by changing the word ``revolve'' to ``revalue''. The 
Commission agrees and will revise the instruction accordingly.

B. Shipper-Supplied Gas

1. Recordkeeping
    In Order No. 581, the Commission revised the recordkeeping 
requirements for shipper-supplied fuel to require records to be 
maintained and readily available for shipper-supplied gas on a rate 
schedule and zone basis.12 INGAA requests that the Commission 
clarify that for companies that calculate shipper-supplied fuel based 
on delivered volumes, the accounts of retained fuel and unaccounted-for 
volumes be maintained on the basis of gas delivered, rather than gas 
received.

    \12\ III FERC Stats. & Regs. at 31,463.
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    The Commission clarifies that it is permissible to maintain records 
of shipper-supplied gas on the basis of gas delivered or gas received, 
as appropriate in the circumstances.
2. Conforming Changes to Regulation Text
    According to NGSA, Order No. 581 states that ``the value of gas 
received from shippers under tariff allowances that is not consumed in 
operations nor returnable to customers through rate tracking mechanisms 
shall be credited to Account 495, Other Gas Revenues and charged to 
Account 805.'' 13 However, NGSA states that this language does not 
appear in the revised regulations. NGSA requests that the Commission 
clarify this matter by including a statement in the regulations which 
explicitly requires such accounting treatment.

    \13\ Id. at 31,461.
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    The Commission will add a new paragraph to the text of Account 805, 
Other gas purchases, to address the treatment of retained shipper-
supplied gas.

C. Revenues

    In Order No. 581, the Commission modified the accounting treatment 
it had proposed for gains and losses on imbalance transactions, in 
instances where a pipeline's tariff requires such gains and losses to 
be passed along to customers. Rather than requiring a gain or loss to 
be initially recorded in Accounts 495 or 813, respectively, the 
Commission stated that it would require pipelines to record the gain or 
loss on imbalances directly in Account 254, Other Regulatory 
Liabilities, or Account 182.3, Other Regulatory Assets, as 
appropriate.14

    \14\ Id. at 31,464-65.
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    INGAA and the PEC Pipeline Group argue that the corresponding 
instructions do not appear in Account 174 of the Balance Sheet 
Accounts; they state that Account 174 only includes instructions to 
record all gains and losses from balancing transactions in Accounts 495 
and 813, respectively. INGAA and the PEC Pipeline Group request that 
the Commission clarify the regulations to reflect its decision to 
record certain gains and losses from imbalance transactions in the 
deferred accounts, Account 254 and Account 182.3, respectively.
    The Commission will not clarify the regulations as requested by the 
parties. Because the Uniform System of Accounts already provides 
instructions for accounting for regulatory assets and liabilities,\15\ 
the Commission believes that it is unnecessary to modify the text of 
Accounts 174, Miscellaneous Current and Accrued Assets, and Account 
242, Miscellaneous Current and Accrued Liabilities, to specifically 
address regulatory assets and liabilities related to imbalances. As 
with any revenue, expense, gain, or loss that would have been included 
in net income determinations in one period under the general 
requirements of the Uniform System of Accounts were it not for the 
probability that such items would be included in a different period for 
ratemaking purposes (or, in the case of regulatory liabilities, would 
be required to be refunded),\16\ imbalance gains and losses to be 
collected from or returned to customers in future rates must be 
accounted for as regulatory assets and liabilities in accordance with 
Definition No. 31, and the instructions to Accounts 182.3 and 254 of 
the Uniform System of Accounts.

    \15\ See Definition No. 31 of the Uniform System of Accounts, 18 
C.F.R. Part 201 (1995).
    \16\ This defines ``regulatory assets and liabilities.'' Id.
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D. Gas Supply Expenses

    In Order No. 581, the Commission found that the amounts recorded in 
Account 806, Exchange Gas, should be based on the measurement attribute 
of the gas received or delivered in the exchange.17 INGAA and the 
PEC Pipeline Group maintain that the instructions in the final rule for 
recording the amounts in Account 806 do not appear in the Account 806 
regulations. They assert that in the final rule, the Commission 
properly stated that if a company is using the inventory method, and 
the gas delivered in an exchange has been priced on a historical cost 
basis, the costs to be recorded in Account 806 would be based on the 
historical cost of the gas. The parties state that the text of the 
Account 806 regulation states that ``costs are to be determined from 
the current market price of gas at the time gas is tendered for 
transportation,'' reflecting a pipeline's use of only the fixed asset 
method. Therefore, INGAA and the PEC Pipeline Group ask that the 
regulations for Account 806 be clarified to reflect the appropriate 
accounting for both the fixed asset and the inventory method.

    \17\ III FERC Stats. & Regs. at 31,466.
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    The Commission will modify the text of Account 806 to reflect the 
use of the inventory method, as well as the use of the fixed asset 
method.
    The PEC Pipeline Group states in Order No. 581, the Commission 
adopted Panhandle Eastern Pipeline Company's suggestion to move the 
detailed recordkeeping requirements for cash-out transactions to other 
accounts.18 The PEC Pipeline Group argues that paragraph B of the 
Part 201 instructions for Account 806, establishing the recordkeeping 
requirement, should be deleted, and the detailed recordkeeping 
requirements for all balancing transactions should be moved to other 
accounts (i.e., Account 174, Miscellaneous Current and Accrued Assets, 
and Account 242, Miscellaneous Current and Accrued Liabilities).

    \18\ Id. 
    
[[Page 8864]]

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    In response to Panhandle's comments on the NOPR, the Commission 
reduced the level of recordkeeping requirements, and moved the 
instructions for accounting for settlement of imbalance receivables and 
payables from Account 806 to Accounts 174 and 242, respectively. 
Included in the new Paragraph B of the instructions to Accounts 174 and 
242 is a requirement that pipelines maintain for each party entering 
gas exchange, load balancing, or no-notice transportation transactions, 
the quantity and cost of gas delivered and received. This is the same 
requirement as now appears in paragraph B of Account 806. Therefore, to 
avoid unnecessary duplication, the Commission will delete paragraph B 
of Account 806, as requested by the PEC Pipeline Group.

III. Form Nos. 2 and 2-A

    Only one corrective change to the Form No. 2 was requested by the 
parties. INGAA and the PEC Pipeline Group note that on page 220, in 
Column (e) for Account 117.4, lines 2 and 3 should not be blacked out. 
Similarly, INGAA states that lines 2 and 3 in Column (b) for Account 
117.1 also should not be blacked out. INGAA states that if a pipeline 
is using the fixed asset method, it will show entries in both Account 
117.1 and Account 117.4 for contra accounts Gas Delivered to Storage 
(line 2) and Gas Withdrawn From Storage (line 3). The Commission agrees 
that those lines should not be blacked out, and will delete the shading 
from those lines.
    The Commission has identified several other editorial, 
typographical, and conforming changes that must be made to the Form No. 
2, and where applicable, to the Form No. 2-A, also. These changes are 
listed below, and appear in the revised pages of the forms in 
Appendices A and B 19 to this order:

    \19\ These Appendices are not being published in the Federal 
Register, but are available from the Commission's Public Reference 
Room.
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General Information--Page i

    In section III, paragraph (b), the second sentence of the 
parenthetical is revised to read: ``Indicate by checking the 
appropriate box on page 3, * * * .''
    In section III, paragraph (c)(i), the word ``aspects'' is revised 
to ``respects.''

General Information--Page ii

    In section III, paragraph (c)(ii), the pages referring to schedule 
``Statement of Income'' are revised to ``114-116,'' and the page 
referring to schedule ``Notes to Financial Statements'' are revised to 
``122.''
    In section III, paragraph (d), the word ``Branch'' is added to the 
end of the phrase ``Public Reference and Files Maintenance.''

General Instructions--Page iii

    In section IV, paragraph (b), the Commission is omitting the 
reference to page 4.

List of Schedules (Natural Gas Company)--Page 3

    In Column (a), under Income Account Supporting Schedules, the word 
``Other'' in the second and third lines is revised to ``Others.'' In 
addition in Column (a), under Common Section, the page reference for 
Distribution of Salaries and Wages is revised to ``354-355.''

Comparative Balance Sheet (Assets and Other Debits)--Page 110

    The page number reference of 200-201 on line 1 is moved to line 3. 
The page number reference of 221 on lines 17 and 18 is eliminated. In 
addition, line 21 is revised to read: ``(For Cost of Account 123.1 See 
Footnote Page 224, line 40).''

Statement of Income for the Year--Page 116

    The account titles on lines 29 through 34 are indented.

Statement of Retained Earnings for the Year--Pages 118-119

    On page 118, Columns (b), (c), and (d) for the account title 
``UNAPPROPRIATED RETAINED EARNINGS,'' and on lines 2 and 3, are shaded.
    On page 119, Column (b), ``Contra Primary Account Affected,'' is 
eliminated for all lines.

Notes to Financial Statements--Page 122

    The Commission is modifying instruction 9 to require explanation 
for only those significant changes in accounting methods made during 
the year which had an effect on net income.

Gas Plant in Service (Accounts 101,102, 103, and 106)--Pages 204-209

    On page 204, the Commission is adding instructions to each line 
showing a total (i.e., lines 5 and 26), instructions to total the 
applicable lines. The Commission is also shading Columns (b) and (c) on 
line 27.
    On page 205, the Commission is adding shading to all columns of 
line 27.
    On page 206, the Commission is adding to each line showing a total 
(i.e., lines 36, 37, 39, 54, 65, 75, and 76), instructions to total the 
applicable lines.
    On page 208, the Commission is adding to each line showing a total 
(i.e., lines 86, 102, 114, 116, and 121), instructions to total the 
applicable lines.
    On page 209, the Commission is removing the shading on line 119, 
and adding shading to Column (d) on line 118.

General Description of Construction Overhead Procedure--Page 218

    The Commission is adding the word ``the'' at the beginning of 
instruction 1(a). The title of Column (c), ``Capital Ratio,'' is 
revised to read ``Capitalization Ratio.'' In addition, the Commission 
is repositioning the parentheses and brackets in the formulas listed in 
items 2 and 3 to correctly present the formulas.

Gas Stored (Accounts 117.1, 117.2, 117.3, 117.4, 164.1, 164.2, and 
164.3)--Page 220

    In addition to deleting the shading on lines 2 and 3 of Columns (b) 
and (e), the Commission is deleting the parenthetical ``(contra 
account)'' from lines 2 and 3 of Column (a), and is revising the 
parenthetical on the last line in instruction 3, to read, ``(i.e., 
fixed asset method or inventory method).''

Investments in Subsidiary Companies (Account 123.1)--Page 224

    After the word ``Total'' on line 40, the Commission is adding the 
phrase ``Cost of Account 123.1 $________'' to Column (a), and the word 
``Total'' to Column (c).

Other Regulatory Assets (Account 182.3)--Page 232

    The title of Column (d) is revised to ``Account Charged.''

Miscellaneous Deferred Debits (Account 186)--Page 233

    On line 39, the Commission is adding shading to Columns (c), (d), 
and (e).

IV. Form No. 8

    All natural gas companies operating an underground natural gas 
storage field have been required to file with the Commission, under 
section 260.11, a monthly report of its storage activities--the Form 
No. 8, ``Underground Gas Storage Report.'' In the NOPR, the Commission 
stated the following, with respect to both section 260.11 and section 
260.4 (prescribing the Form No. 14, ``Annual Report for Importers and 
Exporters of Natural Gas''):

    ``The Commission is not proposing any substantive changes to 
these sections in this NOPR. However, the Commission is seeking 
comments on whether the collection of the information contained in 
these forms by other governmental or private sources is 

[[Page 8865]]
currently adequate, making the collection of the same information in 
these Commission forms unnecessary20

    \20\ IV FERC Stats. & Regs. para. 32,512 at 33,017.
---------------------------------------------------------------------------

    The Commission received comments indicating that essentially the 
same storage information is collected by the Department of Energy (DOE) 
in the more comprehensive Form EIA-191, ``Underground Gas Storage 
Report.'' In the final rule, the Commission determined that the data 
from Form EIA-191 could be used to meet the Commission's requirements 
for storage data in lieu of the Form No. 8 information, and therefore 
eliminated the requirement to file Form No. 8. The Commission held that 
elimination of this form was consistent with the overall objective of 
the rulemaking proceeding to eliminate duplicative reporting 
requirements.
    Louis Dreyfus has filed a petition for reconsideration of the 
Commission's elimination of the Form No. 8. Louis Dreyfus maintains 
that the ready availability of the storage-related information reported 
on Form No. 8 is essential to the continual maturation of the primary 
and secondary gas transmission and storage markets and to improved 
natural gas commodity price discovery. Louis Dreyfus argues that the 
Commission erred in eliminating the Form No. 8 both on substantive 
grounds, asserting that there is no adequate alternative source from 
which to obtain the storage capacity and inventory data in the Form No. 
8, and on procedural grounds, asserting that the Commission failed to 
provide notice that it might eliminate the form.

A. Necessity of Form No. 8

    Louis Dreyfus argues that the Form EIA-191 is not an exact 
duplicate of, or adequate substitute for, the FERC Form No. 8, and that 
the two forms differ radically in their usefulness to the public and as 
sources of information. Louis Dreyfus states that the information filed 
in Form EIA-191 is confidential and is never made available to the 
public on a company-by-company basis, while the company-by-company 
information contained in Form No. 8 is made public within a few weeks 
of its submission. It claims that only after a delay is aggregated Form 
EIA-191 data made available to the public, and that such aggregated 
data is insufficient to meet its needs as a natural gas 
marketer.21

    \21\ The Form No. 8 collects monthly pipeline storage data such 
as injections, withdrawals, and balances. This data in the Form No. 
8 is reported on a company-by-company basis, aggregating all storage 
fields operated by a company. Reservoir capacity and ownership is 
reported separately by storage field. The Form EIA-191 collects 
monthly data on the location and operations of all active 
underground natural gas storage fields, such as injections, 
withdrawals, base gas, working gas, and peak day withdrawals. It 
also collects annual data on the capacity, type of facility, maximum 
deliverability, and pipelines to which the field is connected. Thus, 
the Form EIA-191 is more comprehensive, and collects the data by 
reservoir. However, the Form EIA-191 is subject to certain 
confidentiality requirements, and therefore is not public 
information. DOE does, though, aggregate the Form EIA-191 data by 
geographical jurisdiction, and makes that aggregated data available 
publicly.
---------------------------------------------------------------------------

    Louis Dreyfus maintains that without timely access to the 
information reported in Form No. 8, market participants will be 
hampered in their efforts to compete fairly in natural gas markets. It 
argues that marketers, particularly those not affiliated with storage-
owning pipelines, must be able to evaluate the state of storage 
capacity and storage balances in pricing their products. It claims that 
marketers lacking the data formerly collected and made publicly 
available through Form 8 will be at a disadvantage to marketers that 
can gain access to storage-related information.Louis Dreyfus also 
argues that any efforts by DOE to have the confidentiality requirements 
of Form EIA-191 removed, which the Commission endorsed in Order No. 
581, are unlikely to succeed. In its comments to the NOPR, DOE stated 
that the opposition to having the confidentiality requirements lifted 
that was voiced when DOE attempted to do so in 1993, may have decreased 
with the implementation of Order No. 636. However, Louis Dreyfus argues 
that that opposition was based on the position that Order No. 636 and 
increased competition were the precise reasons why data on storage 
field performance by reservoir must not be made public.
    Most of the reporting requirements under review in this rule exist 
in large part to enable the Commission to carry out its regulatory 
mission. They are intended to provide the Commission with the 
information it needs to conduct its regulatory review activities. 
Accordingly, one of the Commission's main goals in this rulemaking 
proceeding has been to eliminate filing requirements that may be 
unnecessary to meet the Commission's regulatory responsibilities, 
either because they are duplicative, or outdated, or because of other 
reasons. In keeping with this goal, the Commission determined in Order 
No. 581 that Form No. 8 and Form EIA-191 are similar enough that it is 
unnecessary for both DOE and the Commission to require the reporting of 
the information contained in those forms. The Commission further found 
that it could eliminate Form No. 8 and use the data collected in Form 
EIA-191 to meet its regulatory needs.
    Moreover, the Energy Information Administration (EIA), within DOE, 
is subject to a statutory obligation to collect and publish energy 
information and statistics.22 The information that is collected by 
the EIA must be ``promptly provide[d]'' to other offices within DOE 
when requested.23 Thus, the Commission is confident that it will 
be able to readily obtain the storage data in Form EIA-191 when needed, 
and therefore, that replacing the Form No. 8 data collection with 
access to storage data through the Form EIA-191 will be adequate to 
meet the Commission's needs.

    \22\ Section 205(a)(2) of the Department of Energy Organization 
Act provides that the Administrator of EIA shall be responsible for 
carrying out a central comprehensive, and unified energy data and 
information program which will collect, evaluate, assemble, analyze, 
and disseminate data and information which is relevant to energy 
resource reserves, energy production, demand, and technology, and 
related economic and statistical information, or which is relevant 
to the adequacy of energy resources to meet demands in the near and 
longer term future for the Nation's economic and social needs.
    42 U.S.C.A. Sec. 7135(a)(2) (1995).
    \23\ Section 205(f) states: The Administrator shall, upon 
request, promptly provide any information or analysis in his 
possession pursuant to this section to any other administration, 
commission, or office within the Department which such 
administration, commission or office determines relates to the 
functions of such administration, commission, or office.
    42 U.S.C.A. Sec. 7135(f) (1995).
---------------------------------------------------------------------------

    With respect to Louis Dreyfus' needs, Louis Dreyfus complains that 
the Form EIA-191 data is insufficient for its purposes because the EIA 
only makes publicly available aggregated storage data from the Form 
EIA-191 due to the confidentiality restrictions, and because such data 
is not company-specific. However, the EIA is under an obligation, upon 
request to ``promptly [make] available to the public in a form and 
manner easily adaptable for public use'' the information that it 
collects.24 Louis Dreyfus is free to pursue any changes to the 
EIA's publication of the EIA-191 data with the EIA.

    \24\ Section 205(g) of the Department of Energy Organization Act 
provides, in pertinent part:
    ``Information collected by the Energy Information Administration 
shall be cataloged and, upon request, any such information shall be 
promptly made available to the public in a form and manner easily 
adaptable for public use, except that this subsection shall not 
require disclosure of matters exempted from mandatory disclosure by 
section 552(b) of Title 5, United States Code.
    42 U.S.C.A. Sec. 7135(g) (1995).
---------------------------------------------------------------------------

B. Adequacy of Notice Provided

    Louis Dreyfus asks that the Commission exercise its discretion to 
reconsider the elimination of Form No. 8 in light of the alleged lack 
of notice 

[[Page 8866]]
afforded to it. Louis Dreyfus states that the Commission never 
suggested in the NOPR that it might eliminate the Form No. 8 filing 
requirement, but rather ``reassured potentially interested parties that 
the Form No. 8 reporting requirements were `not on the table' for 
elimination.'' 25 Louis Dreyfus argues that the Commission's 
failure to provide any notice of the possibility that it could wholly 
eliminate the Form No. 8 reporting requirement, or to provide an 
adequate comment period for all interested parties to express their 
concerns about such proposal, violates the provisions of Section 553 of 
the Administrative Procedure Act (APA),26 and applicable case law. 
As a remedy for Order No. 581's alleged legal error in eliminating the 
Form No. 8 without adequate notice, Louis Dreyfus argues that the 
Commission must reinstate the Form No. 8 reporting requirements, or in 
the alternative, reopen the matter by issuing a supplemental notice of 
proposed rulemaking that proposes the elimination of Form No. 8 and 
invites comments thereon.

    \25\ Petition for Reconsideration at 5.
    \26\ Section 553(b) of the APA requires that an agency's notice 
of proposed rulemaking provide ``either the terms or substance of 
the proposed rule or a description of the subjects and issues 
involved.'' 5 U.S.C. Sec. 553(b)(3) (1994).
---------------------------------------------------------------------------

    The Commission denies Louis Dreyfus' request for reconsideration. 
The primary purpose of the notice requirement under Section 553(b) of 
the APA is to provide an opportunity for the public to participate in 
the rulemaking process through a commenting procedure. The purpose of 
section 553 of the APA has been met by the notice given in the NOPR 
with respect to the Form No. 8. While the Commission did not explicitly 
propose to eliminate the Form No. 8, the notice provided was adequate 
under the APA to justify elimination because the Commission expressly 
invited parties to comment on whether the collection of the Form No. 8 
information is unnecessary. In so doing, the notice raised the issue of 
the necessity and continuing existence of the Form No. 8, and gave 
interested parties an opportunity to comment on that issue. Given the 
goal of the rulemaking proceeding to simplify and streamline its 
regulations to reduce the reporting burden, the reasonable implication 
from the Commission's invitation for comments was that if commenters 
advised the Commission that the collection of storage information in 
the Form No. 8 was unnecessary because the collection of the same 
information by other entities was adequate, the Commission would 
eliminate the Form No. 8. Thus, the notice did indeed raise the 
prospect of a potential elimination of the Form No. 8.
    The notice with respect to the Form 8 was also adequate under 
applicable case law. Louis Dreyfus argues that courts have found notice 
of an adopted change to be inadequate in cases such as this one, where 
``there were major substantive differences between the proposed rule 
and the rule adopted.'' 27 However, substantive differences 
between a proposed and final rule do not always invalidate the final 
rule for lack of notice. The standard generally invoked by the courts 
with respect to the sufficiency of notice, where the final rule differs 
from the proposed rule, is that if the rule finally adopted is a 
``logical outgrowth'' of, or is ``in character with,'' the proposed 
rule, the rulemaking proceeding, or the comments received, a second 
notice and comment period is unnecessary, and the final rule will not 
be invalidated. 28 However, ``if the final rule deviates too 
sharply from the proposal, affected parties will be deprived of notice 
and an opportunity to respond to the proposal.'' 29

    \27\ Chrysler Corporation v. Dept. of Transportation, 515 F.2d 
1053, 1061 (6th Cir. 1975). Louis Dreyfus cites other cases, as 
well, stressing the importance of specificity in agency notice. See 
Petition for Reconsideration at 4-5.
    \28\ Shell Oil Company v. EPA, 950 F.2d 741, 750-51 (D.C. Cir. 
1991) (citations omitted) (``An agency, of course, may promulgate 
final rules that differ from the proposed regulations. To avoid `the 
absurdity that * * * the agency can learn from the comments on its 
proposals only at the peril of starting a new procedural round of 
commentary,'' we have held that final rules need only be a ``logical 
outgrowth'' of the proposed regulations.''); Rybachek v. U.S. EPA, 
904 F.2d 1276, 1287-88 (9th Cir. 1990) (``[T]he fact that a final 
rule varies from a proposal, even substantially, does not 
automatically void the regulations. Rather, we must determine 
whether the * * * final rule was in character with the original 
proposal and a logical outgrowth of the notice and comments 
received.''); City of Stoughton, Wisconsin v. U.S. EPA, 858 F.2d 
747, 753 (D.C. Cir. 1988) (``[A]n agency may promulgate a final rule 
that differs from its proposed rule without allowing further comment 
if the relevant changes are a `logical outgrowth'' of the proposed 
rule and the notice and comments upon it.''); Natural Resources 
Defense Council, Inc. v. U.S. EPA, 824 F.2d 1258, 1283 (1st Cir. 
1987) (citations omitted) (``An agency can make even substantial 
changes from the proposed version, as long as the final changes are 
`in character with the original scheme' and a `logical outgrowth' of 
the notice and comment.'').
    \29\ Small Refiner Lead Phase-Down Task Force v. U.S. EPA, 705 
F.2d 506, 547 (D.C. Cir. 1983).
---------------------------------------------------------------------------

    In this case, the elimination of Form No. 8 as an unnecessary 
reporting requirement is a ``logical outgrowth'' of, and ``in character 
with'' the nature of the proposed rule, which was designed to simplify 
and streamline the Commission's reporting requirements in an effort to 
reduce the reporting burden, as well as with the comments received. In 
the NOPR, the Commission proposed to eliminate numerous unnecessary 
reporting requirements because they were ``outdated or nonessential in 
light of current regulation, or [were] duplicative of other reporting 
requirements.'' 30 Thus, the Commission's action taken in 
eliminating the Form No. 8 fell within the general rubric, or 
``original scheme'' of the NOPR, and Louis Dreyfus should have 
anticipated that elimination of the Form No. 8 was possible.

    \30\ IV Stats. & Regs. para. 32,512 at 32,996.
---------------------------------------------------------------------------

    Moreover, in determining whether a final rule is a ``logical 
outgrowth'' of a proposed rule, ``the key focus is on whether the 
purposes of notice and comment have been adequately served.'' 31 
In this case, parties were given an adequate opportunity to comment on 
the Form No. 8, specifically on its relationship to other sources of 
storage information, and its necessity. Five parties did, in fact, 
comment in favor of the elimination of the Form No. 8 reporting 
requirement, indicating that they understood what was being proposed. 
Louis Dreyfus had the same opportunity to comment on the retention of 
the Form No. 8, but chose to ignore the Commission's request.

    \31\ Fertilizer Institute v. U.S. EPA, 935 F.2d 1303, 1311 (D.C. 
Cir. 1991) (citations omitted) (``This means that a final rule will 
be deemed to be the logical outgrowth of a proposed rule if a new 
round of notice and comment would not provide commenters with `their 
first occasion to offer new and difference criticisms which the 
agency might find convincing.' ''); see Small Refiner Lead Phase-
Down Task Force v. U.S. EPA, 705 F.2d at 547.
---------------------------------------------------------------------------

    Louis Dreyfus claims that it relied on the Commission's statement 
that it was ``not proposing any substantive changes to [the Form No. 8] 
in this NOPR.'' It claims that such reliance is the reason it failed to 
comment prior to the final rule, and the reason that it was unaware of 
the Commission's ``surprise repeal'' of the Form No. 8 in time to file 
a timely rehearing request. 32

    \32\ Petition for Reconsideration at 8. Louis Dreyfus states 
that it learned of the elimination of the Form No. 8 from reading 
the trade press.
---------------------------------------------------------------------------

    That statement in the NOPR, taken alone, would have indicated to 
the public that no substantive changes would appear in the final rule. 
However, read together with the NOPR's invitation for comments on 
whether the Form No. 8 might be unnecessary, the statement put the 
public on notice that the Commission was contemplating eliminating the 
form; the solicitation for comments following the statement conveyed to 
the public that the Commission did not yet have enough information upon 
which to propose the elimination of the form, but that it 

[[Page 8867]]
simply needed comments to fully and carefully consider the issue.
    The Commission finds that reinstatement of the Form No. 8 on 
procedural grounds is unwarranted. Similarly, Louis Dreyfus' request in 
the alternative for reconsideration of the Form No. 8 issue through 
additional notice and comment procedures is denied. The Commission has 
already reconsidered the issue on the merits, supra, based on Louis 
Dreyfus' petition for reconsideration, and has determined that the Form 
No. 8 will not be reinstated.

V. Discount Rate Report

A. Disclosure of Commercially Sensitive Information

    In their comments to the NOPR, ANR/CIG objected to the public 
disclosure of the customer-specific data that was included in the 
proposed discount report. The discount report that was proposed in 
section 284.7(c)(6) represented a combination of the requirements 
contained in the existing discount reporting and maintenance provisions 
in section 284.7(d)(5)(iv) and 250.16(d), and thus, required expanded 
public reporting of discount information. The proposed discount report 
included: (1) The shipper's contract number (for all discounts on firm 
transportation); (2) any affiliate role in the transaction; (3) the 
quantity of gas delivered during the billing period at the discounted 
rate; and (4) the zone of delivery (for interruptible). ANR/CIG argued 
that the disclosure of much of the information in the discount report 
would cause competitive harm to both pipelines and their customers. 
Therefore, ANR/CIG sought the elimination of the discount report, or at 
a minimum, the deletion of the contract number, affiliate's role, 
quantities delivered, and delivery zone.
    The Commission heard the concerns of ANR/CIG and other commenters 
regarding the release of sensitive commercial information, and 
consequently, abandoned its proposal for an expanded discount reporting 
requirement under section 284.7. Thus, the Commission eliminated many 
of the proposed data elements from the discount report, and limited the 
information required to be filed to the discount data that was 
currently required to be filed under existing section 284.7(d)(5)(iv). 
33 However, on rehearing, ANR/CIG request that the Commission 
reconsider its decision to require disclosure of the information that 
was retained; essentially, ANR/CIG continue to seek elimination of the 
requirement that pipelines file discount rate reports.

    \33\ The discount rate report adopted in new section 284.7(c)(6) 
contains the name of the shipper, the corporate affiliation between 
the shipper and the transporting pipeline, the maximum rate or fee, 
and the rate or fee actually charge during the billing period.
---------------------------------------------------------------------------

    By retaining the existing discount rate report requirement, the 
Commission has already met ANR/CIG's original, alternative request that 
the contract number, affiliate's role, quantities delivered, and 
delivery zone be eliminated from the discount report. The Commission, 
however, will not go one step further and eliminate entirely the 
discount rate report.
    The purpose of the discount rate report is to ensure that discounts 
are offered on a nondiscriminatory basis. The public disclosure of the 
discount rate information is a critical element of the requirement to 
produce the data; it enables the discount report to achieve the 
purposes for which it was designed. Public reporting permits the 
Commission, as well as other interested parties, to maintain a vigil 
against discriminatory pricing. Making it more difficult to access this 
information will diminish the ability of the Commission and the public 
to discover problem deals. This concept was supported by the United 
States Court of Appeals for the D.C. Circuit when it condoned rate 
discounting:

    The reporting system will enable the Commission to monitor 
behavior and to act promptly when it or another party detects 
behavior arguably falling under the bans of [sections] 4 and 5. 
34

    \34\ Associated Gas Distributors v. FERC, 824 F.2d 981, 1009. 
(D.C. Cir. 1987).
---------------------------------------------------------------------------

B. Customer Codes

    At a minimum, if the Commission continues to require the filing of 
a discount rate report, ANR/CIG request that in all instances where 
customer-specific information is sought, the Commission permit 
pipelines, at their option, to use a customer code to identify 
customers. ANR/CIG state that each customer would be apprised of its 
customer code, and the code would be used consistently in all filings 
where customer information is required. ANR/CIG argue that if the need 
arises to identify any customer in any proceeding, that information 
could be sought in discovery, and such need evaluated on a case-by-case 
basis. Thus, ANR/CIG support the use of customer codes, rather than 
shipper names. For example, ANR/CIG assert that the provision of 
customer-specific information in the discount report, identified by 
customer code, with an identification of which codes represent 
affiliates of the pipeline, would be equally useful as a discount 
report containing the full name of the shipper.
    The Commission will not permit the use of customer codes in place 
of the full legal name of the shipper in the discount rate report. As 
noted above, the key purpose of the discount rate report is to enable 
shippers to determine whether a pipeline has offered a discount to a 
similarly situated shipper. Since under ANG/CIG's proposal, only the 
shipper receiving the discount would know its code, other shippers 
would be unable to determine whether the discount given was to a 
``similarly situated'' shipper. In other words, shippers need to know 
the name of the shipper being given a discount to evaluate if they are 
similarly situated. Therefore, the substitution of a secret code for 
the name of the shipper will thwart the purpose of the discount rate 
report, and the collection of the discount rate data will become 
useless.

VI. Index of Customers

A. Receipt Point Data

    In Order No. 581, the Commission required interstate pipelines 
transporting gas under subparts B and G to establish an Index of 
Customers through a downloadable electronic file. Under new section 
284.106(c), on the first day of each calendar quarter, the electronic 
Index of Customers must be posted on the pipeline's electronic bulletin 
board (EBB), and filed with the Commission in electronic form. A paper 
copy of the Index is not required to be filed.
    The Index of Customers, as finally adopted by Order No. 581, 
contains for all firm customers under contract as of the first day of 
the calendar quarter, the full legal name of the shipper, the rate 
schedule number for which service is contracted, the contract effective 
and expiration dates, and the maximum daily contract quantities. This 
is a more limited Index of Customers than the Index of Customers that 
was proposed in the NOPR. The proposed Index had included a number of 
additional data elements, including the receipt and delivery points 
associated with the shippers' maximum daily quantities (MDQs).35

    \35\ IV Stats. & Regs. para. 32,512 at 33,039.
---------------------------------------------------------------------------

    However, in light of the primary goal of the rulemaking proceeding 
to eliminate unnecessary regulations, and in response to comments that 
much of the proposed information was commercially sensitive, and that 
its disclosure would be harmful and 

[[Page 8868]]
burdensome, the Commission reconsidered the regulatory need for the 
information in the proposed Index. The Commission found that many 
items, such as the receipt and delivery points, extended beyond that 
which the Commission needs to receive from all pipelines on a regular 
basis to regulate the natural gas industry today. Thus, in the final 
rule, the Commission eliminated such items, reducing the information 
contained in the proposed Index of Customers to only that information 
absolutely necessary for the Commission's regulatory purposes.
    On rehearing, the Registry argues that capacity information at 
receipt and delivery points must be included in the Index of Customers 
because it is crucial to the development and functioning of the 
capacity market. The Registry states that point rights define the 
location, nature, and extent of capacity rights, and are the only way 
to determine segment rights. It argues that knowing the quantity of 
rights in a contract alone is useful neither to shippers, nor to 
regulators. The Registry argues that the Commission's deletion of point 
rights information from the Index of Customers will ensure that the 
capacity release market will function improperly, and that in taking 
such action, the Commission has abdicated its responsibility to protect 
the public interest.
    The Registry analogizes the operation of the capacity release 
market without disclosure of point rights to the operation of the 
securities market without disclosure of the quantity of stocks or bonds 
available in each class, or disclosure of their maturity, rate, and 
redemption/conversion terms. The Registry uses this analogy to argue 
that absent access to point information, the capacity release market 
will fail, since the securities market failed due to a lack of 
confidence, prior to securities registration.
    In a nutshell, the Registry explains that if users cannot identify 
the quantity of rights that they own to move gas into and out of a 
point relative to the quantity of rights others own to move gas into 
and out of the pipeline at the same and other locations, shippers will 
not know the value of their capacity and will discount the value they 
ascribe to owning the pipeline's capacity. In other words, without the 
availability of point quantity information, there is no method for 
market participants to monitor the quantity of rights sold or available 
for sale, or to measure the relative amount of rights held in relation 
to the total of rights. The Registry asserts that this lack of 
knowledge of the true value of capacity in the capacity release market 
will lead to a lack of confidence in the market and in the real value 
of capacity rights.
    According to the Registry, a lack of confidence in the capacity 
market will lead to an avoidance of long-term commitments, which in 
turn, will result in an unhealthy gas market and market failure. The 
Registry argues that a healthy gas business is in the public interest, 
and that it is the Commission's fundamental role and responsibility to 
provide confidence in, and contribute to, a healthy, functioning 
natural gas market, and to thereby protect consumers.
    Finally, the Registry argues that receipt and delivery point 
information is not overly burdensome or needless; it argues point data 
is essential, otherwise the market will fail, and heavy-handed 
regulation will return. The Registry believes that this information is 
most likely currently contained in one or more computerized databases 
and/or control systems operating at the pipelines, since pipelines need 
this information to determine releases and valid nominations for the 
flow of gas. According to the Registry, the only tool necessary to 
``publish'' this information would be an electronic application to 
extract the information from the computerized system it is contained 
in, and to place it into the defined format for download. Since this 
application has to be developed anyway to supply the rest of the 
information contained in the Index of Customers, argues the Registry, 
the marginal cost to extract and include point level information in the 
application is far less than the benefits to the natural gas market of 
having the information available.
    In the final rule, the Commission found that it was unpersuaded 
that it should require pipelines to maintain a comprehensive list of 
capacity rights by receipt and delivery points to aid the secondary 
capacity market, or to assist third-party-run exchanges and market 
center developers. The Commission stated that it was not clear what 
practical effect providing the proposed receipt and delivery point 
information would have on the secondary market. The Commission remains 
unpersuaded that inclusion of capacity information by receipt and 
delivery points in the Index of Customers is essential to the continued 
viability of the capacity market.
    One of the goals of this rulemaking proceeding is to simplify and 
streamline the Commission's reporting requirements, and to reduce the 
reporting burden on pipelines. For the Commission to add to the 
reporting burden by including receipt and delivery point data in the 
Index of Customers, a conclusive showing would need to be made that a 
problem in the secondary market exists, and that the inclusion of the 
point information would solve the problem. The Registry has not made 
such a showing in its request for rehearing. Instead, the Registry has 
presented a general claim that the market will fail to function 
properly, or will collapse completely, without the availability of the 
information.
    Receipt and delivery point information has never before been 
available in an electronic index. At best, the information was embedded 
in the initial and subsequent reports that pipelines were required to 
file, and thus, not easily accessible. Without the ready availability 
of receipt and delivery point information, the secondary capacity 
market was created, and has grown to a healthy market. Since the market 
has expanded to what it is today, without market participants' access 
to capacity information at receipt and delivery points throughout its 
infancy and development, it is logical to assume that a continued lack 
of access to this information will not cause it to fail or collapse.
    The Registry rests its belief that the market is destined to fail 
on the lack of confidence in the market and of knowledge of the true 
value of capacity that will be caused by a lack of access to receipt 
and delivery point information. It states that without capacity 
information by point, there is no method for market participants to 
monitor the quantity of rights sold or available for sale.
    However, market participants may determine the quantity of rights 
sold, at particular receipt and delivery points, through the capacity 
release data sets that pipelines are required to make publicly 
available through EDI transmission and information posted on each 
pipeline's EBB. Second, even if the contract quantity by receipt and 
delivery point were posted in the Index of Customers, there is no way 
of knowing what proportion of the posted capacity is available for 
release. In any given time frame, some capacity is available for 
release, some is used by the owner, and some is idle.
    Finally, the Commission is not abdicating its responsibility to the 
natural gas market and to the public by failing to require that this 
information be included in the Index of Customers for the purpose of 
aiding the secondary market. The Commission has all indications that 
the market can function adequately without the electronic posting of 
this information in an Index 

[[Page 8869]]
of Customers. Moreover, we have determined that requiring this 
information to be included in a quarterly Index of Customers is 
unnecessary for the Commission to fulfill its regulatory oversight 
responsibilities. We find that there is enough information included in 
the capacity release data sets for the Commission to monitor the 
secondary market. Accordingly, the Commission will not require that 
receipt and delivery point information be included in the Index of 
Customers. Rehearing is denied.

B. Customer Codes

    As with the discount reports, ANR/CIG are concerned that the 
dissemination of the information in the Index of Customers could cause 
competitive harm. Therefore, ANR/CIG also seek the use of customer 
codes instead of customer names for the customer-specific information 
required in the Index of Customers.
    The Commission will not permit the use of customer codes in the 
Index of Customers. ANR/CIG has proposed the use of customer codes to 
ensure that the information required by the Index of Customers is kept 
confidential. However, this information, including the shipper's name, 
is information that appears in the contract between the pipeline and 
the shipper, and is the type of information that section 4(c) of the 
Natural Gas Act (NGA) requires the pipeline to make publicly available. 
36

    \36\ 15 U.S.C. Sec. 717c(c) (1994).
---------------------------------------------------------------------------

    Furthermore, it has not been demonstrated that the release of a 
shipper's name, and the other information included in the Index of 
Customers, would cause competitive harm. First, the data is basic 
contract information of an identifying nature, and does not include 
commercially sensitive rate information. Second, the Commission does 
not presume the existence of competition in the natural gas 
transportation market, since there is a presumption that a pipeline 
still retains a substantial degree of market power in the 
transportation of natural gas, unless proven otherwise. When the claim 
of confidentiality has been asserted in Commission proceedings, the 
Commission has required the claim to be supported with specificity, 
rather than with vague and speculative allegations of competitive harm, 
37 since the Commission must ``balance the need for public 
disclosure against the harm caused by release of the information.'' 
38 ANR/CIG's request for rehearing on this issue is denied.

    \37\ See Trunkline Gas Company, 49 FERC para. 61,227 (1989).
    \38\ ANR Pipeline Company, 65 FERC para. 61,280 at 62,305 
(1993).
---------------------------------------------------------------------------

3. Clarification of Quarterly Posting Requirement
    Section 284.106(c) provides that each calendar quarter, a pipeline 
must post on the pipeline's electronic bulletin board (EBB), and file 
with the Commission in electronic form, an electronic index of firm 
customers under contract as of the first day of the calendar quarter. 
The Commission clarifies this provision to require pipelines to post 
and file its index of customers that are under contract as of the first 
day of the calendar quarter, on the first business day of the calendar 
quarter. This will conserve the pipelines' personnel resources in the 
event the first day of the calendar quarter falls on a weekend or a 
holiday.

VII. Effective Date

    The amendments to the Commission's regulations adopted in this 
order on rehearing will become effective April 5, 1996, except for the 
changes to the Form Nos. 2 and 2-A, which will be effective January 1, 
1996. In the final rule, the Commission adopted an effective date of 
January 1, 1996 for the changes to Form Nos. 2, 2-A, and 11 to afford 
the pipelines adequate opportunity to adapt to the requirements of the 
final rule, and to make the necessary modifications to their 
recordkeeping systems. Adopting the January 1, 1996 effective date 
means that data for the report year 1995 will be submitted in the 
format for Form Nos. 2 and 2-A in effect prior to January 1, 1996. 
Similarly, for report months November 1995 and December 1995, pipelines 
will report Form No. 11 data in the format in effect prior to January 
1, 1996. This is true even though the filing dates for the forms fall 
subsequent to January 1, 1996.

List of Subjects

18 CFR Part 201

    Natural gas, Reporting and recordkeeping requirements, Uniform 
System of Accounts.

18 CFR Part 284

    Continental shelf, Natural gas, Reporting and recordkeeping 
requirements.

    By the Commission.

Lois D. Cashell,
Secretary.

    In consideration of the foregoing, the Commission denies rehearing 
in part, grants rehearing in part, clarifies Order No. 581 as described 
above, and amends Parts 201 and 284, Chapter I, Title 18, Code of 
Federal Regulations, as set forth below.

PART 201-UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR NATURAL GAS 
COMPANIES SUBJECT TO THE PROVISIONS OF THE NATURAL GAS ACT

    1. The authority citation for Part 201 continues to read as 
follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352, 
7651-7651o.

    2. In Part 201, Balance Sheet Accounts, Special Instructions to 
Accounts 117.1, 117.2, and 117.3, a new subparagraph is added after the 
last subparagraph in paragraph (a), and paragraph (b) is revised to 
read as follows:

Balance Sheet Accounts

* * * * *
Special Instructions to Accounts 117.1, 117.2 and 117.3
* * * * *
    (a) Inventory Method-- * * *
    Adjustments for inventory losses related to gas held in underground 
reservoirs due to cumulative inaccuracies of gas measurements, or from 
other causes, must be charged to Account 823, Gas Losses. Losses of 
system gas not associated with underground reservoirs must be charged 
to Account 813, Other Gas Supply Expenses.
    (b) Fixed Asset Method-- * * *
    When replacement of the gas is made, the amount carried in Account 
117.4 for such volumes must be cleared with a contra entry to Account 
808.2, Gas Delivered to Storage--Credit. Any difference between the 
utility's cost of replacement gas volumes and the amount cleared from 
Account 117.4 must be recognized as a gain in Account 495, Other gas 
revenues, or as a loss in Account 813, Other gas supply expenses, with 
contra entries to Account 808.2.
    Adjustments for inventory losses related to gas held in underground 
reservoirs due to cumulative inaccuracies of gas measurements, or from 
other causes, must be charged to Account 823, Gas Losses. Losses of 
system gas not associated with underground reservoirs must be charged 
to Account 813, Other Gas Supply Expenses. Gas losses must be priced at 
the market price of gas available to the utility in the month the loss 
is recognized. 

[[Page 8870]]

    Gas owned by the utility and injected into its system will be 
deemed to satisfy any encroachment on system gas first before any other 
use.
    3. In part 201, Balance Sheet Accounts, Account 117.4, the word 
``revolve'' is removed, and the word ``revalue'' is added in its place.
    4. In Part 201, Operation and Maintenance Expense Accounts, Account 
805, a new paragraph D is added to read as follows:

Operation and Maintenance Expense Accounts

* * * * *
805  Other gas purchases.
* * * * *
    D. The value of gas received from shippers under tariff allowances 
that is not consumed in operations nor returnable to customers through 
rate tracking mechanisms must be credited to Account 495, Other Gas 
Revenues and charged to this account. Utilities must simultaneously 
charge Accounts 117.3 or 117.4 as appropriate, with contra credits to 
Account 808.2, Gas Delivered to Storage--Credit. Records are to be 
maintained and readily available that include the name of shipper, 
quantity of gas, and the publication and price used to value shipper-
supplied gas.
* * * * *
    5. In Part 201, Operation and Maintenance Expense Accounts, Account 
806 is revised to read as follows:

Operation and Maintenance Expense Accounts

* * * * *
806  Exchange gas.
    This account includes debits or credits for the cost of gas in 
unbalanced transactions where gas is received from or delivered to 
another party in exchange, load balancing, or no-notice transportation 
transactions. The costs are to be determined consistent with the 
accounting method adopted by the utility for its system gas. If the 
utility has adopted the inventory method of accounting, the amounts to 
be recorded in Account 806 must be based on the historical cost of the 
gas. If the utility has adopted the fixed asset method of accounting, 
the amounts to be recorded in Account 806 must be based on the current 
market price of gas at the time gas is tendered for transportation. 
(See the Special Instructions to Accounts 117.1, 117.2, and 117.3 for a 
description of the inventory and fixed asset methods and the definition 
of the current market price of gas.) Contra entries to those in this 
account are to be made to account 174, Miscellaneous Current and 
Accrued Assets, for gas receivable and to account 242, Miscellaneous 
Current and Accrued Liabilities, for gas deliverable under such 
transactions. Such entries must be reversed and appropriate contra 
entries made to this account when gas is received or delivered in 
satisfaction of the amounts receivable or deliverable.
* * * * *
    6. In part 201, Operation and Maintenance Expense Accounts, 
paragraph A of Accounts 808.1 and 808.2 are revised to read as follows:

Operation and Maintenance Expense Accounts

* * * * *
808.1  Gas withdrawn from storage-Debit.
    A. This account shall include debits for the cost of gas withdrawn 
from storage during the year. Contra credits for entries to this 
account shall be made to accounts 117.1 through 117.4, or account 
164.2, Liquefied Natural Gas Stored, as appropriate. (See the Special 
Instructions to accounts 117.1, 117.2, and 117.3).
* * * * *
808.2  Gas delivered to storage-Credit.
    A. This account shall include credits for the cost of gas delivered 
to storage during the year. Contra debits for entries to this account 
shall be made to accounts 117.1 through 117.4, or account 164.2, 
Liquefied Natural Gas Stored, as appropriate. (See the Special 
Instructions to accounts 117.1, 117.2, and 117.3).
* * * * *
    7. In Part 201, Operation and Maintenance Expense Accounts, Account 
823 is revised to read as follows:
823  Gas losses.
    This account shall include the amounts of inventory adjustments 
representing the cost of gas lost or unaccounted for in underground 
storage operations due to cumulative inaccuracies of gas measurements 
or other causes. (See the Special Instructions to Accounts 117.1, 117.2 
and 117.3). If however, any adjustment is substantial, the utility may, 
with approval of the Commission, amortize the amount of the adjustment 
to this account over future operating periods.

PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE 
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES

    8. The authority citation for part 284 continues to read as 
follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7201-7352; 
43 U.S.C. 1331-1356.
* * * * *

Subpart B--Certain Transportation by Interstate Pipelines

    9. In Sec. 284.106, the first sentence of paragraph (c)(1) is 
revised to read as follows:


Sec. 284.106  Reporting requirements.

* * * * *
    (c) Index of customers. (1) On the first business day of each 
calendar quarter, subsequent to the initial implementation of this 
provision, an interstate pipeline must provide for electronic 
dissemination of an index of all its firm transportation and storage 
customers under contract as of the first day of the calendar quarter.* 
* *
* * * * *
[FR Doc. 96-5164 Filed 3-5-96; 8:45 am]
BILLING CODE 6717-01-P