[Federal Register Volume 61, Number 73 (Monday, April 15, 1996)]
[Notices]
[Pages 16479-16480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9213]



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DEPARTMENT OF ENERGY

Alternatives to Traditional Cost-of-Service Ratemaking for 
Natural Gas Pipelines; Regulation of Negotiated Transportation Services 
of Natural Gas Pipelines; Order Denying Requests for Rehearing and 
Clarification

[Docket No. RM95-6-001; Docket No. RM96-7-001]
    Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A. 
Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa, 
Jr.
    Issued April 9, 1996.
    On January 31, 1996, the Commission issued a Statement of Policy 
and Request for Comments (Policy Statement) on alternatives to 
traditional cost-of-service ratemaking methodologies.1 The Policy 
Statement articulated and/or modified the criteria the Commission will 
use in evaluating pipeline company proposals to charge market-based 
rates, incentive rates, and negotiated rates where there is a cost-
based recourse rate option. The Policy Statement also created a new 
proceeding, Docket No. RM96-7-000, and requested comments on whether 
the Commission should permit pipelines to negotiate the terms and 
conditions of service, in addition to the rates for those services.
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    \1\ 74 FERC para. 61,076 (1996), 61 FR 4633 (February 7, 1996).
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    Fifteen parties seek rehearing and/or clarification of the January 
31 Policy Statement.2 As discussed in greater detail below, the 
Commission denies the requests for rehearing and clarification.
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    \2\  Alberta Department of Energy
    American Forest & Paper Association
    Associated Gas Distributors
    Brooklyn Union Gas Company
    Columbia Gas Transmission Corporation and Columbia Gulf 
Transmission Company **
    Entex, A Division of NorAm Energy Corp. and Louisiana Gas 
Service Company a Division of Citizens Utilities Company
    Independent Petroleum Association of America
    Indicated Shippers
    Industrial Gas Consumers
    Interstate Natural Gas Association of America **
    Koch Gateway Pipeline Company
    NorAm Gas Transmission Company
    Tenneco Energy **
    Texaco Natural Gas, Inc.
    United Distribution Companies **
    ** Request for Clarification.
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Summary of the Requests for Rehearing and Clarification

    The Requests for Rehearing generally track the three areas 
addressed in the Policy Statement--market-based rates, incentive rates, 
and negotiated rates with a recourse rate option. With respect to 
market-based rates, the parties seek rehearing of several of the 
criteria the Commission adopted. Specifically, parties argue that the 
Commission erred in adopting criteria for defining ``good 
alternatives'' which include the use of netbacks and a 10 percent price 
increase threshold. Furthermore, the parties allege error in the 
Commission's use of a .18 HHI as a screen to determine the level of 
scrutiny to be given to proposals for market-based rates. Parties also 
assert that the Commission's failure to adopt a periodic rate review 
requirement for pipelines charging market-based rates constitutes 
error. Other alleged points of error include the Commission's failure 
to extend the criteria for evaluating market-based rate proposals to 
the secondary transportation market and the Commission's stated 
willingness to consider pipeline proposals to mitigate market power. 
Finally, several parties provided suggestions for modifying the Policy 
Statement and/or the manner in which the criteria for evaluating 
market-based rates will be applied.
    With respect to incentive rates, several parties expressed concern 
regarding the Commission's decision to eliminate the requirement that 
pipelines articulate quantifiable benefits to their customers to result 
from incentive rate proposals. Parties also express concern regarding 
the elimination of the requirement that rates under incentive 
regulation can be no higher than they would have been under cost-of-
service regulation. In addition, several parties made general 
suggestions regarding the application of the criteria for evaluating 
incentive rate proposals.
    Finally, parties also raised concerns regarding the Commission's 
stated willingness to entertain requests to charge negotiated rates, so 
long as a Commission-approved, cost-based recourse rate was available 
to shippers on the pipeline's system.

Discussion

    The purpose of the Policy Statement was to provide the industry 
with guidance by stating the criteria the Commission will consider when 
evaluating proposals for alternative ratemaking methodologies. In 
stating the evaluation criteria, the Policy Statement also conveyed the 
Commission's intent to evaluate the specific proposals based on the 
facts and circumstances relevant to the applicant and to address any 
concerns regarding the application of the criteria on a case-by-case 
basis.3 In general, objections to statements of policy are not 
directly reviewable. Rather, such review must await implementation of 
the policy in a specific case.4 Therefore, the Commission declines 
to consider the issues raised in the requests for rehearing and/or 
clarification regarding market-based, incentive, or negotiated rate 
proposals in the abstract, but will consider such issues and arguments 
in the specific cases in which they apply. In addition, the Commission 
will consider negotiated rate issues that relate to negotiated terms 
and conditions of service in Docket No. RM96-7-000.5

    \3\ See, e.g., Policy Statement, slip op. at 26, 35, 40 and 47.
    \4\ See, American Gas Association v. FERC, 888 F.2d 136 (D.C. 
Cir. 1989).
    \5\ Regulation of Negotiated Transportation Services of Natural 
Gas Pipelines, Docket No. RM96-7-000, Order Granting Clarification, 
74 FERC para. 61,194 (1996) (clarification of the scope of the 
proceeding).

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[[Page 16480]]

    By the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 96-9213 Filed 4-12-96; 8:45 am]
BILLING CODE 6717-01-P