Federal Register, Volume 61 Issue 224 (Tuesday, November 19, 1996)

[Federal Register Volume 61, Number 224 (Tuesday, November 19, 1996)]
[Proposed Rules]
[Pages 58790-58798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29555]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM96-1-003]

Standards for Business Practices of Interstate Natural Gas
Pipelines

November 13, 1996.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of Proposed Rulemaking and Notice of Technical
Conference.

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SUMMARY: The Federal Energy Regulatory Commission is proposing to amend
its open access regulations by incorporating by reference standards

[[Page 58791]]

promulgated by the Gas Industry Standards Board (GISB). These standards
would require interstate natural gas pipelines to conduct business
transactions and provide other information according to Internet
protocols and to abide by business practice standards dealing with
nominations, flowing gas, and capacity release. These business practice
standards supplement GISB business practice standards the Commission
adopted in a final rule issued July 17, 1996 in this docket (61 FR
39053, July 26, 1996). In addition, the Commission is announcing a
staff technical conference to discuss the future direction of GISB's
electronic communication standards and the possible need for standards
in disputed areas.

DATES: Comments on the Notice of Proposed Rulemaking are due December
13, 1996. Comments should be filed with the Office of the Secretary and
should refer to Docket No. RM96-1-003.
The technical conference will be held on December 12, and 13, 1996
at the offices of the Federal Energy Regulatory Commission.

ADDRESSES: Federal Energy Regulatory Commission, 888 First Street,
N.E., Washington DC, 20426.

FOR FURTHER INFORMATION CONTACT:

Michael Goldenberg, Office of the General Counsel, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
(202) 208-2294.
Marvin Rosenberg, Office of Economic Policy, Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, DC 20426, (202) 208-
1283.
Kay Morice, Office of Pipeline Regulation,Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, DC 20426, (202) 208-
0507.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in Room 2A, 888 First
Street, N.E., Washington D.C. 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 1-800-856-3920 if dialing
long distance. To access CIPS, set your communications software to use
19200, 14400, 12000, 9600, 7200, 4800, 2400 or 1200bps, 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 for one year. 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 Room 2A, 888 First Street,
N.E., Washington D.C. 20426.
The Commission's bulletin board system also can be accessed through
the FedWorld system directly by modem or through the Internet. To
access the FedWorld system by modem:

Dial (703) 321-3339 and logon to the FedWorld system
After logging on, type: /go FERC

To access the FedWorld system through the Internet, a telnet
application must be used either as a stand-alone or linked to a Web
browser:

Telnet to: fedworld.gov
Select the option: [1] FedWorld
Logon to the FedWorld system
Type: /go FERC

or:

Point your Web Browser to: http://www.fedworld.gov
Scroll down the page to select FedWorld Telnet Site
Select the option: [1] FedWorld
Logon to the FedWorld system
Type: /go FERC

The Federal Energy Regulatory Commission (Commission) proposes to
amend its open access regulations by incorporating by reference
consensus standards promulgated by the Gas Industry Standards Board
(GISB), a consensus standards organization devoted to developing
standards for electronic communication and business practices for the
natural gas industry. These standards would require interstate natural
gas pipelines to conduct business transactions and provide other
information according to Internet protocols and to abide by business
practices standards dealing with nominations, flowing gas, and capacity
release. These business practices standards supplement GISB business
practices standards the Commission adopted in a final rule issued July
17, 1996 in this docket.\1\ In addition, the Commission gives notice of
a staff technical conference to be held on December 12, 1996 and
December 13, if needed, to discuss the future direction of
standardization for electronic communication and business practices.
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\1\ Standards For Business Practices Of Interstate Natural Gas
Pipelines, Order No. 587, 61 FR 39053 (Jul. 26, 1996), III FERC
Stats. & Regs. Regulations Preambles para. 31,038 (Jul. 17, 1996).
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I. Background

In Order No. 587, the Commission incorporated by reference GISB \2\
consensus standards covering Nominations, Flowing Gas, Invoicing, and
Capacity Release and GISB datasets in Electronic Data Interchange ASC
X12 (EDI) format that detailed the data requirements needed to conduct
business transactions in these areas. At that time, the Commission did
not adopt GISB standards governing the method for transmitting these
datasets (the electronic delivery mechanism (EDM)) because the
standards were not complete and GISB was still determining whether to
use the public Internet or private intranets as the communication
vehicle. GISB had established a pilot program to test the use of the
public Internet. The Commission anticipated that the EDM standards for
the business transactions would be implemented in April through June
1997 in conjunction with the implementation of the business practices
standards.
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\2\ GISB's consensus process provides for balanced voting from
all five major segments of the natural gas industry--pipelines,
local distribution companies (LDCs), producers, end-users, and
services (including marketers and third-party providers of computer
services). To become a GISB standard, a proposal must be approved by
17 out of 25 members of the GISB Executive Committee, with at least
two votes from each segment, and be approved by 67% of GISB's
general membership.
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In the Business Practices Notice of Proposed Rulemaking (NOPR),\3\
and Order No. 587, the Commission also established a September 30, 1996
date for the submission of detailed comments and standards from all
members of the industry on additional issues that GISB had not resolved
the first time, but that several parties considered important. These
included expansion of Internet protocols to include all electronic
information provided by the pipelines (to replace pipeline cost-of-
service Electronic Bulletin Boards (EBBs)), title transfer tracking,\4\
allocations and rankings of gas packages, treatment of compressor fuel,
operational balancing agreements, routing models, imbalance resolution,
operational flow orders, multi-tiered allocations and

[[Page 58792]]

confirmations, and additional pooling standards.
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\3\ Standards For Business Practices Of Interstate Natural Gas
Pipelines, Notice of Proposed Rulemaking, 61 FR 19211 (May 1, 1996),
IV FERC Stats. & Regs. Proposed Regulations para. 32,517 (Apr. 24,
1996).
\4\ Title transfer tracking refers to keeping computerized
record of nominations showing the transfer between parties of title
to gas whether or not the gas is being physically transported on the
pipeline.
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A. GISB's September 30, 1996 Filing

On September 30, 1996, GISB filed consensus standards governing the
electronic methods of conducting certain business transactions,
nominations, confirmations, invoicing, flowing gas, and capacity
release. GISB also filed standards to respond to the additional issues
listed by the Commission.
GISB issued standards to move other information from EBBs to the
Internet (such as notices, affiliated marketer information,
operationally available capacity, index of customers, and tariff
provisions). GISB further approved a standard that, at some time in the
future, pipeline EBBs will be replaced by Internet or another specified
technology that will contain all information now provided on the EBBs.
GISB approved six revisions to its business practices standards and
25 new business practices standards. The new standards passed by GISB
include additional standards for operational flow orders (OFOs) to
facilitate communication of OFO conditions and to clarify shippers'
abilities to correct OFOs; requirements for pipelines, when feasible,
to enter into operational balancing agreements (OBAs) at all pipeline-
to-pipeline interconnects; clarifications regarding the imposition of
imbalance penalties (e.g., allowing shippers to net imbalances across
contracts); an enhanced definition of intra-day nominations; additional
standards to simplify the process of in-kind fuel reimbursement; and
standards for gas package identification and rankings of gas packages.
GISB did not pass any standards regarding title transfer tracking,
one of the areas the Commission had listed for consideration. However,
GISB did approve a pilot program to test various means of providing
this service, including the use of third-parties. The results of the
pilot test are due by September 1997.
GISB proposed the following timetable for implementation of its
proposed standards:

March 1, 1997--Anticipated date for final rule on additional standards
April 1, 1997--Implementation of the Internet protocols for the
business transactions covered by Order No. 587
May, June, July 1997--Tariff filings for Additional Standards with the
same phased pipeline categories as in Order No. 587
August 1, 1997--Implementation of Internet access for additional
information
September 1997--Results of pilot test for title transfer tracking
November 1, 1997--Deadline for implementation of Additional Standards

B. Additional September 30, 1996 Filings

Pursuant to the Commission's invitation to file proposals on
September 30, 1996, the Interstate Natural Gas Association of America
(INGAA), PanEnergy Pipelines,\5\ Williams Interstate Natural Gas System
(WINGS), Enron Interstate Pipelines (Enron), Natural Gas Clearinghouse,
Conoco, Inc., and Vastar Gas Marketing, Inc (NGC/Conoco/Vastar),
Natural Gas Supply Association (NGSA), and Brooklyn Union Gas Company
(Brooklyn Union) filed comments on the GISB proposals.
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\5\ Texas Eastern Transmission Corporation, Panhandle Eastern
Pipe Line Company, Trunkline Gas Company, and Algonquin Gas
Transmission Corporation.
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All the comments find that GISB's standards will improve efficiency
and promote a more integrated natural gas network. NGC/Conoco/Vastar
and NGSA, however, contend that in certain areas the GISB standards do
not go far enough in answering shippers' concerns. They highlight
failures to reach agreement on alternatives to in-kind fuel
reimbursement,\6\ additional pooling standards, further clarification
and standardization of intra-day nominations, further allocation and
ranking standards for gas packages, trading of imbalances across
pipeline customers, and standards for multi-tiered allocations and
confirmations. They point out that the GISB Business Practices
Subcommittee reached agreement on numerous standards that were not
approved at the Executive Committee level and maintain that a number of
these standards were defeated by the pipelines voting as a block.
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\6\ Brooklyn Union also supports standards for additional fuel
reimbursement methodologies.
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INGAA, PanEnergy Pipelines, WINGS, and Enron generally support the
GISB standards, except for WINGS' questioning of one principle (1.1.14)
and one standard (1.3.28). The pipelines do not believe that GISB
should issue additional standards, particularly relating to fuel
reimbursement. Pan Energy contends that standards for multi-tiered
allocations and additional pooling standards are related to title
transfer tracking and should await the report of the GISB title
transfer tracking task force.
WINGS and PanEnergy Pipelines raise questions about GISB's EDM
standards. WINGS maintains the EDM standards for conducting business
transactions depart from standard Internet technology and are too
expensive. PanEnergy Pipelines contend that, during an interim period
when pipelines continue to provide EBB services, pipelines should not
be required to develop GISB approved procedures and standards for both
the Internet and their EBBs.

II. Discussion

The Commission proposes to adopt all the GISB consensus standards:
the GISB electronic communication standards for business transactions,
the standard for dissemination of additional information at Web sites,
and the revised and new business practices standards. The Commission
proposes to follow the implementation schedule set by GISB: the
standards for business communications would be implemented on April 1,
1997 so as to coincide with implementation of the first set of business
practices standards; the provision of additional information at Web
sites would be implemented August 1, 1997, and the tariff filings to
comply with the business practices standards would be made in May,
June, and July of 1997 with implementation November 1, 1997.
The Commission appreciates the time and effort GISB and the members
of the gas industry have again expended in developing these standards.
The industry's ability to reach agreement on standards in some of the
complex areas it considered is testament to this effort and the spirit
of cooperation and compromise that has pervaded this effort. A
consensus of all industry segments find that these standards will
increase efficiency and help create a more integrated gas market, and
the Commission, therefore, is proposing to adopt them.
GISB's proposed electronic communication standards move the gas
industry to the forefront in business use of the Internet.^{7 The
gas industry will be using the Internet not merely as a means of
transmitting information, but as the vehicle for conducting reliably
and securely a number of crucial business transactions, nominations and
confirmations, flowing gas (pre-determined allocations), and invoicing
and payment. The benefits of these standards are not limited to
communications between pipelines and their customers. The protocols,
for instance, also permit improved

[[Page 58793]]

communication efficiency between pipelines and upstream and downstream
operators, which can use the Internet to confirm nominations by
matching the gas nominated with transactions on their system.
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\7\ See Dave Kosiur, Electronic Commerce Edges Closer, PCWeek On
Line, Oct. 10, 1996, http://www.pcweek.com/@netweek/1007/07set.html.
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The new business practices standards similarly should provide for a
more integrated and efficient pipeline grid. They would impose new
requirements for establishing OBAs, provide shippers with increased
flexibility to clear imbalances, require pipelines to honor shippers'
determinations of delivery priorities, clarify shipper's abilities to
correct OFOs, and standardize the methods for calculating the amount of
gas needed to reimburse pipelines for compressor fuel, so that shippers
can accurately submit nominations for transportation across multiple
pipelines, with many zones.
The comments of NGSA and NGC/Conoco/Vastar raise concerns about the
failure to pass standards in additional areas. And, GISB itself left
issues relating to the method by which pipelines are compensated for
services to regulatory agencies. In any industry effort of this
magnitude, there are bound to be areas in which the parties are unable
to reach agreement. That is particularly true given some of the complex
and vexing problems GISB was considering. But, even in those areas
where agreement among the segments has proved elusive, GISB and the
industry's efforts have served an extremely valuable purpose by
defining the scope of the problems and offering reasoned positions and
possible solutions for handling them.
The Commission, however, needs to obtain a better understanding of
the issues in dispute. The Commission, therefore, is directing its
staff to establish a technical conference on December 12, 1996, and
December 13, if needed, to consider these issues.

A. Standards Proposed for Adoption

1. Electronic Delivery Mechanism Standards
GISB has adopted two approaches for using the Internet to transmit
and receive information. For communications involving business
transactions (nominations, confirmations, invoicing), the GISB
standards would require trading partners (pipelines and their
customers) to maintain Internet file servers and Internet addresses and
to exchange files formatted in ASC X12 using HTTP (hyper-text transfer
protocol) as the Internet protocol (hereinafter Internet server model).
^{8 The Internet server model permits pipelines and customers to
transmit internet documents such as nominations and confirmations to
the Internet site of the other party, regardless of whether that party
is currently on-line. Under this model, a pipeline would send a
customer confirmation of its scheduled volumes when the information is
ready. The information would not simply be maintained on the pipeline's
Internet server with the customer having to retrieve it.
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\8\ See Standards 4.3.1-4.3.4 and 4.3.7-4.3.15.
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For the additional information to be transmitted over the Internet
(notices, affiliated marketer information, operationally available
capacity, index of customers, and tariff provisions), GISB has proposed
a somewhat different Internet model. ^{9 In this model, pipelines
will establish Internet Web pages which customers can access through
standard Internet browsers (hereinafter Web browser approach).
Customers also will be able to download this information according to
GISB specified formats. This standard further provides that, within a
reasonable amount of time, pipeline EBBs will be replaced by Internet
or another specified technology that will contain all information now
provided on the EBBs.
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\9\ Standards 4.3.5 and 4.3.6.
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WINGS raises a concern about whether customers will use GISB's
proposed Internet server approach. WINGS does not believe that
customers will find that the advantages of the GISB Internet server
model warrant the added costs of renting server space or paying a
third-party service provider. WINGS contends that a more traditional
Internet approach like the Web browser approach should be adopted for
the business transactions, so the customer would not have to operate
its own Internet server.
NGSA supports the GISB approach, arguing that using the Internet to
conduct these transactions will open the market to smaller customers
and reduce overall costs. In particular, NGSA supports the use of HTTP
because it provides a time stamp showing that the documents have been
received by the other trading partner. ^{10 In anticipation of
potential objections like those from WINGS, NGSA maintains that smaller
customers can either rent server space from an Internet Service
Provider or contract with a third-party vendor.
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\10\ NGSA maintains that other options, such as Internet E-mail
do not provide this critical element. It further argues that the
Internet file transfer protocol (FTP) was rejected for site security
and maintenance reasons.
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According to the transcript of the GISB Executive Committee
meeting, GISB considered and rejected the proposal made by WINGS. The
Internet server model was adopted because pipelines and customers did
not want to have to retrieve documents from the others' sites; they
wanted the documents transmitted and received automatically. ^{11
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\11\ Report of the Gas Industry Standards Board, Vol. IV, filed
in Standards For Business Practices Of Interstate Natural Gas
Pipelines, Docket No. RM96-1-000 (September 30, 1996), Transcript of
September 12, 1996 GISB Executive Committee Meeting, at 99-100.
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The Commission is proposing to adopt the industry's consensus
determination to adopt the Internet server model. This model would make
possible highly formatted, time stamped, computer-to-computer
communication. It would provide customers with the capability of
immediately receiving data from the pipelines when it is ready and
programming their computers to process these data automatically,
without the need to retrieve the data from a Web page. For all the
business transactions, GISB has established multiple reciprocal file
exchanges, including files such as ``Quick Responses'' to verify
receipt and errors in the transmission. The Internet server model
provides an efficient means for sending and receiving these multiple
files. Such computer-to-computer communication seems particularly
necessary to provide a fully integrated and efficient communication
system in the future.
However, while the Internet server model appears necessary, WINGS's
comment raises questions about whether it is sufficient or whether
additional communication methods may be needed. This issue should be
considered at the technical conference.
In addition, the Commission notes that standard 4.3.5 requires that
information on a pipeline's Web site also will be downloadable in file
structures established by GISB. GISB has not yet filed these file
structures. GISB needs to file these technical documents so the
Commission can incorporate them by reference in the final rule.
2. Business Practices Standards
In Order No. 587, the Commission stated that GISB standards are
entitled to great weight because GISB's stringent voting requirements
^{12 reasonably ensure that these standards reflect a

[[Page 58794]]

consensus of the industry. ^{13 All of the September 30, 1996
comments support the consensus standards passed by GISB, except for
WINGS's concerns with principle 1.1.14 (dealing with OFOs) and standard
1.3.28 (dealing with in-kind fuel reimbursement). Accordingly, the
Commission proposes to adopt these standards.
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\12\ Approved standards require approval by 68% of the Executive
Committee, with at least two votes from each segment, and approval
by 67% of the entire membership.
\13\ Order No. 587, 61 FR at 39,057-39,059; III FERC Stats. &
Regs. Preambles at 30,061-30,064.
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WINGS contends that the OFO principle (that pipelines should
provide shippers with the opportunity to take other appropriate action
to cure the circumstances giving rise to the OFO) should not be
interpreted to permit shippers to avoid OFOs or substitute their
judgment for that of the pipeline. First, the Commission has adopted
GISB's principles to give guidance as to the meaning and interpretation
of standards, but has not required pipelines to follow principles.
^{14 Second, the language of the principle does not give shippers
unilateral rights to determine how to respond to OFOs. The principle
states that before assessing a penalty, the pipeline must afford a
shipper the opportunity to correct the circumstance giving rise to the
OFO either by making a nomination or taking other appropriate action.
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\14\ Order No. 587, 61 FR at 39,060, III FERC Stats. & Regs.
Preambles, at 30,066.
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Standard 1.3.28 requires pipelines to establish fuel rates only at
the beginning of the month. WINGS is concerned about the possibility
that pipelines without storage may have less flexibility to absorb mid-
month changes in fuel needs and should be permitted to adjust fuel
during the month. Reimbursement for fuel has been a major issue in
standardization, because many shippers contend that having to compute
the additional gas they need to nominate in order to satisfy the
pipelines' compressor fuel requirements excessively complicates the
nomination process, particularly for transportation across a number of
pipelines, with a multiplicity of zones. A consensus of the industry
has found that simplification of the nomination process requires all
pipelines to set fuel rates at the beginning of the month. While some
pipelines may have to make some adjustments to comply with the
standard, the benefit to the industry from standardized fuel
calculation appears to outweigh any problems caused a few pipelines.
Therefore, the Commission proposes to adopt this standard.
PanEnergy Pipelines recommend a change in the Commission's
staggered implementation schedule, adopted in Order No. 587, for
standard 1.3.1 which establishes a nationwide uniform gas day.
PanEnergy Pipelines maintain that staggered implementation of this
standard could create problems for shippers, which may have to
establish temporary accounting systems to adjust for gas day variances
between pipelines. They recommend uniform implementation of this
standard on June 1, 1997. The consensus agreement of the GISB
membership, including shippers, was to implement this standard
according to the staggered schedule, and, since GISB has proposed no
change, the Commission will not propose a change in the staggered
implementation schedule.

B. Issues To Be Considered at the Technical Conference

1. Electronic Communication Issues
GISB has proposed a different model for the business transaction
standards (Internet server) than for the additional information to be
provided over the Internet. GISB also has proposed that, within a
reasonable amount of time, pipeline EBBs will be replaced by Internet
or another specified technology that will contain all information now
provided on the EBBs. GISB, however, has not explained how its two
models interrelate or how it intends to proceed on developing
communication standards in the future. The Commission would like to
keep abreast of these plans so that it can understand how GISB and the
industry intend to proceed. The following are some of the issues that
the parties should discuss with Commission staff at the technical
conference.
First, GISB has not explained whether the Internet server model is
the only method it will develop for conducting business transactions
with pipelines or whether it envisions developing more standard Web
browser approaches. As noted earlier, WINGS contends the Internet
server model may be too expensive for small customers to use.
The GISB Internet server approach would require pipelines to
provide information in a standardized format that allows for a high
level of functionality, such as time-stamping and automatic transmittal
of information. In this model, customers both large and small must make
an investment decision as to how to obtain the maximum benefit from the
system. Large customers, for instance, may opt to program their
computers to communicate by directly transferring files from their gas
management systems to the pipelines. Smaller customers, however, may
prefer a more interactive (EBB-like) approach, where they can submit
nominations by pointing and clicking in a Windows^{TM-like
environment. Both customer types may want to take advantage of the
capability of programming their computers to automatically process a
document arriving from the pipeline.
Smaller customers could hire a consultant to set-up their system or
choose from among third-party vendors the service that best fits their
needs. Due to scale economies, a third-party provider can spread the
costs of establishing an Internet server and user interface across all
of its customers and, therefore, may be able to provide the service
more cheaply than an individual customer doing its own programming.
Pipelines acting individually or jointly also could help their
customers use this model, possibly even going so far as to provide them
with programs to create and view files interactively.
At the technical conference, the parties should discuss whether the
Internet server model is sufficient for conducting business
transactions with pipelines or whether alternatives need to be
developed. In particular, participants should explore whether
customers, and derivatively third-party service providers, will be
willing to make the investment necessary to implement this model if
they perceive that another model will be developed, which, regardless
of its overall implementation cost, may result in lower out-of-pocket
charges to customers. Participants should address the costs of
establishing the Internet server model, whether third-party vendors are
presently or are anticipating entering the market to provide these
services and at what prices, and whether development of alternative
standards should wait until the market has been given a reasonable
chance to develop products using the GISB model.
Second, WINGS's comment and some of the discussion at the GISB
Executive Committee meeting ^{15 raise questions about why GISB has
adopted two Internet models--the Internet server for conducting
business transactions and the Web browser for transmitting other types
of information--and each model is restricted to certain data. If
customers already need to acquire Internet server space to conduct
electronic business transactions, there would appear to be little extra
cost in providing the other data on notices, affiliated marketer
information, operationally available

[[Page 58795]]

capacity, index of customers, and tariff provisions using the Internet
server model as well.
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\15\ Transcript of Executive Committee Meeting, supra note , at
340-349 (discussing the transmission of critical notices using the
Internet server model).
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For instance, GISB is proposing to put critical notices and
operationally available capacity on the Web site, where customers would
have to log-on to obtain the information. But it would seem that these
data are the type of information that should be automatically
transmitted to the customer or third-party service provider, so that
they can process it immediately upon receipt. A critical notice or
change in operationally available capacity can occur at anytime
unbeknownst to the customers, and, therefore, customers with Internet
servers may want that information transmitted immediately.
Third, GISB anticipates that, within a reasonable time, all EBB
services will move from pipeline EBBs to standardized transactions over
the Internet. PanEnergy Pipelines raise questions about what type of
investment pipelines should be required to make in their EBB services
in the interim period until all transactions are standardized on the
Internet.
As the Commission stated in the final rule, the industry and the
Commission need to consider whether pipelines should be able to recover
through their cost-of-service only the costs of providing standardized
information.^{16 Pipelines, or their affiliates, could still provide
EBB services, but would charge a fee for customers using that service.
Thus, the pipeline EBB services would have to compete in the
marketplace with the communication services provided by third-party
vendors. Participants at the conference should consider these issues
and the role that pipeline EBBs should play in the future. They also
should consider whether additional standards may be necessary to ensure
that pipeline or pipeline affiliated services do not receive
preferential access to the pipeline computers that might distort the
competitive environment.^{17
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\16\ Order No. 587, 61 FR at 39065, III FERC Stats. & Regs.
Preambles at 39,074-75.
\17\ In the communication standards for the electric industry
developed in the OASIS rulemaking, the Commission sought to prevent
utilities from obtaining preferential direct connections. Open
Access Same-Time Information System and Standards of Conduct, Order
No. 889, 61 FR 21737 (May 10, 1996), FERC Stats. and Regs.
Regulation Preambles [Jan. 1991 to June 1996] para. 31,035, at
31,619 (Apr. 24, 1996).
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Clearly, there are tensions in the competing goals of first,
keeping the total costs of electronic communications as low as is
reasonably possible, second, ensuring that the quality of service
remains high, and third, pursuing a transition to a different method of
doing business. The Commission requests parties to address how GISB and
the industry can best manage this transition and minimize its possible
adverse impacts.
In sum, GISB's search for a common industry-wide electronic
communications standard appears to have led to two or three
coexisting--perhaps even competing--standards: pipeline EBBs; the
Internet Server approach; and the Internet Web-browser approach. At
least for the short term, it appears that all three will be in use.
Commenters should address how these standards can be integrated to
provide the natural gas industry with a simplified, streamlined
industry-wide standard for electronic communications. It would also be
helpful to hear views on the costs and benefits of each, the
suitability of each mode to different operational tasks, and the
possible effect on competing services offered by pipelines, third-party
service providers, and others. It would also be helpful to hear the
industry's views on the appropriate time line for the industry's
transition to this standard.
2. Disputed Issues
NGC and NGSA, while supporting the GISB standards that were passed,
contend these standards do not go far enough to resolve many of the
areas the Commission set for further consideration in the NOPR and the
final rule. They maintain that in many areas the GISB Business
Practices Subcommittee approved standards, only to have those standards
defeated at the Executive Committee level. They further point out that
at the Executive Committee level, a number of standards commanded
widespread support from the four customer segments of the industry, but
were defeated by the pipeline segment. Some of the standards they
maintain were defeated by the pipelines are additional standards for
OFOs, intra-day nominations, multi-tiered allocations, pooling, and
alternatives to in-kind reimbursement for compressor fuel. NGSA also
contends that with respect to intra-day nominations, the producer, end-
user, and LDC segments wanted more flexibility, but could not come to
closure on a standard, despite considerable debate. According to NGSA,
some did not support proposed standards, because they were concerned
that adoption of a standard might either reduce some of the flexibility
they presently enjoy from individual pipelines or would be used by
pipelines to establish a minimum compliance level, with any
enhancements provided at additional cost. NGC and NGSA maintain that
since GISB has now had two chances to deal with these standards, it is
time for the Commission to intervene.
INGAA and the pipelines, in contrast, contend that there were good
reasons for voting against the standards. They contend that pipelines'
purchasing gas for compressor fuel is inconsistent with Order No. 636,
by putting pipelines back into the merchant business, and would create
competition for both gas and allocation priority between pipelines and
their customers. In any event, they argue that creating standards for
alternatives to in-kind reimbursement for compressor fuel are premature
since pipelines have not yet experimented with these alternatives. They
further maintain that passing standards in many of the other areas is
similarly premature and urge the Commission to leave these matters for
GISB and the industry to resolve. For example, they contend that some
of the standards regarding multi-tiered allocations are tied to title
transfer tracking, for which GISB established a task force to develop
more information.
At this point in the process, the Commission needs additional
information to determine how best to proceed. For example, the GISB
membership itself has determined that in areas relating to pipeline
compensation Commission guidance is needed.\18\ The Commission,
therefore, needs to examine whether the GISB standards on in-kind fuel
reimbursement are sufficient or whether additional methods of
reimbursement are needed. For instance, clarification is needed of the
consequences to shippers, under the new GISB standards, of incorrectly
calculating fuel, such as whether they would still receive the gas they
need with the difference being attributed to their imbalance.
---------------------------------------------------------------------------

\18\ Principle 1.1.16 states ``compensability of particular
products or services should be determined by trading partners and/or
regulatory agencies as applicable, but not by GISB.''
---------------------------------------------------------------------------

The Commission also needs to review the issues in those areas where
proposed standards having wide support have been defeated. As the
Commission pointed out in the final rule, it has in the past, and will
continue to take, an active role in determining the need for additional
standards in those areas identified by a broad consensus of the
industry as potentially requiring further standardization.\19\ In order
to crystallize those issues on which there is controversy, the
Commission is directing staff to establish a technical

[[Page 58796]]

conference to discuss these issues with the industry. To aid in
preparation for the conference, the Commission is reproducing in the
Appendix the text of those standards that it understands were defeated
by the votes of one segment.
---------------------------------------------------------------------------

\19\ Order No. 587, 61 FR at 39060, III FERC Stats. & Regs.
Preambles, at 30,065.
---------------------------------------------------------------------------

At the technical conference, staff will set a schedule for comments
to be filed with the Commission on these issues. In these comments,
commenters are asked to address, among other issues, how further
standardization in the areas in dispute would affect how pipelines and
their customers do business. How would standardization of these
business practices affect other issues concerning the quality and
nature of basic pipeline transportation services? What are the broader
policy implications associated with whether to standardize these
business practices? Where additional costs would be incurred in
complying with such business practices standards how should the
Commission balance the costs with potential benefits?

III. Information Collection Statement

The following collections of information are contained in this
proposed rule and have been submitted to the Office of Management and
Budget for review under Section 3507(d) of the Paperwork Reduction Act
of 1995, 44 U.S.C. 3507(d). Comments are solicited on the Commission's
need for this information, whether the information would have practical
utility, the accuracy of the provided burden estimates, ways to enhance
the quality, utility, and clarity of the information to be collected,
and any suggested methods for minimizing respondents' burden, including
the use of automated information techniques. The burden estimates for
complying with the Internet protocols for the business transactions
(Internet server model) were included in the burden estimate in Order
No. 587. The following burden estimates include the costs of complying
with the new and revised business practice standards and the additional
costs of implementing the requirement for posting additional
information on an Internet Web page (Web browser model). The burden
estimates are primarily related to start-up and will not be on-going
costs.
Public Reporting Burden: (Estimated Annual Burden).

----------------------------------------------------------------------------------------------------------------
Estimated
Number of Total Estimated total
Affected data collection respondents responses hours per annual
per year response hours
----------------------------------------------------------------------------------------------------------------
FERC-545.................................................... 86 86 58 4,988
FERC-549C................................................... 86 86 3,147 270,642
Total................................................. 86 86 3,205 275,630
----------------------------------------------------------------------------------------------------------------

Information Collection Costs:

Annualized Capital/Startup Costs (Per Respondent)
FERC-545--$2,900
FERC-549C--$157,350
Total--$160,250

The Office of Management and Budget's (OMB) regulations, require
OMB to approve certain information collection requirements imposed by
agency rule.\20\ The Commission is submitting notification of this
proposed rule to OMB.
---------------------------------------------------------------------------

\20\ 5 CFR 1320.11.
---------------------------------------------------------------------------

Titles: FERC-549C, Standards for Business Practices of Interstate
Natural Gas Pipelines FERC-545, Gas Pipeline Rates: Rate Change(Non-
Formal)
Action: Proposed collections.
OMB Control Nos: 1902-0174 (FERC-549C) and 1902-0154 (FERC-545).
Respondents: Businesses for profit, (Interstate natural gas
pipelines; (Not applicable to small businesses.)).
Frequency of Responses: One-time implementation (business
procedures, capital/start-up).
Necessity of the Information: This rule, if implemented, proposes
to adopt standards requiring interstate natural gas pipelines to
conduct business transactions and provide other information according
to Internet protocols and to abide by business practice standards
dealing with nominations, flowing gas, and capacity release. These
business practice standards supplement GISB business practice standards
the Commission adopted in Order No. 587.
The information collection requirements of this proposed rule will
be reported directly to the industry users. The implementation of these
proposed data requirements will help the Commission carry out its
responsibilities under the Natural Gas Act and coincide with the
current regulatory environment which the Commission instituted under
Order No. 636 and the restructuring of the natural gas industry. The
Commission's Office of Pipeline Regulation will use the data in rate
proceedings to review rate and tariff changes by natural gas companies
for the transportation of gas and for general industry oversight.

Internal Review

The Commission has reviewed the standards/business practices and
determined that they are necessary to establish a more efficient and
integrated pipeline grid. Requiring such standards on an industry-wide
basis will reduce the variations in pipeline business and communication
practices and will allow buyers to easily and efficiently obtain and
transport gas from all potential sources of supply. The required
standards/business practices conform to the Commission's plan for
efficient information collection, communication, and management within
the natural gas industry. The Commission has assured itself, by means
of its internal review, that there is specific, objective support for
the burden estimates associated with the information requirements.
Interested persons may obtain information on the reporting
requirements by contacting: Federal Energy Regulatory Commission, 888
First Street, N.E., Washington, D.C. 20426 [Attention: Michael Miller,
Division of Information Services, Phone: (202)208-1415, fax: (202)273-
0873, email:[email protected]].
Comments concerning the collection of information(s) and the
associated burden estimate(s) should be sent to contact listed above
and to the Office of Management and Budget, Office of Information and
Regulatory Affairs, Washington, D.C. 20503 [Attention: Desk Officer for
the Federal Energy Regulatory Commission, phone: (202)395-3087, fax:
(202)395-7285]

IV. Environmental Analysis

The Commission is required to prepare an Environmental Assessment
or an Environmental Impact Statement for any action that may have a
significant adverse effect on the human environment.\21\ The Commission
has categorically excluded certain actions from these requirements as
not having a significant effect on the human environment.\22\ The
action taken here falls within categorical exclusions in the

[[Page 58797]]

Commission's regulations for rules that are clarifying, corrective, or
procedural, for information gathering, analysis, and dissemination, and
for sales, exchange, and transportation of natural gas that requires no
construction of facilities.\23\ Therefore, an environmental assessment
is unnecessary and has not been prepared in this rulemaking.
---------------------------------------------------------------------------

\21\ Order No. 486, Regulations Implementing the National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs. Preambles 1986-1990 para. 30,783 (1987).
\22\ 18 CFR 380.4.
\23\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5), 380.4(a)(27).
---------------------------------------------------------------------------

V. Regulatory Flexibility Act Certification

The Regulatory Flexibility Act of 1980 (RFA) \24\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The proposed regulations would impose requirements only on interstate
pipelines, which are not small businesses, and, these requirements are,
in fact, designed to reduce the difficulty of dealing with pipelines by
all customers, including small businesses. Accordingly, pursuant to
section 605(b) of the RFA, the Commission hereby certifies that the
regulations proposed herein will not have a significant adverse impact
on a substantial number of small entities.
---------------------------------------------------------------------------

\24\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------

VI. Comment Procedures

The Commission invites interested persons to submit written
comments on the matters and issues proposed in this notice to be
adopted, including any related matters or alternative proposals that
commenters may wish to discuss. An original and 14 copies of comments
must be filed with the Commission no later than December 13, 1996.
Comments should be submitted to the Office of the Secretary, Federal
Energy Regulatory Commission, 888 First Street, NE, Washington, DC
20426, and should refer to Docket No. RM96-1-003. All written comments
will be placed in the Commission's public files and will be available
for inspection in the Commission's Public Reference Room at 888 First
Street, NE, Washington, DC 20426, during regular business hours.
Additionally, comments should be submitted electronically.
Participants can submit comments on computer diskette in WordPerfect'
6.1 or lower format or in ASCII format, with the name of the filer and
Docket No. RM96-1-003 on the outside of the diskette.
Participants also are encouraged to participate in a Commission
pilot project to test the use of the Internet for electronic filing
either in conjunction with, or in lieu of, diskette filing. Comments
should be submitted through the Internet by E-Mail to
[email protected] in the following format: on the subject line,
specify Docket No. RM96-1-003; in the body of the E-Mail message,
specify the name of the filing entity and the name, telephone number
and E-Mail address of a contact person; and attach the comment in
WordPerfect 6.1 or lower format or in ASCII format as an
attachment to the E-Mail message. The Commission will send a reply to
the E-Mail to acknowledge receipt. Questions or comments on the
electronic filing project should be directed to Marvin Rosenberg at
202-208-1283, E-Mail address [email protected]. Comments on
the program should not be sent to the E-Mail address for comments on
the NOPR.

List of Subjects in 18 CFR Part 284

Continental shelf, Natural gas, Reporting and recordkeeping
requirements; Incorporation by reference.

By direction of the Commission.
Lois D. Cashell,
Secretary.

In consideration of the foregoing, the Commission proposes to amend
Part 284, Chapter I, Title 18, Code of Federal Regulations, as set
forth below.

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

1. The authority citation for Part 284 continues to read as
follows:

Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C 7101-7532; 43
U.S.C 1331-1356.

2. In section 284.10, paragraphs (b)(1)(i) and (b)(1)(ii) are
revised, paragraph (b)(1)(iv) is redesignated (b)(1)(v) and revised,
and new paragraph (b)(1)(iv) is added to read as follows:

Sec. 284.10 Standards for Pipeline Business Operations and
Communications.

* * * * *
(b) * * *
(1) * * *
(i) Nominations Related Standards (Version 1.0, June 14, 1996), as
modified by Revised Standards 1.3.7, 1.3.14, and 1.3.23 (Version 1.1),
and Principles 1.1.12 through 1.1.16, Definitions 1.2.5 through 1.2.7,
and Standards 1.3.24 through 1.3.34 (Version 1.1);
(ii) Flowing Gas Related Standards (Version 1.0, June 14, 1996), as
modified by Revised Standard 2.3.9 (Version 1.1), and Principles 2.1.2
and 2.1.3, Definition 2.2.1, and Standards 2.3.29 through 2.3.31
(Version 1.1);
(iii) * * *
(iv) Electronic Delivery Mechanism Standards Principles 4.1.1
through 4.1.14 and Standards 4.3.1 through 4.3.3 (Version 1.0), Revised
Standard 4.3.4 (Version 1.1), and Principle 4.1.15 and Standards 4.3.5
through 4.3.15 (Version 1.1); and
(v) Capacity Release Related Standards (Version 1.0, June 14, 1996)
as modified by Revised Standard 5.3.22 (Version 1.1).
* * * * *
Note--The following appendix will not appear in the Code of
Federal Regulations.

Appendix--Proposed GISB Standards Defeated by One Industry Segment

Operational Flow Orders

Proposed Standard No. 23--Declaration of operational flow orders,
critical periods, and/or critical notices should be transmitted to the
affected trading parties. Trading parties should keep the
transportation service providers apprised of the specific locations for
this transmittal. These locations are 24 hour phone, fax, and/or pager.
The communication should contain, by reference, specific tariff
provision(s) that is(are) applicable to each situation being declared.

Gas Package Rankings

Proposed Standard No. 28B--Applicable rankings should be permitted
across contracts for the same service requester and location, when not
in conflict with tariff-based rules.

Multi-tiered Allocations

Proposed Standard No. 29--All owners of gas submitting nominations
or confirmations should be able to submit a predetermined allocation
(PDA). Gas should be allocated based on the PDA submitted by the owner.
If a PDA is not submitted, the service provider's default should be
used.

Pooling

Proposed Standard No. 38A--To the extent operationally compatible
with Transportation Service Provider operations and not to their
economic detriment, paper pool(s) should be created on each pipeline.
Pools should be created so that gas which is already in the zone,
segment or rate area (as applicable) where the pool is located can be
placed in the pool without transportation.
Proposed Standard No. 38B--To the extent operationally compatible
with Transportation Service Provider operations and not to their
economic detriment, logical pool(s) should be created on each pipeline.

[[Page 58798]]

Proposed Standard No. 40B--Any differences between a Aggregator's
(pooler's) scheduled quantities and allocated quantities at locations
for its pool should be allocated to the pooler, or the pooling
agreement. Aggregators (poolers) should be responsible for managing the
imbalances created by variances with their scheduled quantities.

Fuel Reimbursement

Proposed Standard No. 44--Defining standards for administering the
following fuel reimbursement options: in-kind, fuel cash-out,
negotiated sales and cost of service does not preclude service
providers from offering other options. The choice of fuel reimbursement
method(s) is subject to regulatory procedures, where applicable.
Proposed Standard No. 49A--For in-kind fuel reimbursement methods,
fuel rates can change on six month intervals, on April 1 and October 1.
Proposed Standard No. 50A--For in-kind fuel reimbursement and
except where pre-September 30, 1996 settlements provide otherwise, fuel
rates will have a true-up to actual fuel periodically on a prospective
basis.
Proposed Standard No. 51A-- For in-kind fuel reimbursement methods,
fuel rates changes should be made prospectively.
Proposed Standard No. 54B--Other than situations where regulatory
agencies require cost of service to be the only option provided, the
rate for cost of service provided fuel should be stated separately.
Proposed Standard No. 55--For cost of service as the fuel
reimbursement method, the rate for cost of service provided fuel should
be collected as a variable charge.
Proposed Standard No. 56B--No party should be advantaged or
disadvantaged in the offering or use of a service by virtue of any
costs to provide that service being administered via regulatory
proceedings for unassociated services.
Proposed Standard No. 57B--Fuel encompasses, but is not limited to,
the energy consumed in providing the transportation service (i.e.
natural gas, fuel oil, propane, electricity) and lost and unaccounted
for gas.
Proposed Standard No. 58-- For cash-out as the fuel reimbursement
method, Service Requester should notify Service Provider of its
election to exercise the cash-out option for fuel one day prior to the
close of the NYMEX natural gas futures trading for the next calendar
month.
Proposed Standard No. 59B--Where cash-out, as a fuel reimbursement
method, is offered as an option by a Service Provider, the Service
Requester should notify Service Provider of its election to exercise
the cash-out option for fuel one day prior to the close of the NYMEX
natural gas futures trading for the next calendar month.
Proposed Standard No. 60--Fuel Cash-out options should be exercised
for a minimum of one calendar month.
Proposed Standard No. 61--Fuel Cash-out quantities should be
determined by multiplying allocated receipts by fuel percentages as
stated in the tariff or applicable contract(s).
Proposed Standard No. 62--Fuel Cash-out price should be an
established commodity market price (i.e. index or competitive bid) in
rate area, zone or segment of the activity, or be based on the same
fuel cash-out index used for imbalances.
Proposed Standard No. 63--The fuel cash-out value (fuel quantities
times fuel cash-out price) should be separately stated on the invoice
for the related activity.
Proposed Standard No. 64--If fuel cash-out price is index-based,
the determination of the applicable indices should based on the
approved tariff provisions or applicable contract(s).
Proposed Standard No. 65--If fuel cash-out price is other than
index-based, the Service Provider should post that price three days
prior to the close of the NYMEX natural gas futures trading for the
next calendar month.
Proposed Standard No. 66B--There should be no cross-subsidization
by Service Providers of fuel provision service(s) by transportation
service(s) when both fuel provision services and transportation
services are provided by the service provider.
Proposed Standard No. 67--Negotiated fuel gas sales are sales of
gas by the service provider for the use of the service requester as
fuel for its transportation transaction. The price and terms and
conditions applicable to the sales transaction should be negotiated
between the transportation service provider and the service requester.
Proposed Standard No. 95A--If negotiated fuel gas sales are
offered, all transportation terms, conditions applicable to fuel sales
service should be specified in the transportation service providers
tariff, if applicable.

Intraday Nominations

Proposed Standard No. 77A--Intraday nominations should be allowed
at all nominatable receipt and delivery points and at pooling points.

OBAs and Imbalances

Proposed Standard No. 85A--All transportation service providers who
have sufficient system storage should allow service requesters (in this
instance, service requester excludes agents) to net similarly situated
imbalances on and across contracts with the transportation service
provider among themselves. In this context, ``similarly situated
imbalances'' includes contracts with the substantially similar
financial and operational implications to the transportation service
provider.
Proposed Standard No. 88A--Imbalance penalties should be based on
the lesser of the imbalance penalties based on operationally provided
measurement/allocated data and actual measurement/allocated data.
[FR Doc. 96-29555 Filed 11-18-96; 8:45 am]
BILLING CODE 6717-01-P}}}}}}}}}}}}