[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 WindowsTM-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