Federal Register, Volume 62 Issue 222 (Tuesday, November 18, 1997)

[Federal Register Volume 62, Number 222 (Tuesday, November 18, 1997)]
[Proposed Rules]
[Pages 61459-61476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30233]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM96-1-007; Order No. 587-F]

Standards for Business Practices of Interstate Natural Gas
Pipelines

November 12, 1997.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of proposed rulemaking (NOPR).

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
proposing to amend its regulations governing standards for conducting
business practices and electronic communication with interstate natural
gas pipelines by incorporating by reference the most recent version of
standards promulgated by the Gas Industry Standards Board (GISB). The
Commission also is proposing to adopt regulations, not developed by
GISB, governing intra-day nominations, operational balancing agreements
(OBAs), netting and trading of imbalances, standardization of
communications over the public Internet, and notices of operational
flow orders. In addition, the Commission is providing policy guidance
on other issues related to business practices of interstate natural gas
pipelines to assist GISB in developing implementation standards that
could be adopted by the Commission in future regulations. These
business practices standards supplement standards adopted by the
Commission in Order Nos. 587, 587-B, and 587-C.

DATES: Comments are due December 18, 1997.

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

[[Page 61460]]

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 complete text on diskette in
WordPerfect format may be purchased from the Commission's copy
contractor, La Dorn Systems Corporation. La Dorn Systems Corporation is
located in the Public Reference Room at 888 First Street, N.E.,
Washington, D.C. 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, also provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user. CIPS can be accessed over the Internet by pointing your
browser to the URL address: http://www.ferc.fed.us. Select the link to
CIPS. The full text of this document can be viewed, and saved, in ASCII
format and an entire day's documents can be downloaded in WordPerfect
6.1 format by searching the miscellaneous file for the last seven days.
CIPS also 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
19200, 14400, 12000, 9600, 7200, 4800, 2400, or 1200 bps, full duplex,
no parity, 8 data bits and 1 stop bit. The full text of this order will
be available on CIPS in ASCII and WordPerfect 6.1 format. CIPS user
assistance is available at 202-208-2474.

Notice of Proposed Rulemaking and Statement of Policy; Order No.
587-F

November 12, 1997.
The Federal Energy Regulatory Commission (Commission) is proposing
to amend Sec. 284.10 of its regulations governing standards for
conducting business practices and electronic communication with
interstate natural gas pipelines by incorporating by reference the most
recent version of standards promulgated by the Gas Industry Standards
Board (GISB). The Commission also is proposing to adopt regulations,
not developed by GISB, in new Sec. 284.10(b)(2) of its regulations.
These regulations would govern intra-day nominations, operational
balancing agreements (OBAs), netting and trading of imbalances,
standardization of communications over the public Internet, and notices
of operational flow orders. In addition, the Commission is providing
policy guidance on other issues to eliminate disputes within GISB over
these issues and thereby assist GISB in developing implementation
standards in these areas.

I. Background

A. Prior Commission Action

In Order Nos. 587, 587-B, and 587-C ¹ the Commission
began the process of standardizing the business practices and
communication methodologies of interstate pipelines to create a more
integrated and efficient pipeline grid. The Commission incorporated by
reference consensus standards developed by GISB,² covering
certain industry business practices--Nominations, Flowing Gas,
Invoicing, and Capacity Release--as well as standards and electronic
datasets that detailed the data requirements needed to conduct these
business transactions electronically. The Commission also adopted
standards providing that these business transactions would be conducted
over the Internet as well as standards requiring the posting of
additional information on Internet Web pages.
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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),
Order No. 587-B, 62 FR 5521 (Feb. 6, 1997), III FERC Stats. & Regs.
Regulations Preambles para. 31,046 (Jan. 30, 1997), Order No. 587-C,
62 FR 10684 (Mar. 10, 1997), III FERC Stats. & Regs. Regulations
Preambles para. 31,050 (Mar. 4, 1997).
\2\ GISB is a private, consensus standards developer composed of
members from all segments of the natural gas industry.
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During the process of adopting these standards, there were areas
that had been left unresolved which are relevant to the Commission's
proposed actions in this Notice of Proposed Rulemaking (NOPR). First,
in Order No. 587-C, the Commission declined to adopt standards in four
areas--intra-day nominations, operational balancing agreements, netting
of imbalances, and downloading documents from pipeline Internet Web
sites--and requested that GISB and the industry propose clarifications
or revisions to the standards by September 1, 1997. In addition, in
Order No. 587-E, the Commission noted that GISB had committed itself to
completing the standardization of all functions and information now
provided on pipeline Electronic Bulletin Boards (EBBs) and requested a
report, by September 1, 1997, on the extent of GISB's progress and the
contemplated completion
date. ³
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\3\ GISB Electronic Delivery Mechanism Related Standards 4.3.6
states that ``within a reasonable amount of time, all EBB
information, functions and transactions should be achieved via one
mode of communications.''
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Second, in its November 13, 1996 NOPR, ⁴ the Commission
identified several disputed standards where four industry segments
supported the standards, but the pipeline segment prevented a consensus
from being reached.⁵ To review these issues, the Commission
staff held a technical conference on December 12 and 13, 1996, and
comments on the conference were filed on February 21, 1997.⁶
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\4\ See Standards For Business Practices Of Interstate Natural
Gas Pipelines, Notice of Proposed Rulemaking and Staff Technical
Conference, 61 FR 58790 (Nov. 19, 1996), IV FERC Stats. & Regs.
Proposed Regulations para. 32,521 (Nov. 13, 1996). The disputed
issues involve pooling, title transfer tracking, ranking of gas
packages, predetermined allocations, intra-day nominations,
operational flow orders, fuel sales, and imbalance trading.
\5\ For a standard to issue, it must be approved by 17 out of
the 25 members of the GISB Executive Committee with at least two
affirmative votes from each of the five segments.
\6\ Appendix A lists those filing comment on the conference.
Appendix B lists the disputed standards.
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B. GISB's September 2, 1997 Filing

On September 2, 1997, GISB filed with the Commission revisions to
its standards (Version 1.2), a report on the issues raised by the
Commission in Order No. 587-C regarding intra-day nominations, the
unclear OBA and imbalance standards, and the standard covering formats
for file downloads, and a report on the progress of its title transfer
tracking task force.
Version 1.2 replaces Versions 1.0 and 1.1. Version 1.2 contains
several new and revised business practices standards, covering exchange
of volume audit statements, statements of account, changes to Internet
protocols, formats for posting information on pipeline web sites, and
the confirmation and validation process for pre-arranged capacity
release transactions.\7\ The Version 1.2 standards also contain both

[[Page 61461]]

new and revised standards applicable to the datasets used for
electronically conducting business transactions relating to
nominations, flowing gas, invoices and capacity release data.\8\
Finally, the Version 1.2 standards include GISB's interpretations of
standards.\9\
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\7\ Flowing Gas Related Standard 2.1.4, Invoicing Related
Standard 3.3.21, Electronic Delivery Mechanism Standards 4.3.1 and
4.3.16, and Capacity Release Related Standard 5.3.30.
\8\ The new standards are Nominations Related Standard 1.4.6 and
Flowing Gas Related Standard 2.4.6. The revised standards are
Nominations Related Standards 1.4.1 through 1.4.5, Flowing Gas
Related Standards 2.4.1 through 2.4.5, Invoicing Related Standards,
3.4.1 through 3.4.3, Capacity Release Related Standards 5.4.1.
through 5.4.4, 5.4.6 through 5.4.13, and 5.4.15, through 5.4.17.
\9\ Interpretations of Standards 7.3.1 through 7.3.18.
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GISB reports that it established a task force to evaluate the
intra-day nomination process, but the task force has not yet completed
standards to better synchronize this process across pipelines. GISB
states that the completion of the intra-day nomination process was
delayed because the members of the task force came to the realization
that, in order to make the intra-day process work efficiently, a
fundamental review of the entire confirmation process was necessary.
GISB concludes that the task force remains cautiously optimistic that
it will successfully report a recommendation out of the task force to
the Executive Committee before the end of 1997.
GISB reports that it has not completed the clarification of the OBA
and imbalance standards as requested by the Commission in Order No.
587-C. GISB states that the standards are pending before its Business
Practices subcommittee, which intends to review them when its normal
rotation deals with contract and flowing gas issues. GISB anticipates
consideration of these issues before the end of 1997.
On electronic communication issues, GISB explained that it has
approved Electronic Delivery Mechanism Standard 4.3.16 which provides
that files can be downloaded from pipeline web sites in two formats:
hyper-text mark-up language (HTML) or rich-text-format (RTF). However,
GISB did not file a progress report on its efforts to complete the
process of standardizing information currently provided on pipeline
EBBs, as requested in Order No. 587-E.
GISB included a report by its title transfer tracking task force on
its progress. The task force has not yet completed its work, and GISB
comments that this is ``one of the most challenging and time consuming
issues facing the industry.''
Comments on the topics addressed by GISB's report were filed by
Natural Gas Clearinghouse (NGC), Koch Gateway Pipeline Company (Koch),
and TransCapacity Limited Partnership (TransCapacity). NGC contends
that GISB is stymied and that the time has come for the Commission to
resolve the issues which the Commission set for consideration in Order
No. 587-C. NGC further states that the title transfer tracking task
force has not addressed the underlying issue of whether the pipeline
should perform this service, and argues that this is an issue the
Commission must resolve. TransCapacity suggests the GISB process be
given more time, within defined limits, to resolve these issues.
Koch, on the other hand, contends the Commission should resist
further standardization, because standardization will impede the
pipelines' ability to provide creative or dynamic new services. Koch is
particularly concerned that further standardization of intra-day
nominations along the lines being considered by GISB's task force could
result in depriving shippers on its pipeline of service options they
value. Koch also is concerned about the possibility that the Commission
will replace pipelines' proprietary EBBs with a requirement for
standardized communication modalities.

II. Discussion

The Commission proposes to incorporate by reference the Version 1.2
standards passed by GISB to substitute for the Version 1.0 and 1.1
standards currently incorporated in the regulations. In the
Commission's earlier orders, the Commission adopted standards only when
all segments of the industry concurred that the standard was needed to
improve efficiency. However, the Commission has recognized that policy
disputes between the segments may prevent the development of standards
that are necessary to the development of an integrated pipeline
grid.\10\
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\10\ Order No. 587, 61 FR at 39060, III FERC Stats. & Regs.
Regulations Preambles, at 30,065; Order No. 587-C, 62 FR at 10686,
III FERC Stats. & Regs. Regulations Preambles para. 31,050, at
30,583.
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After having reviewed the transcript of the December 12-13, 1996
technical conference, the February 21, 1997 comments submitted on the
technical conference, and the GISB report, the Commission has concluded
that it needs to resolve policy disputes so that GISB can focus its
efforts on resolving the technical details of implementation. On some
issues, the Commission is proposing new regulations when uniform
standards appear necessary to increase the overall efficiency of the
pipeline grid or when the standard reflects a fundamental service right
to which similarly situated shippers should be entitled on all
pipelines. On other issues, the Commission is providing policy guidance
in this NOPR so that GISB and the industry can develop the most
efficient standards to implement those policy choices.
Specifically, the Commission is proposing to incorporate the
Version 1.2 standards in section 284.10(b)(1)(i) and is further
proposing in section 284.10(b)(2) to adopt additional regulations that
would: require pipelines to give firm intra-day nominations priority
over already nominated and scheduled interruptible transportation; \11\
require pipelines to enter into operational balancing agreements at all
pipeline to pipeline interconnects; \12\ require pipelines to permit
shippers to offset imbalances accruing on their different contracts
with a pipeline and trade imbalances when such imbalances have similar
operational impact on the pipeline's systems; \13\ require pipelines to
post all information and conduct all business transactions using the
public Internet and internet protocols by June 1, 1999; \14\ require
pipelines to adhere to specific standards in posting information on
pipeline web sites and in maintaining electronic records; \15\ and
require pipelines to provide shippers with notice of operational flow
orders by posting the notices on the pipelines' Internet web sites as
well as by notifying shippers through Internet E-Mail or through
notification to the shipper's Internet (URL) address. \16\ The
Commission is proposing that pipelines comply with these regulations
within 60 days of the issuance of final rule, with the exception, as
noted above, of section 284.10(b)(2)(iii)(A) (requiring pipelines to
conduct business using the Internet), for which compliance would be
expected by June 1, 1999.
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\11\ Proposed regulation 284.10(b)(2)(i).
\12\ Proposed regulation 284.10(b)(2)(ii)(A).
\13\ Proposed regulation 284.10(b)(2)(ii)(B).
\14\ Proposed regulation 284.10(b)(2)(iii)(A).
\15\ Proposed regulation 284.10(b)(2)(iii) (B) through (D).
\16\ Proposed regulation 284.10(b)(2)(iii)(E).
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The Commission is providing policy guidance in the following areas:
the extent of notice interruptible shippers should be given of
rescheduled capacity allocations, as well as the pipelines'
responsibilities to support title transfer tracking, to permit gas
package ranking across contracts, and to support the use of third-
parties to provide reimbursement for compressor fuel.

[[Page 61462]]

With respect to other issues in dispute, pipeline tracking of multi-
tiered allocations, provision of paper pools, and penalty calculations,
the Commission does not find that a sufficient case has been made to
justify its intervention at this time.
With the Commission's resolution of the fundamental policy issues,
GISB should be able to formulate the standards necessary for
implementing the policies addressed in this NOPR. Although GISB had
anticipated being able to complete standards in some areas by the end
of calendar 1997, the Commission recognizes that it may need additional
time to consider these standards in the light of the Commission's
policy guidance given here. The Commission finds that a March 31, 1998
deadline should provide sufficient time, and the Commission, therefore,
solicits the submission of final standards from GISB and others in the
industry by that date.
In stepping-in to resolve the disputed issues, the Commission is in
no way seeking to derogate GISB's role or its accomplishments. GISB's
ability to develop a consensus on the large number of standards it has
adopted is a signal achievement and testament to the industry's ability
to work together to solve mutual problems. However, it would ignore
reality to assume that all factions will be able to agree on every
issue, particularly when those issues involve regulatory policy issues.
By resolving these issues, the Commission is not seeking to replace
GISB, but rather to work together with GISB and the industry to develop
policies and standards necessary to increase the efficiency of the
pipeline grid.¹⁷ Indeed, the resolution of these policy
questions may permit GISB to focus its resources on developing the
necessary standards to implement these policies in the most efficient
manner possible.
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\17\ See Michael E. Porter & Class van der Linde, Green and
Competitive: Ending the Stalemate, Harvard Business Review 120, 124,
127 (Sept/Oct 1995); Malcolm Gladwell, Just Ask For It, The New
Yorker, 45 (April 7, 1997) (governmental regulation is sometimes
needed to motivate industries to adopt policies that enhance
competition and foster greater efficiency, but government needs to
focus on outcomes and should work with industry in setting relevant
standards).
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The Commission's proposed standards and its policy guidance in all
these areas are discussed below.

A. Proposed Adoption of the Version 1.2 Standards

Version 1.2 of the standards principally revises the data elements
used to conduct business transactions with the pipelines. The
Commission recognizes the difficulty, on the first shot, of developing
a comprehensive set of data elements that will accommodate business
transactions across all pipelines. Inevitably, experience with the
Version 1.1 standards would reveal areas where refinements and
improvements were needed. Adoption of the Version 1.2 revisions,
therefore, should improve the standards so that they better accommodate
pipeline business practices. In addition to incorporating the standards
by reference, the Commission also is proposing to incorporate the GISB
interpretations. While the interpretations will not necessarily be
determinative in the event of a dispute, they, like the GISB principles
adopted previously, will help to provide reliable guides as to the
industry's understanding of the standards should disputes or complaints
arise.
The Commission appreciates that the Version 1.1 standards have been
implemented unevenly across the pipeline grid. Some pipelines have
received waivers which permit them to use non-standardized data
elements, while they sought changes or revisions from
GISB.¹⁸ Other pipelines have implemented the Version 1.2
standards early.¹⁹ When implementation is not uniform,
burdens are created for shippers who have to have several different
sets of data elements to match the differing requirements of the
different pipelines. The Commission, therefore, requests comments on
whether in the interests of providing certainty, it should decline to
extend its waivers of the dataset compliance any further and require
all pipelines to follow the Version 1.2 standards even if certain
issues are still unresolved.
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\18\ See Texas Eastern Transmission Corporation, 79 FERC para.
61,223 (1997).
\19\ Tennessee Gas Pipeline Company, 80 FERC para. 61,311
(1997).
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A related question is how quickly to issue revisions to the
standards. There clearly is going to be a need to revise these
standards. Indeed, in this NOPR, the Commission has requested the
submission of additional data elements for certain transactions. On the
other hand, if the standards are modified too frequently, shippers
incur time and expense in having to reprogram their computers to meet
the new changes. Thus, the Commission requests comment on whether it
should grant a hiatus of a year or more before the Commission adopts
any subsequent revision of the datasets so that shippers will be able
to implement them without a risk that they subsequently will have to
remap their computers. A possible alternative to be considered in the
comments is whether additions to the datasets could be permitted, so
long as these additions do not affect the ability of shippers to use
the Version 1.2 standards. One of the advantages of EDI is that it does
permit the addition of data elements without affecting the ability of
shippers to use an earlier version. Under this approach, shippers that
want to avail themselves of the new features could do so, while other
shippers could still use the Version 1.2 datasets.

B. Proposed Regulations and Policy Guidance on Intra-day Nomination
Issues

1. The Issues
Under the GISB standards,²⁰ the initial nomination for
the next day of gas flow (which starts at 9 a.m.) must be transmitted
to the pipeline by 11:45 a.m. central clock time (CCT).²¹
This nomination is confirmed by 4:30 p.m. CCT. An intra-day nomination
is any nomination sent after the initial nomination
deadline.²² An intra-day nomination may be made either on
the day prior to gas flow (after 11:30 a.m.) or on the day of gas
flow.²³ Intra-day nominations are for a daily quantity;
changes in hourly gas flows are determined by the interconnecting
parties.²⁴
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\20\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards 1.3.1
and 1.3.2.
\21\ Central clock time is central time taking into account
changes for daylight savings time.
\22\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.2.4.
\23\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.2.7.
\24\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.3.9.
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The current standards require a pipeline to permit one intra-day
nomination four hours prior to gas flow.²⁵ In Order No. 587-
C, the Commission pointed out that pipelines chose to implement this
standard in divergent ways. Some pipelines process intra-day
nominations using a ``rolling'' system permitting the shipper to choose
the time at which it submits the intra-day nomination, while others
chose a ``batch process'' in which the pipeline sets a specified time
for processing intra-day nominations and all intra-day nominations
submitted before that time are accumulated and processed together. The
batch process also differs from pipeline to pipeline, with pipelines
choosing different batch times. In addition, on some pipelines intra-
day nominations for firm service ``bump'' or interrupt scheduled or
flowing interruptible gas, while on others they

[[Page 61463]]

do not. The Commission commented that this plethora of approaches
prevented shippers from coordinating their intra-day nominations across
multiple pipelines, and requested that GISB provide recommendations by
September 1, 1997 on standards to provide the necessary coordination.
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\25\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.3.10.
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According to GISB's September 2, 1997 filing, the task force it
assembled to consider this issue has not completed its work, because
its members came to the realization that, in order to make the intra-
day nomination process work efficiently, a fundamental review of the
entire confirmation process was necessary. GISB included with its
filing the current test model its task force has developed to deal with
this issue.
Under this model, pipelines would establish three times during
which shippers could synchronize their intra-day nominations across
multiple pipelines. The synchronization times are 6 p.m. (to take
effect on the next gas day) and 10 a.m. and 5 p.m. to take effect on
the same gas day.

BILLING CODE 6717-01-P
[GRAPHIC] [TIFF OMITTED] TP18NO97.021

BILLING CODE 6717-01-C

In the report, the task force summarizes the outstanding policy
disputes that it has been unable to resolve. First, the task force did
not address the ``bumping'' issue--whether firm intra-day nominations
can interrupt or displace scheduled interruptible service. The timeline
proposed by the task force attempts to accommodate both bumping and
non-bumping pipelines.
Second, the task force is unclear as to the amount of notice and
opportunity to reschedule which Commission policy accords to
interruptible shippers. For instance, under the test model, an intra-
day nomination submitted at 6 p.m. on the day before gas flow will not
take effect until 5 p.m. on the day of gas flow if it bumps an
interruptible shipper. If the intra-day nomination does not bump, it
will take effect at 9 a.m., rather than 5 p.m. The time line also
provides that the last intra-day opportunity of the day, at 5 p.m.,
does not bump.
The report states that some on the task force contend that bumping
an interruptible shipper's scheduled gas is unfair unless the shipper
has the opportunity to reschedule. Firm shippers, on the other hand,
contend that since they pay reservation charges, they are entitled to
scheduling priority and, therefore, their intra-day nomination should
take effect at 9 a.m. even if the firm intra-day nomination bumps
scheduled interruptible service.
Third, the task force states that some believe that the
synchronized time line can coexist with those pipelines that use a
rolling intra-day process, because shippers can choose whether to
submit their nominations at the synchronized times. Others, however,
are concerned that if a bump occurs, the coexistence of the two methods
seems to unravel.²⁶ They maintain that, if the Commission
requires that firm intra-day nominations bump scheduled interruptible
service, pipelines may have to switch from the rolling to the batching
process, which would be a degradation of service to shippers.
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\26\ In its September 2, 1997 comments, Koch, which states it
uses a rolling process without bumping, contends that if an
interconnected pipeline supports bumping and uses the batch process,
a bump on that pipeline can wreak havoc on Koch's system since a
bump will ripple down and disrupt flow.
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In addition, there was one disputed standard (Standard No. 77A)
dealing with intra-day nominations. This standard would have required
pipelines to permit intra-day nominations at all nominatable receipt
and delivery points.²⁷
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\27\ See Appendix B.
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2. Commission Resolution of the Issues
The Commission agrees that having three synchronization times, as
proposed by the task force, would be a significant improvement on the
current system. As GISB itself has recognized, however, the adoption of
these nomination timelines is only an interim step, with the ultimate
goal being the development of a continuous and contiguous scheduling
system.\28\
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\28\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.1.2.
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The Commission will resolve the policy disputes highlighted by the
GISB task force to enable GISB to focus on the implementation details
of the standards, such as ensuring that the intra-day confirmation
procedures are in place so that nominations will be accepted when
capacity is available. GISB and others in the industry should submit an
intra-day timeline and scheduling standards in accordance with these
policies by March 31, 1998.

a. Priorities of Firm and Interruptible Intra-day Nominations

(1) Commission's Policy on Service Priority
The Commission's policy since Order No. 636 has been that firm
shippers, who pay reservation charges, are entitled to service superior
to that of interruptible shippers. Interruptible shippers, by
definition, take the risk that their service will be interrupted if
firm shippers choose to use their capacity.
In Order No. 636, the Commission did not require pipelines to
provide intra-day nomination opportunities, but some pipelines did so,
and the Commission permitted those pipelines to include provisions in
their tariffs under which scheduled interruptible nominations would not
be bumped by firm intra-day

[[Page 61464]]

nominations. However, as intra-day nominations became more prevalent,
the Commission's policy was to apply its general scheduling priorities
to intra-day nominations. Thus, the Commission found that firm intra-
day nominations should be entitled to bump scheduled interruptible
service.²⁹ The Commission, however, concluded that
interruptible shippers should receive notice of their rescheduled
quantities and an opportunity to renominate.³⁰ The
Commission also determined that bumped interruptible shippers should
not be subject to penalties directly related to the bump on the day on
which the bump takes place.³¹
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\29\ See Tennessee Gas Pipeline Company, 73 FERC para. 61,158,
at 61,456 (1995).
\30\ Id.
\31\ Id. (daily variance charge waived, but only for the day on
which the bump takes place).
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When Order No. 587 required all pipelines to implement intra-day
nominations, the Commission determined that those pipelines filing to
institute intra-day nominations on their systems had to follow the
general policy and permit firm intra-day nominations to bump scheduled
interruptible service upon reasonable notice.³² On those
pipelines with no-bump provisions that existed prior to Order No. 587,
the Commission permitted the no-bump provisions to stand, because the
pipeline filings were strictly compliance filings, and the Order No.
587 standards did not address the priority issue for intra-day
nominations.³³
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\32\ See El Paso Natural Gas Company, 77 FERC para. 61,176
(1996); Alabama-Tennessee Natural Gas Company, 79 FERC para. 61,117
(1997); Algonquin Gas Transmission Company, 78 FERC para. 61,281
(1997); ANR Pipeline Company, 78 FERC para. 61,142 (1997); Arkansas-
Western Pipeline Company, 78 FERC para. 61,250 (1997); Canyon Creek
Compression Company, 78 FERC para. 61,003 (1997); CNG Transmission
Corporation, 78FERC para. 61,131 (1997); Great Lakes Gas
Transmission Limited Partnership, 79 FERC para. 61,194 (1997);
Iroquois Gas Transmission System, L.P., 79 FERC para. 61,196 (1997);
K N Interstate Gas Transmission Company, 79 FERC para. 61,208
(1997); Mojave Pipeline Company, 78 FERC para. 61,153 (1997);
National Fuel Gas Supply Corporation, 78 FERC para. 61,332 (1997);
NorAm Gas Transmission Company, 79 FERC para. 61,069 (1997);
Overthrust Pipeline Company, 78 FERC para. 61,285 (1997); Questar
Pipeline Company, 78 FERC para. 61,305 (1997); Southern Natural Gas
Company, 78 FERC para. 61,125 (1997); Texas Gas Transmission
Corporation, 79 FERC para. 61,175 (1997); Trailblazer Pipeline
Company, 77 FERC-- para. 61,328 (1996); Viking Gas Transmission
Company, 78 FERC para. 61,243 (1997); Young Gas Storage Company,
Ltd., 79 FERC para. 61,030 (1997).
\33\ See Transwestern Pipeline Company, 78 FERC para. 61,146
(1997); Florida Gas Transmission Company, 78 FERC para. 61,177
(1996).
---------------------------------------------------------------------------

(2) Proposed Regulation Giving Firm Intra-Day Nominations Priority Over
Scheduled Interruptible Service
The Commission is proposing to require that the remaining no-bump
pipelines follow its general policy that firm intra-day nominations
should have scheduling priority over scheduled interruptible service.
This regulation would ensure that all firm shippers will receive the
same rights on all pipelines.
INGAA and Koch ³⁴ contend that the Commission should not
seek to standardize this element of intra-day service. They maintain
that the diversity in approach is the product of individual pipeline
settlements and customer preferences which should not be upset.
---------------------------------------------------------------------------

\34\ Comments of the Interstate Natural Gas Association of
America, at 33 (February 21, 1997); Koch Gateway Pipeline Company,
at 11 (February 21, 1997). See also Comments of Enron Interstate
Pipelines, at 12 (February 21, 1997) (setting intra-day schedules is
not appropriate for a standard-setting forum).
---------------------------------------------------------------------------

Not only would a continuation of a bifurcated intra-day nomination
system deprive firm shippers on some pipelines with the legitimate
priority rights to which they are entitled, a bifurcated system also
appears to be at odds with the goal of creating an integrated pipeline
grid. A firm shipper nominating gas across multiple pipelines needs to
be able to coordinate its intra-day nominations. Under the present
system, if even one pipeline in its nomination chain has a no-bump
rule, the shipper may be unable to have its entire chain of intra-day
nominations confirmed. Thus, a single approach to bumping appears
necessary to integrate the pipeline grid.
The Commission, however, does agree with the GISB task force that,
if a firm shipper has had a reasonable opportunity to reschedule its
gas, a pipeline may provide a final intra-day nomination opportunity
where scheduled interruptible service will be protected from bumping.
Under the GISB task force's model, firm intra-day nominations submitted
at the third intra-day opportunity at 5 p.m. on the day of gas flow
would not bump previously scheduled interruptible service. Eliminating
bumping at this stage would provide a final opportunity for all
shippers to renominate supply and provide stability.
The Commission, therefore, is proposing to require pipelines to
give nominations by firm shippers scheduling priority over nominated
and scheduled volumes for interruptible service. The pipelines also
would have to provide interruptible shippers with notice that their
volumes will be reduced.³⁵ Pipelines would be required to
file to implement this provision within 60 days from the date of a
final rule in this proceeding. Pipelines would be expected to implement
this regulation based on their current intra-day schedule until such
time as GISB completes, and/or the Commission adopts, a revised intra-
day schedule. In accordance with the previous discussion, those
pipelines that permit at least three intra-day nomination opportunities
each gas day may file a request to permit scheduled interruptible
service to have a scheduling priority higher than a firm intra-day
nomination submitted at the final intra-day nomination opportunity of
the gas day. Pipelines filing to comply with this provision also need
to consider whether bumped interruptible shippers should be exempt from
certain penalties.
---------------------------------------------------------------------------

\35\ Proposed regulation 284.10(b)(2)(i).
---------------------------------------------------------------------------

(3) Policy Regarding Notice to Interruptible Shippers
The next question raised by the GISB task force report is over the
extent of notice, and the opportunity to renominate, to which an
interruptible shipper should be entitled if a firm intra-day nomination
bumps interruptible service. For instance, under the task force's
model, a firm intra-day nomination may be submitted at 6 p.m. on the
day before gas flow. If that nomination does not bump interruptible
service, it would become effective at 9 a.m. on the day of gas flow. If
it bumped interruptible service, one segment of the task force wants
the nomination to become effective at 5 p.m. on the day of gas flow in
order to permit the interruptible shipper to attempt to reschedule gas
at the 10 a.m. intra-day nomination. Under this approach, the firm
shipper would have 16 hours of gas flow (5 p.m. until 9 a.m. the next
day) while the interruptible shipper would have 8 hours of flow (9 a.m.
until 5 p.m.) under the initial nomination before the bump occurs.
Another segment contends that firm shippers, paying reservation
charges, should have the right to commence gas flow at 9 a.m.
regardless of whether it would bump interruptible shippers.
As described above, the Commission's policy is that firm shippers
have scheduling priority over interruptible shippers. Thus, in the
situation posited by the GISB task force, firm shippers should have the
right to submit an intra-day nomination on the day prior to gas flow
and have that nomination become effective at the start of the gas day,
rather than eight hours later. While interruptible shippers are
entitled to notice that their scheduled volumes will be reduced, they
are not necessarily entitled to an opportunity to reschedule prior to
their volumes being reduced if such a renomination would interfere with
the ability of a firm shipper to have

[[Page 61465]]

its nomination become effective at the earliest possible time after
confirmation.
In the situation posed by the GISB task force, the interruptible
shippers are provided with at least 11 hours notice prior to the start
of gas flow for the next day.³⁶ Thus, even if bumped, they
would not be required to reduce flowing volumes. Second, the
interruptible shippers would still have the opportunity at 10 a.m. to
reschedule its entire quantity of gas for the day, subject to available
capacity.
---------------------------------------------------------------------------

\36\ Under the test model, scheduled quantities for the 6 p.m.
intra-day nomination would be no later than 10 p.m., for gas that
does not begin to flow until 9 a.m. the next morning. Compare
Tennessee Gas Pipeline Company, 73 FERC para. 61,158, at 61,456
(1995) (four hours notice).
---------------------------------------------------------------------------

Moreover, interruptible shippers that wish to avoid the risk of
being bumped can enter into short-term capacity release transactions to
obtain firm service. Once scheduled, firm nominations to secondary
points have the same priority as service to primary points so that a
shipper obtaining released capacity could not be bumped even by a firm
intra-day nomination to a primary point.³⁷
---------------------------------------------------------------------------

\37\ Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation; and Regulation of
Natural Gas Pipelines After Partial Wellhead Decontrol, Order No.
636-B, 57 FR 57,911 (December 8, 1992), 61 FERC para. 61,272, at
62,013.
---------------------------------------------------------------------------

The Commission has considered whether, in the situation posited,
pipelines should be required to provide bumped interruptible shippers
with a further opportunity to reschedule their gas prior to the 9 a.m.
start of the gas day. However, given the 11 hour advance notice, and
the interruptible shippers' ability to reschedule gas at 10 a.m., the
Commission does not think that pipelines need to provide interruptible
shippers with an overnight opportunity to reschedule their gas prior to
the start of the gas day. Pipelines wishing to provide more certainty
for interruptible shippers, however, may provide such a later right if
they choose.
According to the task force report, some parties contend that
allowing a firm intra-day nomination, which bumps scheduled
interruptible service, to take effect at 9 a.m. does not provide an
adequate incentive for firm shippers to submit timely and reasonably
reliable nominations at 11:30 a.m. These parties contend that firm
shippers may delay their nomination, because they can always rely upon
their intra-day right to make a nomination change effective at the
start of gas flow. The Commission does not find this hypothetical
concern sufficient to deny firm shippers the right to renominate their
supplies to take into account changes in weather or other
circumstances. First, firm shippers do not appear to have an obvious
incentive to purposefully delay their initial nominations or to submit
nominations not based on their best assessment of their needs, at the
time, for the next day.³⁸ Second, firm shippers still run a
risk if they delay their nominations, because a firm shipper's
nomination to a primary point will not bump already scheduled secondary
firm service to that point. Thus, a firm shipper that delays its
nomination risks losing its ability to acquire gas at its primary
point.
---------------------------------------------------------------------------

\38\ Indeed, under the current standards firm shippers have an
incentive to overnominate at the 11:30 deadline, because they can
always reduce their nomination through the intra-day nomination
process, but may not be able to increase it.
---------------------------------------------------------------------------

b. Guidance Regarding the Effect of an Intra-Day Schedule on Pipelines
Using Rolling or Continuous Processing of Intra-Day Nominations

Some members of the GISB task force and some of the comments have
raised the question of whether the move to batch processing of intra-
day nominations at certain specific times may result in a degradation
of service on pipelines that currently process intra-day nominations on
a rolling or continuous basis. Koch, for instance, maintains that, if
bumping is permitted according to the GISB task force's model, it would
be forced to reconsider whether to move to a batch
process.³⁹
---------------------------------------------------------------------------

\39\ Comments of Koch Gateway Pipeline Company, at 3-4 (Sept. 2,
1997).
---------------------------------------------------------------------------

As the GISB task force points out, the identification of
synchronization times is not necessarily inconsistent with a rolling or
continuous process. Shippers that want to avail themselves of
synchronization can time their nominations identically on all
pipelines. However, if a pipeline and its customers find that the
synchronization times along with the requirement that firm intra-day
nominations can bump scheduled interruptible service creates too much
disruption on a rolling or continuous system, the pipeline may move to
conform to the standardized schedule. The efficiency gained by the
entire industry in being able to coordinate nominations across the
pipeline grid outweighs any potential diminution of service on the
pipeline using a continuous intra-day nomination process. Indeed, it is
not clear how valuable the continuous process is on a single pipeline,
since even if a shipper on that pipeline is permitted an intra-day
change, the shipper will not know whether similar coordinating changes
will be permitted on interconnecting pipelines.

c. Submission of Intra-Day Nominations at All Nomination Points

Disputed Standard No. 77A would require pipelines to allow intra-
day nominations at all nominatable receipt and delivery points. The
Commission's policy is that those intra-day nominations required by the
Commission must be made available to all regular open access services,
apply to each contract between the shipper and the pipeline, and permit
the shipper to request changes at all receipt and delivery
points.⁴⁰ Pipelines, however, may impose restrictions on
intra-day nomination opportunities that go beyond those required by the
Commission.⁴¹ Thus, the Commission will clarify that the
three intra-day opportunities under the GISB task force's model would
be available at all points where nominations are permitted.
---------------------------------------------------------------------------

\40\ See Tennessee Gas Pipeline Company, 78 FERC para. 61,007,
at 61,019-20 (1997); Canyon Creek Compression Company, 78 FERC para.
61,003 (1997) (cannot restrict intra-day nominations to telemetered
points); Trailblazer Pipeline Company, 77 FERC para. 61,328 (1996)
(cannot restrict intra-day nominations to telemetered points).
Standard 1.3.11 states that intra-day nominations can be used to
request changes to receipt points or delivery points. 18 CFR
284.10(b)(1)(i), Nominations Related Standards 1.3.11.
\41\ See Tennessee, note 40, supra (permitting intra-day
nominations beyond the minimum required under certain rate
schedules).
---------------------------------------------------------------------------

C. Proposed Regulations Concerning Operational Balancing Agreements and
netting and Trading of Imbalances

1. Background
In Order No. 587-C, the Commission did not adopt two GISB flowing
gas standards relating to operational balancing agreements (OBAs)
(Standard 2.3.29) and netting of imbalances across contracts (Standard
2.3.30), because the pipelines' obligations under the standards were
not clearly defined. GISB Standard 2.3.29 states:

At a minimum, transportation service providers should enter into
Operational Balancing Agreements at all pipeline-to-pipeline
(interstate and intrastate) interconnects, where economically and
operationally feasible.

GISB Standard 2.3.30 states:

All transportation service providers should allow service
requesters (in this instance, service requester excludes agents) to
net similarly situated imbalances on and across contracts with the
service requester. In this context, ``similarly situated
imbalances'' includes contracts with the substantially similar
financial and operational implications to the transportation service
provider.

The Commission found that standards requiring OBAs and netting of

[[Page 61466]]

imbalances were important, but that the use of the terms ``economically
and operationally feasible'' and ``similarly situated financial and
operational implications'' did not define precisely enough the
pipelines obligations under the standards. Rather than attempting to
deal with the meaning of these terms in individual pipeline compliance
filings, the Commission gave GISB until September 1, 1997 to clarify
the standards.
According to the GISB report, it initially sent the standards to
the interpretations subcommittee which determined that interpretation
would not be sufficient and that new standards would have to be
developed. The standards were then referred to the business practices
subcommittee that, according to GISB, will not review these issues
until its normal rotation deals with contract and flowing gas issues,
perhaps by the end of 1997.
2. Proposed Regulations
The Commission has reviewed these standards in light of Commission
priorities and policies and has determined that the Commission needs to
propose its own standards in these areas. In certain respects, the
Commission's proposals go beyond the standards being considered by
GISB.

a. OBAs

An OBA is a contract between two parties that specifies the
procedures that will be used to manage operating variances at an
interconnect.⁴² The OBA specifies how imbalances
⁴³ or differences in hourly flow rates will be handled by
the two parties. An OBA increases the efficiency of the grid, because a
shipper, which has properly nominated and had its gas confirmed, will
not be held responsible for imbalances, resulting from the transfer of
gas between the pipelines. Accordingly, the Commission is proposing to
require interstate pipelines to enter into OBAs at all interconnecting
points with other interstate and intrastate pipelines.⁴⁴
These agreements must be maintained by the pipelines and provided upon
request to the Commission and any other requesting party. If two
interstate pipelines are unable to negotiate an acceptable agreement,
they can file a request for the Commission to resolve the disputed
terms. If a pipeline finds itself unable to enter into an OBA with an
entity not regulated by the Commission, it can file for a waiver of
this requirement setting out any operational or other issues that have
prevented an agreement from being consummated.
---------------------------------------------------------------------------

\42\ 18 CFR 284.10(b)(1)(ii), Flowing Gas Related Standards
2.2.1.
\43\ An imbalance is a discrepancy between the quantity of gas a
shipper tenders to the pipeline at a receipt point and the amount of
gas the shipper takes at a delivery point.
\44\ Proposed regulation 284.10(b)(2)(ii)(A).
---------------------------------------------------------------------------

b. Netting and Trading Imbalances

Netting of imbalances refers to the ability of shippers to offset a
positive imbalance on one contract with a negative imbalance on another
contract. While GISB standard 2.3.30 would permit some netting of
imbalances by shippers across contracts, it would not permit shippers'
agents to net imbalances. As discussed above, the standard also was
unclear as to which contacts could be offset against each other. In
addition to this standard, one of the disputed standards before the
Commission is whether to permit shippers to trade imbalances amongst
themselves.⁴⁵
---------------------------------------------------------------------------

\45\ Appendix B, Disputed Standard No. 85A.
---------------------------------------------------------------------------

The Commission is proposing to require pipelines to permit shippers
and their agents to both offset imbalances accruing on different
contracts held by the shippers and to trade imbalances with other
shippers when the imbalances have similar operational impact on the
pipeline.⁴⁶ Permitting shippers to offset and trade
imbalances in the same operational area allows shippers to avoid
imbalance charges without jeopardizing system reliability. If one
shipper, for instance, incurs an overrun and another shipper an
underrun of the same amount, the pipeline is physically in balance
between those shippers. Moreover, permitting shippers to trade
imbalances with each other may improve system reliability because a
shipper may be willing, for a fee, to put gas on a system or take gas
off in order to offset imbalances incurred by other
shippers.⁴⁷ Since all shippers would be permitted to trade
imbalances under this proposal, there would be no reason why shippers'
agents should not be able to trade imbalances among the contracts they
manage.
---------------------------------------------------------------------------

\46\ Proposed regulation 284.10(b)(2)(ii)(B).
\47\ The fee most likely would not exceed the imbalance penalty
or other costs that the out-of-balance shipper would incur if the
imbalance was not offset.
---------------------------------------------------------------------------

The regulation permits offsets and imbalance trades when
the imbalances have similar operational impact on the pipeline
operations. The GISB standard (2.3.30) also included similar financial
implications to the pipelines. The Commission cannot discern how
pipelines' legitimate financial interests are implicated, since the
offsets and trades involve only physical imbalances and the penalties
associated with those imbalances, not charges for transportation
service.
Under this requirement, the pipelines would be required to provide
shippers with timely notice of their imbalances and sufficient time to
permit shippers to execute trades. To facilitate trading, pipelines
should post a shipper's imbalances if the shipper requests. The
pipelines would then have to accept and process trades provided to them
by the shippers or shippers' agents, including third-party firms that
would conduct imbalance trading for shippers. Pipelines further would
be expected to designate in their compliance filings the largest
possible areas on their systems in which imbalances have similar
operational effects and explain, in detail, why imbalances crossing
these areas are not sufficiently similar in operational effect.
Pipelines would not be required to establish a computerized system
on which trading would take place. Pipelines, however, are free to
establish such a system and to assess a separate fee for using that
system. If a pipeline does establish its own trading system, it must
provide equal and non-discriminatory access for shippers trading their
own imbalances or those using third-party services.

D. Proposed Regulations for Electronic Communication

1. Background
For many years, pipelines have communicated with their customers
using direct dial up connections to pipeline Electronic Bulletin Boards
(EBBs). Each pipeline EBB is a proprietary system, with unique
software, log-on, and other procedures. The uniqueness of each
pipeline's EBB raises costs to shippers across multiple pipelines,
since redundant computers and communication software may have to be
maintained and staff must be trained in the idiosyncracies of each
pipeline's system. Beginning in 1993, the Commission has sought to
create greater standardization in communication so that shippers could
reap the efficiencies of using one standardized method to transact
business with all pipelines.
The standards developed by GISB so far, however, do not standardize
all the information pipelines are currently providing electronically.
Pipelines are continuing to post information and conduct many
transactions on their proprietary EBBs. For instance, GISB has not
developed standards for communicating offers to release capacity and
bids for capacity over the

[[Page 61467]]

Internet and has not provided standards to enable shippers to download
the Index of Customers in the format specified by the Commission.
2. Proposed Regulations

a. Proposed Requirement That Pipelines Provide all Information on the
Internet Using Internet Tools

The Commission remains committed to standardizing all
communications with the pipelines. For shippers to be able to use the
interstate natural gas grid efficiently, they need to be able to
transact business across multiple pipelines without having to incur the
added costs and delay attendant to having to train personnel to use the
pipelines' proprietary EBBs. While the current standards cover some of
the more important transactions with the pipelines, they still do not
remove the necessity for shippers to deal with pipeline EBBs.
In Standard 4.3.6, GISB had stated that ``all EBB information,
functions and transactions should be achieved via one mode of
communications.'' ⁴⁸ In Order No. 587-E, the Commission
requested a report from GISB by September 1, 1997 on its progress in
completing the standardization of communications, but GISB did not file
the requested report. In its comments, Koch contends the Commission
should not mandate the exclusive use of Internet technologies, because
shippers on single pipelines may prefer to use the existing EBBs and it
may be difficult or costly for them to convert to using the Internet
technologies. Koch points out that third-party service providers can
assist those shippers wanting to conduct business with the pipelines in
a standardized manner.⁴⁹
---------------------------------------------------------------------------

\48\ 18 CFR 284.10(b)(1)(iv), Electronic Delivery Mechanism
Related Standards 4.3.6.
\49\ See comments of Koch Gateway Pipeline Company, at 4-7
(September 2, 1997) (arguing EBBs should not be eliminated).
---------------------------------------------------------------------------

To prevent such disputes from slowing the standardization of
communications further, the Commission is proposing to require
pipelines to provide all electronic information and conduct all
electronic transactions with their customers over the public Internet
using only internet protocols and procedures. Pipelines will be
expected to comply with this regulation by June 1, 1999.⁵⁰
---------------------------------------------------------------------------

\50\ Proposed regulation 284.10(b)(2)(iii)(A).
---------------------------------------------------------------------------

GISB has considered the security issues affecting the use of the
public Internet and concluded that security concerns can be adequately
addressed through commercially available software and
techniques.⁵¹ However, pipelines also would be required to
provide third party, private communication networks with equal, but not
preferential, access to the same information and transactions for a
reasonable connection fee.⁵² Shippers with concerns about
the Internet could pay to use these private networks.⁵³
---------------------------------------------------------------------------

\51\See Order No. 587, 61 FR at 39065, III FERC Stats. & Regs.
Regulations Preambles at 30,074 (report of GISB's Future Technology
Task Force); 18 CFR 284.10(b)(1)(iv), Electronic Delivery Mechanism
Related Standards 4.3.15.
\52\ Altra Energy Technologies, L.L.C. refers to these private
networks using internet protocols as extranets.
\53\ The Commission has adopted similar requirements for the
electronic OASIS system in the electric industry. Open Access Same-
Time Information System (formerly Real-Time Information Networks)
and Standards of Conduct, Order No. 889, 61 FR 21737 (May 10, 1996),
FERC Stats. & Regs. Regulations Preambles [Jan. 1991-June 1996]
para. 31,035, at 31,618-19 (Apr. 24, 1996).
---------------------------------------------------------------------------

This timetable should give the pipelines sufficient time to develop
the needed infrastructure and also gives GISB and the rest of the
industry the opportunity to further standardize the provision of this
information. With the policy question resolved by the Commission, GISB
can focus exclusively on developing the needed standards without debate
over the extent of the pipelines' responsibilities. By March 31, 1998,
the Commission requests a report from GISB and the industry on their
progress in developing needed standards and whether the Commission
needs to establish procedures to assist in standards development.
Regardless of whether standards are developed, however, pipelines
should begin preparing to make the transition to the public Internet.
Even without standards, the ability to conduct transactions using one
communication method without the need for different log-on and access
procedures and different software for each pipeline will increase
efficiency. Standards can still be developed after implementation of
the system.
The Commission disagrees with Koch that there is no harm to the
retention of dual systems. Maintenance of dual systems not only drains
resources and talent from developing an efficient standardized system,
it creates an understandable competitive incentive for pipelines to
favor their proprietary systems over the standardized system. Overall
efficiency will be enhanced if rather than working independently to
develop their own systems, the pipelines work together with the
industry to develop an efficient, user-friendly, standardized system
that all shippers can use. Indeed, as Koch points out, shippers that do
not want to invest in developing their own internal communication
system can turn to the competitive market for third-party services to
obtain whatever services they require.

b. Proposed Regulations Regarding Presentation of Information on
Pipeline Web Sites

In Order No. 587-C, the Commission adopted GISB standard 4.3.6
requiring pipelines to post information for viewing in HTML format on
pipeline Internet web sites. The Commission, however, did not adopt
GISB standard 4.3.5, stating that in addition to posting the
information for viewing on a web site, the information should be
downloadable in a GISB specified electronic structure, because GISB had
not developed the electronic structure. In Version 1.2 of its
standards, GISB has included standard 4.3.16 which gives the pipelines
the choice of providing downloadable files either in hyper-text mark-up
language (HTML) or rich-text-format (RTF). The Commission is proposing
to adopt the previously rejected standard 4.3.5 and new standard
4.3.16.
The Commission, however, is concerned that merely specifying the
document format for downloading does not go far enough. There are no
standards regarding the use of passwords for obtaining access to the
public information on the web site or the methods by which information
will be posted and downloaded from the web site. For instance, the
standards do not require that the information be searchable on line. A
pipeline, therefore, conceivably could post each tariff page as an
individual HTML document without giving users the opportunity to search
the entire tariff online for individual words or phrases. Therefore,
the Commission is proposing a regulation that would require pipelines
to adhere to standards regarding accessibility to public information,
searching and copying of documentation, and downloading capability.\54\
The Commission also requests comments on other possible standards to
improve users' ability to access and use this information.
---------------------------------------------------------------------------

\54\ Proposed regulation 284.10(b)(2)(iii)(B).
---------------------------------------------------------------------------

There is a further issue regarding the comparability of information
between various sources. Pipelines currently provide the names of
shippers in the capacity release information posted on their EBBs.
However, in the current datasets for downloading capacity release
information, shippers are identified only by their assigned Dun &
Bradstreet numbers and there is no

[[Page 61468]]

available cross-reference table. The use of a numeric designation for
shipper name is valuable only if it is accompanied by a means for users
of the information to translate the numeric designation into the
company name, so the user can determine who is receiving capacity.\55\
The easiest solution for this problem would be for the pipelines to
provide a cross-reference table between the Dun & Bradstreet numbers
and the names of releasing and replacement shippers consummating
capacity release transactions on their systems. If, for any reason,
pipelines are unable to provide a cross-reference table using DUNS
numbers, the industry should either develop their own numeric
designations for shippers or include shipper names in the capacity
release datasets.
---------------------------------------------------------------------------

\55\ The user would have to accumulate its own database of
numbers and then attempt to obtain the names from Dun & Bradstreet,
at a cost.
---------------------------------------------------------------------------

In addition, pipelines need to ensure that the content of any
information that is provided on multiple formats (on EBBs, pipeline web
sites, or through EDI formatted files) must be the same regardless of
the format. For instance, the operationally available capacity
information available from EBBs, pipeline web sites, and EDI downloads
should have the same content. Moreover, when the Commission has
specified a download format for EBB information, the same format should
be used for downloads from pipeline web sites. For example, the
Commission has specified a download format for the Index of Customers
and that format should also be available from the pipelines' web
site.\56\
---------------------------------------------------------------------------

\56\ The Commission recognizes, however, that while the pipeline
web sites must contain the same information as that posted on an EBB
or in the EDI datasets, the downloads from the web site should not
be in EDI format.
---------------------------------------------------------------------------

The Commission, therefore, is proposing a regulation requiring that
the content of all information provided electronically must be the same
regardless of the electronic form used to display the data. It also is
proposing that, if a pipeline uses numerical designations to represent
information, such as shipper names, a cross-reference between the
numeric designation and the represented information must be available
to users, at a cost no higher than what is necessary to cover
reasonable shipping and handling.\57\
---------------------------------------------------------------------------

\57\ Proposed regulation 284.10(b)(2)(iii)(C). This is the same
principle that applies to the acquisition of the cross-reference
table between the common transaction point codes and the pipelines'
individual nomenclature for referring to those points. Standards For
Electronic Bulletin Boards Required Under Part 284 Of The
Commission's Regulations, Order No. 563-A, 59 FR 23624 (May 9,
1994), III FERC Stats. & Regs. Regulations Preambles para. 30,994,
at 31,044-45 (May 2, 1994).
---------------------------------------------------------------------------

The generic standards proposed here should not be the end of the
process. GISB's future technology task force recognizes that as
additional categories of information are posted on web sites, separate
standards may need to be developed for each category of information.
GISB also reports that, at the instance of its Board of Directors, it
has established a ``Look and Feel'' team to develop a consistent and
uniform presentation of information on the Internet. The Commission
urges GISB to continue to work on these standards, and looks forward to
seeing the resulting proposals.
As an additional matter, the Commission is proposing to modify the
data retention requirements related to transactions and information
provided over the Internet. GISB Standard 4.3.4 provides that
transactional data should be maintained for at least 24 months for
audit purposes, but states further that this requirement should not
otherwise modify statutory, regulatory, or contractual record retention
requirements. GISB did not pass a standard for retention of information
displayed on Internet web pages. The Commission regulations currently
require pipelines to maintain electronic data on EBBs for three years
and make that information available to users in electronic form at a
reasonable fee.\58\ However, the Commission is concerned that three
years may not be a sufficient retention period for the Commission to
adequately monitor industry practices. Accordingly, the Commission is
proposing to replace Standard 4.3.4, with a requirement that pipelines
maintain electronic information displayed or transmitted using the
Internet for five years and make that information available in
electronic form for a reasonable fee.\59\ This regulation would require
public disclosure only of archived information originally displayed
publicly. Access to archived confidential business information would be
provided only to the customer involved in the transaction, the
Commission, or as part of discovery procedures.\60\
---------------------------------------------------------------------------

\58\ 18 CFR 284.10(a)(2); Pipeline Service Obligations and
Revisions to Regulations Governing Self-Implementing Transportation
Under Part 284 of the Commission's Regulations, Order No. 636-A, 57
FR 36128 (Aug. 12, 1992), III FERC Stats. & Regs. Regulations
Preambles para. 30,950, at 30,549 (Aug. 3, 1992).
\59\ Proposed regulation 284.10(b)(2)(iii)(D).
\60\ 18 CFR Part 385, Subpart D.
---------------------------------------------------------------------------

c. Proposed Requirement for Notification of OFOs and Critical Notices
Using Internet Posting Along With E-Mail or Notice to URL Addresses

A standard that has been in dispute concerns the method by which
pipelines communicate operational flow orders (OFOs) and other critical
notices to shippers.\61\ OFOs are orders by a pipeline requiring
shippers to take certain actions to alleviate emergency operational
conditions on the pipeline's system. The four segments, other than the
pipelines, supported a standard to require pipelines to notify affected
parties of OFOs and critical notices according to the medium chosen by
the shipper, 24 hour phone, fax, or pager. The pipelines, on the other
hand, support only electronic notification using a general posting on
their EBB or Internet web sites.
---------------------------------------------------------------------------

\61\ Appendix B, Disputed Standard No. 23.
---------------------------------------------------------------------------

The pipelines contend requiring individual notice, particularly for
system-wide OFOs or critical notices is far too burdensome and may be
unfair.\62\ Given the pipelines' limited resources to provide
individual notice, some shippers will receive notice far earlier than
others. Moreover, the pipelines maintain that if a shipper fails to
receive a telephone or fax transmission, the pipelines have no
electronic record that it was sent. The shippers maintain that purely
electronic posting on an EBB is insufficient actual notice,
particularly for notices issued after normal business hours. In
addition, at the conference and in comments,\63\ some parties suggested
that posting on the pipeline's web site be supplemented by the use of
Internet E-mail or notification to a shipper's Internet web address as
alternatives for providing telephonic or fax notice to shippers.
---------------------------------------------------------------------------

\62\ For example, one pipeline representative stated that even
calling in all available personnel, about 24 people, it took them
six hours to contact all affected parties. Transcript of December
13, 1996 technical conference at 37.
\63\ Comments of American Gas Association, at 11 (February 21,
1997); Brooklyn Union Gas Company, at 1 (February 21, 1997).
---------------------------------------------------------------------------

The Commission concludes this last approach has the most merit.
Internet E-mail and notification to a shipper's Internet address
provides the shipper with direct notice without the need to monitor the
pipeline's Internet site. Such notice can be automated by the pipeline
so sending the message should not create the burdens of individual
telephonic or fax notification. Automated notice also permits
simultaneous notice to all shippers, thereby eliminating any potential
for discrimination as to when a shipper receives notification.
Moreover, if a

[[Page 61469]]

shipper receives notice through Internet E-Mail or to a web address,
the shipper can, if it wants, obtain telephonic or pager notice by
purchasing commercially available software packages and services that
permit Internet notification to trigger a phone or a pager.\64\ Thus,
the Commission is proposing to require pipelines to post OFOs and
critical notices on their Internet web sites and to provide individual
notice to shippers, at the shipper's option, either through Internet E-
mail or by a direct notice to a shipper's Internet address.\65\
---------------------------------------------------------------------------

\64\ See National Fuel Gas Supply Corporation, 80 FERC para.
61,403 (1997) (finding Internet notification sufficient and noting
customers' ability to use such notifications to trigger pagers).
\65\ Proposed regulation 284.10(b)(2)(iii)(E).
---------------------------------------------------------------------------

At the conference, there also was discussion about the difference
between requiring telephone or fax notice for system-wide or large-
scale OFO situations and attempting to reach a small number of shippers
by whatever means is necessary in localized and critical
situations.\66\ The Commission continues to expect that for extremely
critical OFOs limited to only a few shippers, the pipelines will
continue to make every effort to ensure that the affected shippers are
informed.
---------------------------------------------------------------------------

\66\ Transcript of December 13, 1996 technical conference, at
17, 34-36.
---------------------------------------------------------------------------

E. Policies Regarding Title Transfer Tracking

1. Background
Title transfer tracking refers to the accounting for transfers of
title to gas at a nomination point when no transportation is involved.
Under the Commission's policy, shippers must have title to gas in order
to transport the gas on a pipeline. Pipelines, therefore, have always
had to perform some title transfer tracking to ensure that shippers
have title to gas. For example, if shipper A on an upstream pipeline
transports gas to an interconnect with a downstream pipeline and
transfers the gas to shipper B on the downstream pipeline, the
pipelines would have to match those transactions as part of the process
of confirming the nominations.
However, with unbundling and the development of a more fluid gas
market, transactions at nomination points are increasing to a much
greater extent. Thus, at an interconnect point, there may be multiple
transfers of title before the gas is nominated on the downstream
pipeline.\67\ In order for pipelines to confirm the gas nominated on
the upstream and downstream pipelines, there is a need to convey
information about which shipper(s) are delivering the gas to the
shipper on the downstream pipeline.
---------------------------------------------------------------------------

\67\ Enron Interstate Pipelines refers to these transactions as
``title transfer only'' transactions to differentiate them from
transactions involving title exchange and transportation.
---------------------------------------------------------------------------

GISB established a title transfer tracking task force to evaluate
these issues and attempt to develop standards for how title transfer
tracking would be conducted, with a report due by September of 1997. In
its September 2, 1997 filing, GISB included an interim report by its
title transfer tracking task force summarizing its progress. According
to the report, the task force has distilled 13 initially proposed
methods for handling title transfers to five, which it is still
considering. It also has identified 13 remaining issues relating to
title transfer tracking, such as how title transfers are related to
invoicing, pre-determined allocations (PDAs), and multi-tiered
allocations, whether title transfers can have imbalances, and how title
transfers fit in with intra-day scheduling.
NGC in its September 2, 1997 comments states that while the title
transfer tracking task force is evaluating and defining the process,
the task force is not addressing the underlying issue of whether the
pipelines should be required to perform the service. NGC claims the
extent of the pipelines' responsibility to perform title transfer
tracking is an intractable policy dispute that only the Commission can
resolve.
In reviewing the comments filed on this issue, it is evident that
there is a split between the segments on whether the pipelines should
be responsible for performing title transfer tracking service. The
pipelines contend that tracking title exchanges, when no physical
transportation is occurring, is unrelated to transportation
service.\68\ They maintain that they should not be responsible for
performing an accounting service for marketers and others that are
seeking to arbitrage in the volatile gas market. If the Commission were
to require them to perform title transfer tracking, the pipelines
maintain that they should be able to collect a separate charge for the
service, rather than having it included in their general transportation
rates. LDCs similarly contend that shippers using title transfer
services should be required to pay a separate charge.\69\ Charging a
separate fee, they maintain, is consistent with the GISB principle that
the users of title transfer services should bear the cost of the
service.\70\
---------------------------------------------------------------------------

\68\ See Comments of NorAm Gas Transmission Company and
Mississippi River Transmission Company, at 4 (February 21, 1997).
\69\ Comments of American Gas Association, at 16 (February 21,
1997).
\70\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.1.11.
---------------------------------------------------------------------------

Marketers and others \71\ contend that title transfer tracking is
related to the confirmation process and that pipelines are in the best
position to perform this service because they already process
nominations and confirmations electronically. The marketers further
contend that if the pipelines do not perform title transfer tracking,
the pipelines may seek to require shippers to disclose the string
(``daisy chain'') of title transfers, so that interconnecting pipelines
can confirm the nomination. Disclosure of the daisy chain, marketers
assert, is anticompetitive because marketers would have to disclose to
the ultimate purchaser the marketer's raison d'etre--the source of the
marketer's reasonably priced gas.\72\ They allege that the purchaser
could appropriate this information for its own benefit in succeeding
months by eliminating the marketer and buying gas directly from the
source.
---------------------------------------------------------------------------

\71\ Comments of Natural Gas Clearinghouse, at 14 (February 24,
1997); Energy Managers Association, at 9 (February 21, 1997).
\72\ Transcript of December 12, 1997 technical conference, at
104.
---------------------------------------------------------------------------

2. Pipeline Obligations With Respect to Title Transfer Tracking
To assist GISB, the Commission will resolve this policy dispute
regarding the pipelines' responsibilities to perform title transfer
tracking. Pipelines must continue to ensure that shippers on their
systems have title to the gas they intend to ship. To perform this
function, the Commission sees no reason to require pipelines to
establish a computerized title transfer tracking service to account for
the purchase and sale of gas between shippers independent of
transportation. It is the shipper's responsibility to furnish the
transporter with the information needed to establish title to gas and
its right to nominate that gas on the pipeline. GISB should continue
its efforts to develop standards defining the minimum information
needed for nominations and confirmations.
While the Commission is not proposing that the pipelines be
required to perform title transfer tracking, the Commission recognizes
that some shippers have a need for this service. Pipelines, therefore,
may perform title transfer tracking service and may assess a
reasonable, independent fee for the service.\73\ Charging a separate
fee for

[[Page 61470]]

such service will help to ensure that shippers will use the service
only to the point at which the shippers value the service more than the
price charged.
---------------------------------------------------------------------------

\73\ See Trunkline Gas Company, 75 FERC para. 61,003 (1996)
(approving a separate flat charge for tracking service) But cf.,
Williams Natural Gas Company, 79 FERC para. 61096 (1997) (rejecting
a volumetric, per Dth, fee for title transfer service).
---------------------------------------------------------------------------

Further, shippers should have the opportunity to develop their own
competitive systems for tracking title and have the pipeline recognize
those title transfers in determining whether a shipper has title to the
gas it seeks to transport. Title transfer services already are
beginning to be offered both by pipelines and by storage and hub
operators and, if the demand exists, such services should increase.\74\
Enron Interstate Pipelines contend that third-parties in the
competitive market can provide title transfer tracking services,
although Enron recognizes that pipelines may need to perform a
coordinating role by accepting confirmations from these third-
parties.\75\
---------------------------------------------------------------------------

\74\ See Moss Bluff Hub Partners, L.P., 80 FERC para. 61,181, at
61,475 (1997); Trunkline Gas Company, 75 FERC para. 61,003 (1996).
\75\ Comments of Enron Interstate Pipelines, at 18 (February 21,
1997).
---------------------------------------------------------------------------

The Commission agrees with Enron that pipelines must accept title
transfer confirmations from point operators and third-party service
providers, acting as agents for shippers, on a non-discriminatory
basis.\76\ Requiring pipelines to accept such confirmations from third-
parties is consistent with the Commission's policy in Order No. 636
that pipelines need not create market centers, but must not take
actions which will inhibit the development of such centers.\77\ The
development of third-party title transfer tracking services also will
place competitive pressure on pipelines that choose to offer a title
transfer tracking service and thus help to ensure the pipelines' rates
are reasonable.
---------------------------------------------------------------------------

\76\ Title transfer tracking is part of the confirmation
process, because it involves the confirmation that gas nominated by
a shipper will be injected into the pipeline's system. It is no
different than a confirmation provided by a producer or point
operator, who, in fact, may be offering a title transfer tracking
service of its own.
\77\ 18 CFR 284.8(b)(4), 284.9(b)(4) (1997).
---------------------------------------------------------------------------

With the clarification of the pipelines' role in title transfer
tracking, the Commission expects that GISB should be able to develop
the business practices and electronic communication standards relating
to the confirmation process for title transfers. The Commission will
provide GISB until March 31, 1998 to submit such standards. Other
members of the industry also may propose standards at that time as
well.

F. Commission Policies Regarding the Disputed Issues Remaining From the
December 12-13, 1996 Technical Conference

During the standardization process, disputes developed in a number
of areas in which the GISB membership was unable to reach consensus. A
number of standards were supported by four segments of the industry,
but were not passed by GISB due principally to the opposition of the
pipeline segment.\78\ The pipelines contended that these standards are
not warranted or that they represented an attempt by the other members
of the industry to shift costs onto the pipelines, as the only
regulated entities.\79\ In the November 13, 1996 NOPR,\80\ the
Commission announced that in order to exercise its oversight role,
Commission staff would hold a technical conference on December 12-13,
1996 to consider these issues. The technical conference was to provide
further information on those disputed standards so that the Commission
could determine whether these standards were of sufficient importance
to the maintenance of an integrated pipeline grid that the pipelines
should be required to abide by them. Comments on the technical
conference were filed on February 21, 1997.
---------------------------------------------------------------------------

\78\ See Appendix B.
\79\ See comments of Interstate Natural Gas Association of
America, at 13-18 (February 21, 1997).
\80\ See Standards For Business Practices of Interstate Natural
Gas Pipelines, Notice of Proposed Rulemaking, 61 FR 58790 (Nov. 19,
1996), IV FERC Stats. & Regs. Proposed Regulations para. 32,521
(Nov. 13, 1996).
---------------------------------------------------------------------------

Three of the disputed standards were discussed earlier; \81\ the
remainder will be discussed below.
---------------------------------------------------------------------------

\81\ Disputed Standard No. 77A relating to intra-day
nominations, Disputed Standard 85A relating to imbalance trading,
and Disputed Standard No. 23 relating to notice of OFO's. See text
accompanying notes 40, 46, and 61, supra.
---------------------------------------------------------------------------

1. Ranking Across Contracts (Disputed Standard No. 28B)
Disputed Standard No. 28B states that pipelines should permit
rankings across contracts for the same service requester and location,
when not in conflict with tariff-based rules. Gas package ranking
refers to the ability of shippers to designate the amount of gas that
will be allocated to particular markets or customers in the event the
shipper's full nomination is not accepted. The standards adopted by the
Commission already require pipelines to honor shipper ``rankings when
making reductions during the scheduling process when this does not
conflict with tariff-based rules.'' \82\ For example, if a shipper
nominates 1,000 MMBtus under one contract, it can specify how that
1,000 will be divided if the full 1,000 MMBtus is not confirmed. The
disputed standard would specifically extend the pipelines' obligation
to support ranking across contracts.
---------------------------------------------------------------------------

\82\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.3.23.
---------------------------------------------------------------------------

Shippers contend this standard is needed to give them the
flexibility to manage their own gas supplies.\83\ They point out that
shippers may be shipping under a variety of contracts, including their
own firm and interruptible contracts as well as capacity release
contracts which have their own specific terms and conditions. They
further note that a capacity release contract may contain a take-or-pay
clause in which a shipper is required to pay a certain rate whether it
moves gas or not. To maximize their use of transportation, shippers
contend they should be able to determine how their transportation is
allocated among their contracts.
---------------------------------------------------------------------------

\83\ Comments of Natural Gas Clearinghouse, at 23 (February 24,
1997); Energy Managers Association, at 15 (February 21, 1997).
---------------------------------------------------------------------------

The pipelines are not unified in their position on this standard.
Columbia Gas/Columbia Gulf support allowing shippers to use rankings
across contracts.\84\ Enron Interstate Pipelines, however, is concerned
about how such a provision would impact pipelines' tariff provisions
establishing scheduling priority.\85\ They ask, for instance, whether a
shipper would be able to rank an interruptible contract as having a
higher priority than a firm contract.
---------------------------------------------------------------------------

\84\ Comments of Columbia Gas Transmission Corporation and
Columbia Gulf Gas Transmission Corporation, at 4 (February 21,
1997).
\85\ Comments of Enron Interstate Pipelines, at 19 (February 21,
1997).
---------------------------------------------------------------------------

The Commission's general policy is to allow shippers to manage
their gas supplies and contracts in ways that are the most favorable to
them as long as such management does not affect the operational
integrity of the pipeline. The pipelines, therefore, should provide
shippers with the ability to rank gas supplies across their contracts
so long as the ranking does not adversely affect the operational
integrity of the system. There are two potential scenarios identified
by the comments: problems with the shipper's gas supply resulting in a
reduction in a shipper's nomination; and transportation constraints
resulting in the reduction.
If the reduction is related to a loss of supply, the Commission
sees no reason why shippers should not be able to specify the contract
under which the gas should flow. Such a determination is

[[Page 61471]]

unrelated to any transportation issues on the pipeline, since there
have been no cuts in transportation.
Even when the reduction is a result of transportation problems,
allowing the shipper to rank its contracts does not appear to interfere
with pipeline scheduling priorities. Suppose a shipper has nominated
100 MMBtus each on three contracts, firm primary, capacity release
secondary, and interruptible, from the same receipt to the same
delivery point, but the pipeline can schedule only the firm primary
contract. Under normal priority rules, the shipper could receive only
the 100 MMBtus of transportation represented by the firm primary
contract. However, permitting the shipper to choose how to assign those
100 MMBtus among its contracts does not upset the transportation
priority rules. The shipper still would receive only the 100 MMBtus
represented by its firm primary contract even if it allocated gas to
its secondary capacity release contract. If the shipper had nominated
no primary firm transportation in this example, it would receive no
transportation.
Since the business practices standards already require the
pipelines to honor shipper rankings, no new standards are necessary.
GISB and the industry should work on dataset changes, if necessary, to
permit cross-contract ranking. Such standards should be filed by March
31, 1998 along with the title transfer tracking standards.
2. Multi-Tiered Allocations (Disputed Standard No. 29)
Disputed Standard No. 28 would require pipelines to permit all
owners of gas to submit a pre-determined allocation. A pre-determined
allocation is a set of instructions by owners of gas as to how gas
should be allocated among amongst them when the actual volumes do not
match with the scheduled volumes. A pre-determined allocation is not
necessary if the pipeline has an OBA in effect at a transfer point.\86\
The standards currently require pipelines to accept one tier of
allocations from the upstream or downstream custody transfer party.\87\
The standard data elements accommodate multi-tiered allocations, but
pipelines are not required to accept or support such allocations.\88\
The dispute is whether pipelines should be required to support multi-
tiered allocations from all owners of gas, including the wellhead
operator and each producer owner.
---------------------------------------------------------------------------

\86\ 18 CFR 284.10(b)(1)(ii), Flowing Gas Related Standards
2.2.3.
\87\ 18 CFR 284.10(b)(1)(ii), Flowing Gas Related Standards
2.3.19.
\88\ 18 CFR 284.10(b)(1)(ii), Flowing Gas Related Standards
2.3.25.
---------------------------------------------------------------------------

Those supporting multi-tiered allocations contend that they fit
well with title transfers occurring at the wellhead.\89\ The pipelines
generally maintain that multi-tiered allocations are merely another
aspect of title transfer tracking and contend that they should not be
required to perform such accounting for transactions not occurring on
their systems.\90\
---------------------------------------------------------------------------

\89\ Comments of Natural Gas Clearinghouse, Docket No. RM96-1-
000, filed October 1, 1996, at 14.
\90\ Comments of Enron Interstate Pipelines, at 18 (February 21,
1997); Interstate Natural Gas Association of America, at 33
(February 21, 1997).
---------------------------------------------------------------------------

The current regulations give those parties connecting with a
pipeline the right to determine how gas is to be allocated at the
interconnection with the pipeline system. The Commission fails to see
why this right needs to be extended so that pipelines become
responsible for maintaining the accounting records for allocations
occurring at the well-head or at interconnections not affecting the
pipeline. The request for pipelines to accept multi-tiered allocations
appears to be just another aspect of the request for the pipelines to
track all title transfers, and, as discussed above, the Commission does
not view title transfer tracking as the responsibility of the
pipelines. The GISB task force has recognized that accounting for
multi-tiered allocations is another aspect of title transfer
tracking,\91\ and GISB should continue to work on standards that will
allow such allocations to be performed by third-parties.
---------------------------------------------------------------------------

\91\ GISB September 2, 1997 filing at Appendix A, part 4.
---------------------------------------------------------------------------

3. Paper Pooling (Disputed Standard Nos. 38A, 38B, 40B)
The disputed standards would require pipelines to establish so-
called ``paper pools'' in zones, segments, or rate areas where shippers
can deliver gas without an additional transportation charge. The
disputed standards also would require allocation of imbalances to the
pooler or the pooling agreement.
Pooling refers to the aggregation of gas from multiple physical or
logical points to a single physical or logical point.\92\ The current
standards require that shippers be able to both deliver gas from
receipt points into at least one pool and receive quantities at a
delivery point from at least one pool.\93\
---------------------------------------------------------------------------

\92\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.2.3.
\93\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.3.17 and 1.3.18.
---------------------------------------------------------------------------

Those supporting paper pooling contend that aggregation of gas
supplies is necessary for the gas market to work efficiently, although
they do not explain why paper pooling is absolutely necessary to
achieve this efficiency.\94\ The further contend that pooling is
necessary to permit pool to pool transfers. The pipelines maintain that
the requests for additional pooling standards are another aspect of the
request that pipelines provide title transfer tracking services.\95\
---------------------------------------------------------------------------

\94\See comments of Natural Gas Clearinghouse, at 11 (February
24, 1997); Energy Managers Association, at 10-13 (February 21,
1997).
\95\ Comments of Enron Interstate Pipelines, at 18 (February 21,
1997); Interstate Natural Gas Association of America, at 33
(February 21, 1997).
---------------------------------------------------------------------------

The existing standards recognize the benefits of pooling and the
pipelines are required to provide at least one pool for both receipt
and deliveries of gas. Those advocating paper pooling standards have
not provided a sufficient rationale for these standards at this time.
Some pipelines currently offer paper pools, while others offer physical
pooling in which shippers may have to pay a transportation charge to
move gas into the pool. When a pool exists in a rate zone, the charge
for shipment in that zone must be incurred either for shipment to the
pool or shipment out of the pool. The marketers and producers
advocating paper pooling do not provide sufficient justification for
imposing the transportation charge on the outbound transportation in
all situations. Moreover, to some extent, the argument for paper
pooling is connected to title transfer tracking, because those
proposing the use of paper pools want to use pool to pool transfers as
a way of transferring title. But, as discussed above, the Commission is
not requiring pipelines to offer title transfer tracking service, so
there is little reason to require all pipelines to permit paper pooling
at this time.
4. Fuel Reimbursement Standards (Disputed Standard Nos. 44, 49A, 50A,
51A, 54B, 55, 56B, 57B, 58, 59B, 60-65, 66B, 67, 95A)
The current standards have simplified and made more uniform the
process of providing in-kind fuel reimbursement for compressor
fuel.\96\ These standards provide, in part, that pipelines must adhere
to a standard method for calculating fuel, provide fuel reimbursement
percentages at the beginning of the month, not reject nominations for
fuel due to differences of less than 5 Dth, and provide a fuel

[[Page 61472]]

matrix for receipt and delivery point combinations.\97\
---------------------------------------------------------------------------

\96\ In-kind fuel reimbursement refers to a requirement that a
customer nominate and put into the system extra gas to compensate
the pipeline for the gas used by its compressors.
\97\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards
1.3.16, 13.3.28 through 1.3.30.
---------------------------------------------------------------------------

The disputed standards would further standardize in-kind fuel
reimbursement by requiring that pipelines make fuel rate changes
prospectively only, that pipelines can change fuel rates only on six
month intervals, and that pipelines will have to true-up fuel rates to
actuals periodically and on a prospective basis. The disputed standards
also cover a number of alternatives to in-kind fuel reimbursement, such
as fuel cash-out, negotiated sales, and cost of service. At the
December 12-13, 1996 technical conference, it was not clear whether
shippers wanted to mandate that pipelines provide an alternative to in-
kind fuel reimbursement or whether they simply wanted standards for
these alternatives so that if pipelines choose to offer an alternative,
the shippers would not be faced with different implementation
methods.⁹⁸ Some marketers, such as NGC, also want to ensure
that they are able to compete with pipelines in providing fuel service.
---------------------------------------------------------------------------

\98\ See transcript of December 13, 1996 technical conference at
58.
---------------------------------------------------------------------------

Pipelines oppose additional standardization of fuel
reimbursement.⁹⁹ The pipelines maintain that they should not
be required to reenter the merchant function to buy gas in order to
provide an alternative to in-kind fuel reimbursement. Such a
requirement, they assert, reverses the unbundling mandate of Order No.
636. They further contend that alternatives to in-kind fuel
reimbursement are not yet in widespread use and that standardization of
a new service will prevent innovation and creativity in the early
stages of development.
---------------------------------------------------------------------------

\99\ See Comments of Columbia Gas/Columbia Gulf, at 7 (February
21, 1997); INGAA, at 27 (February 21, 1997); Enron Interstate
Pipelines, at 25 (February 21, 1997); Koch, at 17 (February 21,
1997); Viking, at 4 (February 21, 1997); Williston Basin, at 5
(February 21, 1997).
---------------------------------------------------------------------------

In the Commission's view, the case for including these additional
fuel reimbursement standards has not been made at this time. With
respect to in-kind fuel reimbursement, there appears to be no need to
limit pipelines to two fuel reimbursement changes per year, as the
disputed standard would provide. Pipelines may have a need to file for
further changes, and can file to implement such changes when necessary
under section 4 of the Natural Gas Act. The current standard requiring
pipelines to provide fuel reimbursement percentages at the beginning of
the month provides sufficient notice for shippers to obtain the correct
fuel percentages and update their computers for all pipelines on a set
schedule.
The Commission also agrees with the pipelines that standardizing
alternatives to in-kind fuel reimbursement is premature at this point,
since such alternatives are not in widespread use. Nor is it clear why
creating standards for cash out mechanisms is more important for fuel
reimbursement than for the other areas, such as penalties, in which
cash outs also are employed. It may be worthwhile for the Commission to
reexamine standardization of cashout mechanisms as part of a more
comprehensive examination of penalty structures, but that is beyond the
scope of this proceeding.
The Commission, however, finds that pipelines, whether or not they
provide fuel service, should permit shippers that do not want to
calculate fuel to contract with third-party agents to provide the
required fuel at the necessary points. The pipelines must accept fuel
nominations from these third-party providers. For those pipelines that
do provide fuel service, they must allow third-parties to provide fuel
on a non-discriminatory basis.
5. Penalty Determination (Disputed Standard No. 88A)
Disputed Standard No. 88A would provide that imbalance penalties
would be based on the lesser of operationally provided data or actual
data. There is some dispute over the meaning of the standard. While the
standard seems to contemplate that imbalance penalties would be
calculated based on the lower of the two figures, Natural Gas
Clearinghouse contended at the technical conference that the standard
only applied to the determination of the penalty category, not to the
volumes against which the penalty would be applied.¹⁰⁰ For
instance, under Natural Gas Clearinghouse's reading of the standard, if
the reported imbalance put the shipper in the 10% penalty category, the
shipper would pay the penalty associated with that category on the
actual imbalance amount, even if the actual imbalance would have placed
the shipper in a higher penalty category.
---------------------------------------------------------------------------

\100\ Transcript of December 12, 1996 technical conference at
243.
---------------------------------------------------------------------------

Pipelines contend cash-outs for imbalances need to be dealt with on
a case specific basis. Enron Interstate Pipelines, for instance, argues
that the standard is too broad and fails to recognize that in many
cases, the shipper or point operator, and not the pipeline, is the
party with better access to the data. It maintains, for instance, that
pipelines and shippers may agree in settlements to forgo the expense of
installing electronic flow measurement devices, which would limit the
accuracy of the pipeline's operational measurements.
As a general principle, the Commission's policy is to determine the
penalty category by the data provided to the shipper, particularly when
the pipeline is doing the measurement.\101\ A shipper should be
responsible only for penalty category it reasonably could have
anticipated based on the information provided by the pipeline. The cash
out price, however, should be based on the actual imbalance
incurred.\102\
---------------------------------------------------------------------------

\101\ See Algonquin Gas Transmission Company, 63 FERC para.
61,188, at 62,374 (1993); Texas Eastern Transmission Corporation, 63
FERC para. 61,100, at 61,486 (1993); Transcontinental Gas Pipe Line
Corporation, 55 FERC para. 61,446, at 62,369 (1991).
\102\ See Texas Eastern, supra note 101, supra.
---------------------------------------------------------------------------

The Commission does not find that a generic standard is necessary
on this issue. There appears no compelling reason to insist on
uniformity across all pipelines on this issue. As the pipelines point,
there may be some circumstances in which the policy is not reasonable
and those issues are best handled on a case-by-case basis.

III. Information Collection Statement

The following collections of information contained in this proposed
rule have been submitted to the Office of Management and Budget (OMB)
for review under Section 3507(d) of the Paperwork Reduction Act of
1995, 44 U.S.C. 3507(d). The Commission solicits comments on the
Commission's need for this information, whether the information will
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
following burden estimates include the costs of complying with GISB's
Version 1.2 standards and the Commission's proposed regulations
regarding intra-day nominations, the use of OBAs at pipeline
interconnects, the trading of imbalances, and communications using the
Internet. The proposed requirements regarding communication over the
Internet build upon the computer infrastructure pipelines have already
created to comply with Order No. 587. The burden estimates are
primarily related to start-up and will not be on-going costs except for
the recordkeeping requirement.

[[Page 61473]]

Estimated Annual Burden
----------------------------------------------------------------------------------------------------------------
No. of
Data collection No. of responses per Hours per Total annual
respondents respondent response hours
----------------------------------------------------------------------------------------------------------------
FERC-545........................................ 93 1 58 5,394
FERC-549C....................................... 93 1 4,483 416,919
----------------------------------------------------------------------------------------------------------------

Total Annual Hours for Collection (Reporting + Recordkeeping, (if
appropriate)) = 422,313.
Information Collection Costs: The Commission seeks comments on the
costs to comply with these requirements. It has projected the average
annualized cost for the total of 93 respondents to be the following:

----------------------------------------------------------------------------------------------------------------
FERC-545 FERC-549C Totals
----------------------------------------------------------------------------------------------------------------
Annualized Capital/Startup Costs.......................... $284,303 $21,641,327 $21,192,630
Annualized Costs (Operations & Maintenance)............... 0 333,321 333,321
-----------------------------------------------------
Total Annualized Costs................................ 284,303 21,974,648 22,258,951
----------------------------------------------------------------------------------------------------------------

The Office of Management and Budget's (OMB) regulations
¹⁰³ require OMB to approve certain information collection
requirements imposed by agency rule. The Commission is submitting
notification of this proposed rule to OMB.
---------------------------------------------------------------------------

\103\ 5 CFR 1320.11.
---------------------------------------------------------------------------

Title: FERC-545, Gas Pipeline Rates: Rate Change (Non-Formal);
FERC-549C, Standards for Business Practices of Interstate Natural Gas
Pipelines.
Action: Proposed collections.
OMB Control No: 1902-0154, 1902-0174.
Respondents: Business or other for profit, (Interstate natural gas
pipelines; (Not applicable to small business)).
Frequency of Responses: One-time implementation (business
procedures, capital/start-up).
Necessity of the information: This rule, if implemented, proposes
to revise the requirements contained in 18 CFR 284.10. These
requirements would further the process of standardizing business
practices and electronic communications with interstate pipelines begun
by the Commission in Order No. 587. Through the adoption of the
regulations proposed in this NOPR, the Commission is seeking to
continue to the process of establishing a more efficient and integrated
interstate pipeline grid. By requiring adherence to these regulations
on an industry-wide basis, the Commission seeks to reduce variations in
pipeline business practices and communication protocols, permitting
pipelines and their customers to more efficiently obtain information
from and transact business across multiple pipelines.
The information collection requirements of this proposed rule will
be reported directly to the industry users. The implementation of these
data requirements will help the Commission carry out its
responsibilities under the Natural Gas Act to monitor activities of the
natural gas industry to ensure its competitiveness and to assure the
improved efficiency of industry's operations. 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, for general industry oversight, and to supplement the
documentation used during the Commission's audit process.
Internal Review: The Commission has reviewed the requirements
pertaining to business practices and electronic communication with
natural gas interstate pipelines and made a determination that the
proposed revisions are necessary to establish a more efficient and
integrated pipeline grid. These requirements 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 the following: Federal Energy Regulatory
Commission, 88 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 the 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.\104\ The
Commission has categorically excluded certain actions from these
requirements as not having a significant effect on the human
environment.\105\ The actions proposed to be taken here fall within
categorical exclusions in the 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.\106\ Therefore, an environmental assessment is unnecessary
and has not been prepared in this rulemaking.
---------------------------------------------------------------------------

\104\ 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).
\105\ 18 CFR 380.4.
\106\ See 18 CFR 180.4(a)(2)(ii), 380.4(a)(5), 3804.(a)(27).
---------------------------------------------------------------------------

V. Regulatory Flexibility Act Certification

The Regulatory Flexibility Act of 1980 (RFA) \107\ 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

[[Page 61474]]

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.
---------------------------------------------------------------------------

\107\ 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 [insert date 30 days
after publication in the Federal Register]. 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. RM96-1-007. 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.
Commenters are encouraged to file comments using Internet E-Mail.
Comments should be submitted through the Internet by E-Mail to
[email protected] in the following format: on the subject line,
specify Docket No. RM96-1-007; 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 electronic filing
using Internet E-Mail should be directed to Marvin Rosenberg at 202-
208-1283, E-Mail address [email protected].
Commenters also 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. RM96-1-007 on the outside of the
diskette.

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, paragraph (a)(6) is added and paragraph (b)
is revised to read as follows:

Sec. 284.10 Standards for Pipeline Business Operations and
Communications.

(a) * * *
(6) A pipeline's obligation to provide information pursuant to this
paragraph will terminate when all relevant information is provided
pursuant to paragraph (b)(2)(iii)(A) of this section.
(b) Business Practices and Electronic Communication Standards.
(1)(i) An interstate pipeline that transports gas under subparts B or G
of this part must comply with the following business practice and
electronic communication standards promulgated by the Gas Industry
Standards Board, which are incorporated herein by reference:
(A) Nominations Related Standards (Version 1.2, July 31, 1997),
with the exception of Standard 1.3.32;
(B) Flowing Gas Related Standards (Version 1.2, July 31, 1997),
with the exception of Standards 2.3.29 and 2.3.30;
(C) Invoicing Related Standards (Version 1.2, July 31, 1997);
(D) Electronic Delivery Mechanism Related Standards (Version 1.2,
July 31, 1997), with the exception of Standard 4.3.4; and
(E) Capacity Release Related Standards (Version 1.2, July 31,
1997).
(ii) This incorporation by reference was approved by the Director
of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR
Part 51. Copies of these standards may be obtained from the Gas
Industry Standards Board, 1100 Louisiana, Suite 4925, Houston, TX
77002. Copies may be inspected at the Federal Energy Regulatory
Commission, Public Reference and Files Maintenance Branch, 888 First
Street NE., Washington, DC 20426 and at the Office of the Federal
Register, 800 North Capitol St. NW., Suite 700, Washington, DC.
(2) An interstate pipeline that transports gas under subparts B or
G of this part must comply with the following requirements.
(i) Nominations. A pipeline must accord an intra-day nomination
submitted by a firm shipper scheduling priority over nominated and
scheduled volumes for interruptible shippers. An interruptible shipper
must be provided with notice that its scheduled volumes are to be
reduced.
(ii) Flowing Gas. (A) Operational Balancing Agreements. A pipeline
must enter into Operational Balancing Agreements at all points of
interconnection between its system and the system of another interstate
or intrastate pipeline.
(B) Netting and Trading of Imbalances. A pipeline must establish
provisions permitting shippers and their agents to offset imbalances
accruing on different contracts held by the shipper with the pipeline
and to trade imbalances with other shippers where such imbalances have
similar operational impact on the pipeline's system.
(iii) Communication Protocols. (A)(1) All electronic information
provided and electronic transactions conducted by a pipeline must be
provided on the public Internet. A pipeline must provide, upon request,
private network connections using internet tools, internet directory
services, and internet communication protocols and must provide these
networks with non-discriminatory access to all electronic information.
A pipeline may charge a reasonable fee to recover the costs of
providing such an interconnection.
(2) A pipeline must implement this requirement no later than June
1, 1999.
(B) A pipeline must comply with the following requirements for
documents constituting public information posted on the pipeline web
site:
(1) The documents must be accessible to the public over the public
Internet using commercially available web browsers, without imposition
of a password or other access requirement;
(2) Users must be able to search an entire document online for
selected words and users must be able to copy selected portions of the
documents; and
(3) Documents on the web site should be directly downloadable
without the need for users to first view the documents on the web site.
(C) A pipeline must provide the same content for all information
regardless of the electronic format in which it is provided. If a
pipeline uses a numeric or other designation to represent

[[Page 61475]]

information, an electronic cross-reference table between the numeric or
other designation and the information represented must be available to
users, at a cost not to exceed reasonable shipping and handling.
(D) A pipeline must maintain for a period of five years electronic
records of the information displayed and transactions conducted
electronically under this section. The pipeline must make this archived
information available in electronic form for a reasonable fee.
(E) A pipeline must post operational flow orders, critical periods,
and critical notices on their Internet web site and must notify
affected parties of such notices in either of the following ways to be
chosen by the affected party: Internet E-Mail or direct notification to
the parties' Internet URL address.
Note--The following appendices will not appear in the Code of
Federal Regulations.

Appendix A.--Comments on December 12-13, 1996, Technical Conference
----------------------------------------------------------------------------------------------------------------
Commenter Abbreviation
----------------------------------------------------------------------------------------------------------------
Altra Energy Technologies, L.L.C................. Altra.
American Gas Association......................... AGA.
ANR Pipeline Company and Colorado Interstate Gas ANR/CIG.
Company.
Arizona Public Service Company and Salt River APS/SRP.
Project Agricultural Improvement and Power
District.
The Brooklyn Union Gas Company................... Brooklyn Union.
Columbia Gas Transmission Corporation and Columbia Gas/Columbia Gulf.
Columbia Gulf Transmission Corporation.
El Paso Natural Gas Company...................... El Paso.
Energy Managers Association...................... EMA.
Enron Capital & Trade Resources Corporation...... Enron Capital and Trade.
Enron Interstate Pipelines (Northern Natural Gas Enron Interstate Pipelines.
Company, Transwestern Pipeline Company, Florida
Gas Transmission Company, and Black Marlin
Pipeline Company).
Florida Power & Light Company.................... FPL.
Interstate Natural Gas Association of America.... INGAA.
Koch Gateway Pipeline Company.................... Koch.
National Fuel Gas Distribution Corporation....... National Fuel Distribution.
Natural Gas Clearinghouse........................ NGC.
Natural Gas Pipeline Company of America.......... NGPL.
Natural Gas Supply Association................... NGSA.
NorAm Gas Transmission Company and Mississippi NGT/MRT.
River Transmission Corporation.
Northwest Industrial Gas Users................... NWIGU.
NrG Information Services Inc..................... NrG.
Pacific Gas and Electric Company................. PG&E.
The Peoples Gas Light and Coke Company and North Peoples/North Shore.
Shore Gas Company.
Producers Energy Marketing, LLC and Independent ProEnergy/IPAA.
Petroleum Association of America.
TransCapacity Limited Partnership................ TransCapacity.
Viking Gas Transmission Company.................. Viking.
Williston Basin Interstate Pipeline Company...... Williston.
----------------------------------------------------------------------------------------------------------------

Appendix B.--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.
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.

[[Page 61476]]

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. 97-30233 Filed 11-17-97; 8:45 am]
BILLING CODE 6717-01-P