[Federal Register Volume 63, Number 193 (Tuesday, October 6, 1998)]
[Rules and Regulations]
[Pages 53565-53577]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26677]



[[Page 53565]]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM96-1-009; Order No. 587-I]


Standards for Business Practices of Interstate Natural Gas 
Pipelines

Issued September 29, 1998.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule; order on rehearing.

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SUMMARY: The Federal Energy Regulatory Commission is addressing 
requests for rehearing and clarification of Order No. 587-G, 63 FR 
20072 (Apr. 23, 1998). The rehearing and clarification requests concern 
the regulations relating to intraday nominations, trading of 
imbalances, and Internet communications. The Commission is revising 
Sec. 284.10(c)(3)(i)(B) of its regulations to change the implementation 
date for the transition to Internet communications to June 1, 2000. The 
Commission also is requiring that pipelines provide a dual 
communication system involving file transfers and standardized Internet 
web sites so shippers will have the option of choosing the 
communication modality that best fits their business needs.

EFFECTIVE DATE: The amendment to the Commission's regulation adopted in 
this order will become effective November 5, 1998.

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

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

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of 
this document in the Federal Register, the Commission also provides all 
interested persons an opportunity to inspect or copy the contents of 
this document during normal business hours in the Public Reference Room 
at 888 First Street, N.E., Room 2A, Washington, D.C. 20426. The 
Commission Issuance Posting System (CIPS) provides access to the texts 
of formal documents issued by the Commission. CIPS can be accessed via 
Internet through FERC's Homepage (http://www.ferc.fed.us) using the 
CIPS Link or the Energy Information Online icon. The full text of this 
document will be available on CIPS in ASCII and WordPerfect 6.1 format. 
CIPS is also available through the Commission's electronic bulletin 
board service at no charge to the user and may be accessed using a 
personal computer with a modem by dialing 202-208-1397, if dialing 
locally, or 1-800-856-3920, if dialing long distance. To access CIPS, 
set your communications software to 19200, 14400, 12000, 9600, 7200, 
4800, 2400, or 1200 bps, full duplex, no parity, 8 data bits and 1 stop 
bit. User assistance is available at 202-208-2474 or by E-mail to 
[email protected].
    This document is also available through the Commission's Records 
and Information Management System (RIMS), an electronic storage and 
retrieval system of documents submitted to and issued by the Commission 
after November 16, 1981. Documents from November 1995 to the present 
can be viewed and printed. RIMS is available in the Public Reference 
Room or remotely via Internet through FERC's Homepage using the RIMS 
link or the Energy Information Online icon. User assistance is 
available at 202-208-2222, or by E-mail to [email protected].
    Finally, the complete text on diskette in WordPerfect format may be 
purchased from the Commission's copy contractor, RVJ International, 
Inc. RVJ International, Inc., is located in the Public Reference Room 
at 888 First Street, N.E., Washington, D.C. 20426.

Order on Rehearing

    This order addresses requests for rehearing of Order No. 587-G 
which revised Commission regulations to require interstate natural gas 
pipelines to comply with a set of standards governing business 
practices and communication protocols.1 In Order No. 587-G, 
the Commission incorporated by reference, in Sec. 284.10(b) of its 
regulations, the most recent version (Version 1.2) of standards 
promulgated by the Gas Industry Standards Board (GISB). The Commission 
also adopted regulations, in new Sec. 284.10(c) of its regulations, 
governing intraday nominations, operational balancing agreements 
(OBAs), netting and trading of imbalances, standardization of 
communications over the public Internet, and notices of operational 
flow orders. A number of parties filed for rehearing or clarification 
of Commission regulations regarding intraday nominations, imbalance 
trading, and the Internet requirements.2 The Commission 
denies the rehearing requests relating to the intraday nomination 
regulations and grants rehearing and clarification with respect to the 
requirements relating to Internet communication.
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    \1\ Standards For Business Practices Of Interstate Natural Gas 
Pipelines, Order No. 587-G, 63 FR 20072 (Apr. 23, 1998), III FERC 
Stats. & Regs. Regulations Preambles para. 31,062 (Apr. 16, 1998).
    \2\ The parties filing for rehearing are listed on the appendix.
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I. Background

    In Order No. 587-G, the Commission continued its efforts, begun in 
Order Nos. 587, 587-B, and 587-C,3 to create a more 
standardized interstate pipeline grid so that shippers can more easily 
ship gas and transact business across the grid. Towards this end, the 
Commission updated its regulations to incorporate by reference version 
1.2 of the business practices and communication standards promulgated 
by GISB, a private consensus standards developer with a membership 
drawn from all facets of the natural gas industry. The Commission also 
adopted regulations governing business practices and communication 
protocols to resolve policy issues that had been dividing the GISB 
membership. The business practice regulations adopted by the Commission 
require pipelines to:
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    \3\ 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).
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     Give firm intraday nominations priority over already 
nominated and scheduled interruptible transportation service and permit 
firm intraday nominations submitted on the day prior to gas flow to go 
into effect at the start of the gas day;
     Enter into operational balancing agreements at all 
interstate and intrastate pipeline to pipeline interconnects; and
     Permit shippers to offset imbalances across contracts and 
trade imbalances amongst themselves when such imbalances have similar 
operational impact on the pipeline's systems.
    The electronic communication regulations require pipelines to:

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     Post all information and conduct all business transactions 
using the public Internet and internet protocols by June 1, 1999;
     Adhere to standards governing the provision of information 
on pipeline web sites and retention of electronic records of 
transactions;
     Notify shippers of critical events affecting the system, 
such as operational flow orders, by posting the information on pipeline 
web sites and by direct notice either through Internet E-Mail or 
notification to the shipper's Internet address.
    In addition, in Order No. 587-G, the Commission determined not to 
issue regulations on other disputed issues that are still under 
consideration by GISB--title transfer tracking, cross-contract ranking, 
multi-tiered allocations, fuel reimbursement, and penalty calculations. 
In Order Nos. 587-F 4 and 587-G, the Commission provided 
guidance on aspects of these issues and established December 31, 1998, 
as the date for submission of further standards and comments on these 
issues.
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    \4\ Standards For Business Practices Of Interstate Natural Gas 
Pipelines, Order No. 587-F, 62 FR 61459 (Nov. 18, 1997), IV FERC 
Stats. & Regs. Proposed Regulations para. 32,527 (Nov. 12, 1997).
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    Requests for rehearing of Order No. 587-G were due by May 18, 1998, 
and 45 parties filed requests for rehearing and clarification.

II. Discussion

    The rehearing and clarification requests concern the regulations 
requiring pipelines to: give firm intraday nominations priority over 
interruptible shippers; permit shippers to trade imbalances; and 
transact business using the public Internet and adhere to standards for 
posting information on Internet web sites and retention of electronic 
records. In addition, clarification was sought in two areas in which 
the Commission chose not to issue regulations: title transfer tracking 
and fuel reimbursement.
    The vast majority of the rehearing and clarification requests focus 
on the regulations requiring pipelines to conduct all business 
transactions over the public Internet by June 1, 1999.5 The 
Commission is revising Sec. 284.10(c)(3)(i)(B) to change the 
implementation date for the transition to Internet communications to 
June 1, 2000. The Commission also is requiring that pipelines provide a 
dual communication system involving file transfers and standardized 
Internet web sites so shippers will have the option of choosing the 
communication modality that best fits their business needs.
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    \5\ The Commission also received a number of letters relating to 
these requirements.
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    In addition, with respect to intraday nominations, the Commission 
denies the requests to revise Sec. 284.10(c)(1)(i)(B) so that a firm 
intra-day nomination that bumps scheduled interruptible service would 
take effect at 5 p.m., rather than 9 a.m. It also reaffirms its policy 
regarding waivers of penalties for bumped interruptible shippers for 
one day. As to imbalance trading, the Commission reaffirms its policy 
of requiring pipelines to permit shippers to trade imbalances across 
rate schedules. The requests for rehearing and clarification are 
discussed in detail below.

A. Intraday Nominations

    An intraday nomination is any nomination submitted after the 
initial nomination made at 11:30 a.m. central clock time 
(CCT).6 An intraday nomination may be made either on the day 
prior to gas flow (after 11:30 a.m.) or on the day of gas 
flow.7 GISB initially passed a standard requiring pipelines 
to provide one intraday nomination per day. Pipelines implemented this 
standard in different ways which limited the ability of shippers to 
coordinate intraday nominations across multiple pipelines.
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    \6\ 18 CFR 284.10(b)(1)(i) (1998), Nominations Related Standards 
1.2.4.
    \7\ 18 CFR 284.10(b)(1)(i) (1998), Nominations Related Standards 
1.2.7 (deleted by Order No. 587-H).
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    To achieve better coordination, GISB then approved a revised 
intraday schedule establishing three synchronization times at which 
shippers could coordinate intraday nominations: 6 p.m. (to take effect 
the next gas day), 10 a.m. and 5 p.m. (to take effect on the same gas 
day). The Commission adopted this timeline in Order No. 587-
H.8 GISB, however, reported that it had been unable to reach 
agreement on whether intraday nominations should displace (bump) 
previously scheduled interruptible service.
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    \8\ Standards For Business Practices Of Interstate Natural Gas 
Pipelines, Order No. 587-H, 63 FR 39509 (July 23, 1998), III FERC 
Stats. & Regs. Regulations Preambles para. 31,063 (July 15, 1998).
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    In Order No. 587-G, the Commission resolved this dispute by 
adopting regulations, in Sec. 284.10(c)(1)(i), establishing the 
scheduling priority for intraday nominations. The Commission adopted 
regulations requiring pipelines to accord an intraday nomination 
submitted by a firm shipper scheduling priority over nominated and 
scheduled volumes for interruptible shippers. In addition, the 
regulations require that an intraday nomination submitted on the day 
prior to gas flow will take effect at the start of the gas day at 9 
a.m. CCT. The Commission, however, also agreed with the GISB consensus 
that the third intraday nomination opportunity should not have priority 
over scheduled interruptible volumes.
    In effect, the regulations as adopted in Order No. 587-H require 
pipelines to permit intraday nominations by firm shippers at 6 p.m. (on 
the day prior to gas flow) and 10 a.m. (on the day of gas flow) to bump 
scheduled interruptible service, while a firm intraday nomination at 5 
p.m. (on the day of gas flow) would not bump scheduled interruptible 
service. Under the regulations, a firm intraday nomination at 6 p.m. 
would bump scheduled interruptible service as of the 9 a.m. start of 
the next gas day.
    The regulations further provide that pipelines must give an 
interruptible shipper advance notice of its reduction in scheduled 
volumes and inform the shipper whether penalties will apply on the day 
its volumes are reduced. The Commission further stated that it would 
consider whether pipelines should waive certain daily penalties for 
bumped interruptible shippers when pipelines made their filings to 
comply with the regulations. As a general principle, the Commission 
found that pipelines should follow the Commission's previous precedent 
and waive non-critical penalties, such as daily variance or scheduling 
penalties.
1. Effective Time of Intraday Nominations Submitted the Day Prior to 
Gas Flow
    Natural Gas Clearinghouse (NGC) and Exxon Company, U.S.A. (Exxon) 
do not challenge the Commission's determination that firm intraday 
nominations should be entitled to scheduling priority over 
interruptible service. They contest only the determination that a firm 
intraday nomination submitted on the day prior to gas flow will take 
effect at the start of the gas day (9 a.m. central clock time). They 
contend that instead of becoming effective at 9 a.m., a firm intraday 
nomination that bumps scheduled interruptible service should not become 
effective until 5 p.m. NGC argues that, if the Commission does not 
change the effective time to 5 p.m., the Commission should, in the 
alternative, require pipelines to allow bumped interruptible shippers 
an overnight rescheduling opportunity.
    NGC and Exxon maintain that the 9 a.m. effective time causes 
problems for interruptible shippers because they will have no 
opportunity to reschedule their

[[Page 53567]]

bumped gas before the bump becomes effective at 9 a.m. CCT, and the 
producers and marketers serving interruptible shippers may not always 
have the capability of shutting down plants and remote wells during 
non-working hours. In contrast, if firm shippers' nominations do not 
become effective until 5 p.m., the interruptible shippers could 
reschedule their bumped supply at the 10 a.m. intraday nomination 
opportunity the next day. Exxon maintains the balance between firm and 
interruptible shippers in Order No. 587-G weighs too heavily on the 
side of the firm shippers.
    The Commission denies the rehearing requests. The Commission's 
general policy is that firm service is entitled to priority over 
scheduled interruptible service. Firm shippers pay reservation charges 
for firm service and, therefore, are entitled to have their intraday 
nominations become effective at the earliest possible time. 
Interruptible shippers, by contrast, take the risk that their service 
will be interrupted. Thus, the Commission concludes that when balancing 
the rights of firm and interruptible shippers, the balance must weigh 
more heavily on the side of firm shippers.
    Exxon maintains that prior to Order No. 587-G, firm shippers on 
many pipelines were not able to bump interruptible shippers and had a 
more limited number of intraday opportunities available to them. It, 
therefore, maintains that firm shippers' ability to bump interruptible 
shippers should be limited to protect interruptible shippers.
    In fact, however, prior to Order No. 587-G, the Commission had 
required pipelines filing to implement intraday nominations to follow 
the Commission's general policy that firm intraday nominations would be 
given priority over scheduled interruptible service.9 It was 
only on those pipelines which had pre-existing no-bump rules that 
interruptible shippers were protected against bumping. To achieve 
uniformity, the Commission, in Order No. 587-G, applied the same rule 
to all pipelines.
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    \9\ See, e.g., 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, 78 FERC 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 ] 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).
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    Moreover, when all the intraday nomination changes are considered 
together, interruptible shippers receive as great a benefit from these 
changes as firm shippers, and interruptible shippers are not left 
unprotected under the Commission's regulation. Prior to Order No. 587, 
many pipelines provided no opportunity for interruptible shippers to 
reschedule gas bumped by firm nominations. Even after implementation of 
Order No. 587, firm nominations submitted at 11:30 a.m. could reduce or 
terminate existing interruptible flow starting at 9 a.m. the next day, 
and the interruptible shipper would have no opportunity to reschedule 
that gas until after the reduction took effect.
    In contrast, under the new regulations providing for multiple 
intraday nominations, an interruptible shipper whose existing flow is 
reduced by a firm nomination will have an opportunity to reschedule 
that gas using the 6 p.m. intraday nomination. Moreover, an 
interruptible shipper bumped by a 6 p.m. intraday nomination will have 
two additional opportunities to reschedule gas on an industry-wide 
basis (the 10 a.m. and 5 p.m. intraday opportunities).
    Interruptible shippers are protected in other ways as well. The 
Commission has given interruptible shippers the tools, such as pooling, 
gas package identifiers, ranking, and allocation flexibility 
10 that they can use to manage their gas supplies in the 
event of a bump. For instance, even if a producer has some remote 
wells, it can use pooling and ranking to ensure that the gas from its 
more easily accessible wells is cut before gas from remote wells. 
11 The Commission has also protected interruptible shippers 
by requiring pipelines to waive certain daily penalties, such as daily 
scheduling or variance penalties, for bumped interruptible shippers.
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    \10\ 18 CFR 284.10(b)(1)(i) (1998), Nominations Related 
Standards 1.3.17-1.3.18 (pooling), 1.3.23 (ranking), 1.3.24-1.3.25 
(package identifiers); 18 CFR 284.10(b)(1)(ii) (1998), Flowing Gas 
Related Standards 2.3.19 (allocations).
    \11\ Pooling refers to the ability of producers to aggregate gas 
from many wells in a single pool. Ranking refers to the ability to 
inform the pipeline which well will be cut first in the event of a 
cut.
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    Finally, if interruptible shippers or their suppliers have to 
adjust flows, the standards give them ample notice (11 hours) to do so. 
The gas business is increasingly becoming a 24-hour per day business. 
Indeed, the industry agreed that all parties need to support a seven-
days-a-week, twenty-four-hours-a-day nominations process.12 
Thus, all participants must structure their businesses to accommodate 
to that change, and ultimately producers dealing with interruptible 
shippers need to be able to adjust their gas flows when necessary to 
accommodate nomination changes.
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    \12\ 18 CFR 284.10(b)(1)(i) (1998), Nominations Related 
Standards 1.3.4.
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    Establishing a delayed effective time for 6 p.m. firm intraday 
nominations that bump interruptible service, as NGC and Exxon suggest, 
also could have negative effects on interruptible shippers by creating 
incentives for firm shippers to overnominate at the 11:30 a.m. initial 
nomination. Under a delayed effective time, firm shippers would have an 
incentive to overnominate on their initial nominations to protect 
themselves. A firm shipper that overnominates at the 11:30 a.m. 
nomination always retains the ability to reduce that nomination by 
submitting an intraday nomination at 6 p.m. (that day) or 10 a.m. or 5 
p.m. (the next day) to decrease its scheduled quantity. However, under 
NGC's and Exxon's proposed delayed effective time, the firm shipper 
could not increase its initial nomination until 10 a.m. (the next day) 
to become effective at 5 p.m. Thus, Exxon's and NGC's proposal create 
an incentive for firm shippers to overnominate at the initial 11:30 
a.m. nomination to protect themselves, potentially resulting in less 
interruptible service being available.
    NGC maintains unless the Commission adopts an overnight 
rescheduling opportunity, the current rule could result in decreased 
flows for interruptible shippers using multiple pipelines and cause 
pipelines to lose interruptible revenues. It argues that, if an 
interruptible shipper is bumped on the upstream pipeline, its gas will 
not flow on the downstream pipeline either. Without at least an 
overnight rescheduling opportunity, NGC argues, the downstream pipeline 
will lose revenue.
    The Commission, however, made clear in Order No. 587-G that 
pipelines are permitted to institute overnight rescheduling 
opportunities for bumped interruptible shippers if the pipeline deems 
it necessary to preserve its revenue. Each pipeline needs to judge the 
efficacy of instituting such a policy on its own system, rather than 
having the Commission impose the requirement

[[Page 53568]]

on a generic basis. As one pipeline pointed out in its comments in this 
proceeding, in many cases, an overnight rescheduling opportunity might 
be of little value since the nominations could not be 
confirmed.13
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    \13\ Order No. 587-G, 63 FR at 20079, III FERC Stats. & Regs. 
Regulations Preambles para. 31,062 at 30,673.
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2. Penalty Waivers
    In Order No. 587-G, the Commission proposed to adhere to its 
previous policy requiring pipelines to waive certain daily penalties 
for interruptible shippers whose scheduled volumes are reduced by a 
firm intraday nomination.14 Under this policy, penalties 
would be waived only for the day on which the bump takes place. Given 
the variety of penalty provisions in pipeline tariffs, the Commission 
concluded that the determination as to which penalties should be waived 
would be made when pipelines fail to comply with the regulations.
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    \14\ Order No. 587-G, 63 FR at 20077, III FERC Stats. para. 
Regs. Regulations Preambles para. 31,062 at 30,672.
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    The Commission set forth principles as to how it would determine 
which penalties should be waived. The Commission found that no 
penalties should be imposed if shippers have not received appropriate 
notice of their reduced volumes. During non-critical periods, pipelines 
would be expected to waive daily penalties, such as daily variance or 
scheduling penalties, but they would not be expected to waive daily 
penalties during critical periods, when operational flow orders (OFOs) 
are in effect. During OFO periods, the Commission did expect pipelines 
to comply with standard 1.1.14, which provides that, unless critical 
circumstances dictate otherwise, OFO penalties should not be imposed 
when a nomination is required to comply with the OFO and the shipper 
has not been given an opportunity to correct the circumstance giving 
rise to the OFO.15
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    \15\ 18 CFR 284.10(b)(1)(i) (1998), Nominations Related 
Standards 1.1.14.
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    Koch Gateway Pipeline Company (Koch) and ANR Pipeline Company and 
Colorado Interstate Gas Company (ANR/CIG) raise questions about the 
Commission's policy on waiver of penalties. Koch contends the 
Commission should not require pipelines to waive daily penalties during 
non-critical or critical periods because pipelines will lose control of 
their systems if shippers can continue to dump gas onto the pipelines 
with no liability. Koch contends waiver of penalties should be at the 
pipelines' discretion. ANR/CIG requests clarification that the 
Commission's guidance about penalties should not foreclose GISB from 
adopting standards related to, or even contrary to those proposals, and 
should not predetermine the scope of pipeline proposals.
    As a general matter, the Commission finds its principles establish 
a reasonable balance between the needs of pipelines to manage their 
systems and the difficulties imposed on shippers whose scheduled 
volumes are reduced. While the Commission expects shippers to adjust 
gas flows to accord with revisions to their scheduled volumes, the 
Commission recognizes that, in some circumstances, the shortened notice 
period (three hours under the standards)  16 may make such 
adjustments difficult. Thus, for non-critical periods, pipelines should 
waive daily penalties for the day of the bump. This rule does not 
immunize shippers from liability for placing extra gas on the system, 
as Koch asserts. Shippers would still have an incentive to minimize the 
amount of excess gas they put on the system, because the waiver applies 
only to penalties for the day of the bump; shippers would still be 
responsible for excess gas on the system and would be subject to 
penalties resulting from that gas on subsequent days. At the same time, 
during non-critical periods, having some extra gas on the system should 
not create operating difficulties for pipelines. During normal 
operations, pipelines should be able to absorb some extra gas on their 
systems for one day.
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    \16\ 18 CFR 284.10(b)(1)(i), Nominations Related Standards 1.3.2 
(iii) (three-hour notice of bumping at the 10 a.m. intraday 
nomination cycle).
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    In contrast, during critical periods, pipelines should not be 
required to waive daily penalties, because having extra gas on the 
system even for one day may cause operational problems. Moreover, 
during critical periods, all shippers may have difficulty in adjusting 
to an OFO and bumped interruptible shippers should not necessarily be 
given different treatment, particularly when any extra latitude given 
to interruptible shippers may come at the expense of reduced service or 
increased penalties for other shippers.
    These principles are intended to provide pipelines with guidance as 
to the Commission's view as to which penalties should be waived. As 
stated in Order No. 587-G, the Commission will consider specific 
pipeline penalties depending on the circumstances involved when 
pipelines make their compliance filings, and the principles do not 
predetermine the result of that inquiry.
3. Relative Priority of Firm Primary and Secondary Nominations
    National Fuel Gas Supply Corporation (National Fuel) requests 
clarification that, in its filing to comply with Order No. 587-G, it 
can revise its tariff to establish that a firm intraday nomination to 
firm primary receipt or delivery points will not bump already scheduled 
firm volumes to secondary receipt or delivery points. National Fuel 
points out that in the November 12, 1997 Notice of Proposed Rulemaking 
(NOPR), which led to Order No. 587-G, the Commission stated that its 
general policy regarding relative firm priorities is that intraday 
nominations to primary points do not bump already scheduled firm 
nominations to secondary points. National Fuel asserts that its current 
tariff does not protect firm shippers using secondary points from being 
bumped by firm intraday nominations to primary points. It contends that 
it should be able to change this policy in its compliance filing, 
because much of the benefit of the intraday timetable would be lost if 
secondary firm nominations are not protected from bumping by primary 
firm nominations.
    In Order No. 587-G, the Commission rejected requests to adopt a 
regulation or a generic policy on the priority of firm primary and firm 
secondary intraday nominations.17 The Commission determined 
that the current priorities for firm service in effect on each pipeline 
should continue.
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    \17\ Order No. 587-G, 63 FR at 20079, III FERC Stats. & Regs. 
Regulations Preambles para. 31,062 at 30,673-74.
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    Since Order No. 587-G did not adopt a regulation regarding the 
relative priorities of firm primary and secondary capacity, National 
Fuel should not include a change to its current priority scheme for 
firm shippers in a compliance filing. Any such filing must be made as a 
separate section 4 filing. This is consistent with the manner in which 
the Commission previously handled filings to comply with GISB 
standards. In those compliance filings, the Commission permitted 
changes to tariff provisions only when necessary to comply with the 
standards. Pipelines seeking to reduce, eliminate, or change other 
service offerings as a result of the standards were required to submit 
such proposed changes in a filing under section 4 of the Natural Gas 
Act made coincident with the compliance filing.18
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    \18\ See El Paso Natural Gas Company, 77 FERC para. 61,176, at 
61,660, 61,662 (1996); Florida Gas Transmission Company, 77 FERC 
para. 61,177, at 61,664 (1996); National Fuel Gas Supply 
Corporation, 77 FERC para. 61,178, at 61,673 (1996); Northern Border 
Pipeline Company, 77 FERC para. 61,179, at 61,680, 61,682 (1996); 
Transwestern Pipeline Company, 77 FERC para. 61,180, at 61,684 
(1996).

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[[Page 53569]]

B. Imbalance Trading

    In Order No. 587-G, the Commission adopted a regulation 
(Sec. 284.10(c)(2)(ii)) requiring pipelines to permit shippers (and 
their agents) to offset imbalances on different contracts held by the 
shipper and to trade imbalances with other shippers so long as the 
imbalances have similar operational impact on the pipeline. The 
Commission required pipelines to permit netting and imbalance trading 
across contracts under different rate schedules. The Commission 
reiterated its current policy that if a pipeline can document that such 
trading will cause a loss of transportation revenue, the pipeline would 
be permitted to implement an appropriate mechanism to ensure that it is 
made whole for all appropriate transportation charges.19
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    \19\ See Panhandle Eastern Pipeline Company, 64 FERC para. 
61,009, at 61,066 (1993).
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    Williston Basin requests clarification that it will be allowed to 
devise a mechanism to protect against loss of transportation revenue 
when interruptible imbalances are traded with firm imbalances. 
Williston Basin poses the following as an example of a situation in 
which imbalance trading will result in a loss of transportation 
revenue:

    Assume a shipper has a 1,000 Dth positive imbalance (i.e., 
delivers into Williston Basin's system 1,100 Dth of which Williston 
Basin delivers 100 Dth off its system at a rate of $0.41) under an 
interruptible contract and trades the 1,000 Dth positive imbalance 
with a shipper who has a 1,000 Dth negative imbalance (i.e., 
delivers into Williston Basin's system 100 Dth of which Williston 
Basin delivers 1,100 Dth off its system at a rate of $0.04) under a 
firm contract. The imbalance on Williston Basin's system is 0 Dth. 
However, Williston Basin will have received transportation revenues 
of only $85 ($41 based on 100 Dth at the Rate Schedule IT-1 
[interruptible] rate of $0.41 and $44 based on 1,100 Dth at the Rate 
Schedule FT-1 [firm] rate of $0.04). Under Williston Basin's 
currently effective FERC Gas Tariff, Second Revised Volume No. 1, 
which does not allow shippers to trade imbalances across rate 
schedules and under the same scenario just illustrated, the Rate 
Schedule IT-1 shipper must trade its 1,000 Dth positive imbalance 
with another Rate Schedule IT-1 shipper's 1,000 Dth negative 
imbalance. Williston Basin would have received transportation 
revenues of $451 based upon 1,100 Dth at the Rate Schedule IT-1 rate 
of $0.41 and $41 (sic) based upon 100 Dth at the Rate Schedule FT-1 
rate of $0.04.
    In the example above, allowing shippers to trade imbalances 
would cause Williston Basin to forego $407 of transportation 
revenues.20
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    \20\ Williston Basin's Request for Clarification And/Or 
Rehearing, Docket No. RM96-1-009, at 4 (May 15, 1998).

If the Commission does not grant Williston Basin's requested 
clarification, Williston Basin requests rehearing of the Commission's 
requirement that pipelines permit imbalance trading across rate 
schedules.
    Williston Basin's example is confusing. For example, it derives 
revenue of $41 from 100 Dth of firm transportation at the firm usage 
rate of $0.04. But the correct calculation would be $4.00. It may be 
that Williston Basin intended in the second example to refer to 
imbalance trading between two interruptible shippers rather than an 
interruptible and a firm shipper. In that case the revenue received 
would be $41 (100 Dth at an interruptible rate of $0.41).
    However, if that is the case, then Williston Basin is determining 
differential revenues by, in one case, evaluating revenues from an 
interruptible and a firm shipper and, in the other case, from two 
interruptible shippers. But this is an apples and oranges comparison. 
The proper analysis to determine whether imbalance trading results in 
transportation revenue loss is to compare revenues received from the 
same two shippers (interruptible and firm) with imbalance trading and 
without such trading. When this comparison is made, the Commission can 
see no such transportation revenue loss.
    Williston Basin's tariff, like those of many pipelines, states that 
transportation charges for interruptible service are based on the 
``quantity of gas in dkt delivered  * * * for Shipper's account at the 
point(s) of delivery.'' 21 In Williston Basin's example, 
there are two shippers, one interruptible and one firm. If no 
imbalances are traded between these shippers, the interruptible shipper 
would pay transportation revenues of $41 (100 Dth of delivered gas 
multiplied by $.41) and the firm shipper would pay $44 (1,100 Dth of 
delivered gas multiplied by $.04). Thus, without imbalance trading, 
Williston Basin would still receive the same $85 from the two shippers 
as it receives with imbalance trading.
---------------------------------------------------------------------------

    \21\ Williston Basin Interstate Pipeline Company, FERC Gas 
Tariff, Second Revised Volume No. 1, Substitute Second Revised Sheet 
No. 91.
---------------------------------------------------------------------------

    Williston Basin's only potential loss of revenue would seem to be a 
loss of potential penalty revenue on the imbalance. Without imbalance 
trading, both shippers would have imbalances of 1,000 Dth, although 
going in opposite directions. But penalties are imposed solely to 
discourage shipper conduct inimical to the system; pipelines are not 
entitled to expect such revenue. As the Commission explained in Order 
No. 587-G, and Williston Basin does not contest, as long as the 
imbalances net out, there is no adverse operational effect on the 
pipeline.
    Given the confusion in Williston Basin's example, it may be that 
Williston Basin has other circumstances in mind. If there are other 
circumstances that should be considered, Williston Basin can propose in 
an NGA section 4 filing an appropriate mechanism to ensure that 
imbalance trading does not result in a reduction in transportation 
revenue to which it is legitimately entitled.

C. Internet Communications

    In Order No. 587-G, the Commission promulgated regulations, in 
Sec. 284.10(c)(3), requiring pipelines to post all information and 
conduct all business using the public Internet by June 1, 1999, and to 
adhere to other standards relating to electronic communication. As 
discussed below, the vast majority of the clarification and rehearing 
requests concern the principles the Commission established for the 
transition to Internet communications. Other requests relate to the 
regulations establishing standards for presentation of information on 
pipeline web sites, requiring pipelines to provide tables cross-
referencing numeric designations with common names, and requiring 
pipelines to adhere to standards for retention of electronic data.
1. Transition to Internet Communications
    Prior to Order No. 587-G, the pipelines communicated with their 
shippers using dial-up Electronic Bulletin Boards (EBBs) on which 
shippers would view pipeline information and enter their own 
information on the screen through keystrokes. The EBBs, however, 
created difficulties for shippers dealing with multiple pipelines 
because each EBB required unique software, logon, and other procedures. 
In Order No. 587-G, the Commission required pipelines to conduct all 
business transactions using Internet communications to solve the 
difficulties created by the proprietary EBBs and to provide shippers 
with a standardized method of doing business across multiple pipelines.
    In Order No. 587-G, the Commission also provided guidance on how 
the transition to standardized Internet

[[Page 53570]]

communication should be implemented. The Commission set forth the 
following four principles.
     Pipelines had to conduct all business transactions (which 
they currently conduct using their EBBs) through downloading and 
uploading files in ASC X12 electronic data interchange (EDI) 
format.22
---------------------------------------------------------------------------

    \22\ EDI was chosen by the industry and GISB as the standardized 
format for file transfers. Standards for EDI are promulgated by the 
American National Standards Institute (ANSI) Accredited Standards 
Committee (ASC) X12.
---------------------------------------------------------------------------

     Pipelines could, but were not required to, provide 
interactive web sites.23 Pipelines would be permitted cost-
of-service recovery in subsequent section 4 rate cases for the costs of 
the interactive web sites only if the pipelines created standards 
governing the access to, presentation, and format (``look and feel'') 
of the sites.
---------------------------------------------------------------------------

    \23\ Interactive web sites permit shippers to view information 
on-line and transmit information to the pipelines by filling in on-
line forms.
---------------------------------------------------------------------------

     Pipelines must assure a level playing field for shippers 
using EDI and the interactive web site. Regardless of which system is 
used, the shipper must obtain the same service and same information 
handling and response priority from the pipeline.
     By the June 1, 1999, conversion to Internet 
communications, communications using EBBs should cease, although 
pipelines could maintain EBBs solely as a back-up system for a period 
of one year after the June 1, 1999 date for implementing Internet 
communication. Pipelines would be required to remove EBB costs from 
cost-of-service in any general section 4 rate case effective after June 
1, 2000.
    The rehearing requests do not challenge the Commission's decision 
to require pipelines to conduct communications via the Internet. They 
focus on the principles articulated by the Commission for implementing 
the requirement. The rehearing requests focus on four issues: the 
relationship between EDI file transfers and interactive web sites, the 
requirement that pipelines assure a level playing field for EDI and 
interactive web sites, the June 1, 1999 implementation date, and cost 
recovery for pipeline EBBs and interactive web sites.
    a. File Transfers and Interactive Web Sites. (1) Rehearing 
Requests. In Order No. 587-G, the Commission required pipelines to 
conduct all business transactions using EDI. At the same time, it 
permitted pipelines to establish interactive web sites. These 
interactive web sites would operate much the same way as EBBs with 
shippers able to view information on-line and transmit information to 
the pipelines by filling in on-line forms. The Commission permitted the 
pipelines to recover the costs for establishing interactive web sites 
in their cost-of-service as long as the sites conformed to standards 
governing access to the web sites as well as the presentation and 
format (``look and feel'') of the sites.
    While shippers and pipelines do not object to the requirement that 
pipelines support the use of EDI, they contend that EDI should not be 
the exclusive means of communication and that some form of interactive 
approach is also necessary.24 They maintain that EDI is 
cost-effective only for those doing a high volume of transactions. 
While the cost to shippers of using EDI is the paramount concern, some 
shippers are also concerned about the potential for losing some of the 
interactive functionality provided by EBBs 25 To avoid 
having to use EDI, some shippers suggest pipeline EBBs should be 
continued,26 while many others support a mandatory 
requirement for pipelines to provide interactive web 
sites.27 PSCo/Cheyenne and National Fuel Distribution 
contend that in addition to EDI file transfers, pipelines should 
continue to transact business using flat files (not in EDI format).
---------------------------------------------------------------------------

    \24\ See, e.g., AGDF, Atlanta/Chattanooga, CNG, Consumers, El 
Paso/Tennessee, Engage, East-of-California Shippers, Florida 
Municipalities, Florida Power, INGAA, IPAA, Koch, MCV, MGE, National 
Fuel Distribution, NGT/MRT, Pacific Northwest Shippers, PG&E GT-NW, 
PSCo/Cheyenne, Reedy Creek, RPC, Southern, TCGS.
    \25\ See Pacific Northwest Shippers, East-of-California 
Shippers.
    \26\ See Piedmont, PSCo/Cheyenne, IPAA, RPC, Western.
    \27\ See AGA, et al., East-of-California Shippers, Brooklyn 
Union/Long Island, MCV, Florida Power, TCGS, Florida Municipals, 
NGC, NGSA, Pacific Northwest Shippers.
---------------------------------------------------------------------------

    On July 15, 1998, GISB filed with the Commission a report that 
included the steps it was taking to achieve the transition to the 
Internet required by Order No. 587-G. GISB requested that pipelines 
provide a list of current EBB applications for which no EDI standards 
had been developed. Four hundred eighty-five items were identified. 
GISB is having these items independently reviewed by Ernst & Young to 
determine which of the 485 items are susceptible to EDI usage. In 
addition, GISB is considering several models for Internet transition, 
including a model developed by a consortium of pipeline and shipper 
interests providing for both pipeline interactive web sites and EDI 
file transfers.
    (2) Commission Resolution. In Order No. 587-G, the Commission 
required pipelines to establish a standardized communication system 
using the Internet because, despite shipper complaints about the 
difficulties of using non-standardized EBBs, GISB and the pipelines had 
not developed a plan for moving to a standardized communication 
system.28 The Commission is pleased that given the impetus 
of Order No. 587-G, GISB and the industry are now developing standards 
for both EDI and interactive web sites.
---------------------------------------------------------------------------

    \28\ GISB standard 4.3.6 states that all transactions should be 
achieved through one mode of communications, but GISB apparently had 
reached an impasse on achieving this goal.
---------------------------------------------------------------------------

    The Commission continues to favor an approach to communication in 
which shippers can either transact business using computer-to-computer 
file transfers or conduct business on-line in an interactive fashion, 
whichever approach best fits their needs. For instance, currently, 
pipelines' EBBs provide the interactive access and EDI is used for 
standardized file transfers. Both EBBs and EDI are included in the 
pipelines' cost-of-service. The rehearing requests raise issues related 
to both interactive web sites and file transfers.
    (a) Interactive Web Sites. While the Commission did not mandate the 
use of an interactive web site in Order No. 587-G, it permitted 
pipelines to respond to customer demand to provide an interactive web 
site and to recover the costs of establishing the web site in the 
pipelines' cost-of-service as long as the site complied with applicable 
standards developed by GISB. This approach was a carry-over from the 
prior cost treatment of EBBs; the Commission had required pipelines to 
conduct only certain transactions on their EBBs, but, if pipelines 
chose to offer more services, they could include those costs in their 
cost-of-service.
    Many customers request that the Commission mandate that pipelines 
provide interactive Internet web sites in order to ensure that the 
sites are developed on the same schedule as the EDI file transfers. The 
pipelines themselves generally support the development of such an 
approach. The Commission, therefore, will require pipelines to develop 
interactive web sites that comply with the standards being developed by 
GISB. If there are pipelines where parties prefer only to use EDI file 
transfers to avoid the added costs of having the pipeline establish an 
interactive web site, the pipelines may seek a waiver of the 
requirement to develop an interactive web site.
    (b) File Transfer Standards. The Commission chose to require 
pipelines

[[Page 53571]]

to use EDI as the standardized format for file transfers, because that 
was the method chosen by the industry. In the industry working groups 
and later through GISB, the industry chose EDI, because it found that 
non-EDI flat files,29 would be less flexible and lacked the 
validation programs available for EDI.30 Rehearing requests 
raise questions relating to pipeline obligations to provide for EDI and 
non-EDI file transfers.
---------------------------------------------------------------------------

    \29\ Flat files contain the same information as the EDI files, 
but without the special formatting included in EDI files.
    \30\ See Standards for Electronic Bulletin Boards Required Under 
Part 284 of the Commission's Regulations, Order No. 563-A, 59 FR 
23624 (May 9, 1994), FERC Stats. & Regs. Regulations Preambles [Jan. 
1991-June 1996] para. 30,994 at 31,042 (May 2, 1994).
---------------------------------------------------------------------------

    In its rehearing request, Koch suggests it has a choice as to 
whether to provide EDI file transfers. But providing standardized EDI 
communication is not optional. The current regulations require Koch to 
provide for EDI communication. Indeed, in the rehearing requests in 
this proceeding, shippers and pipelines support the continuation of the 
EDI requirement because they find that file transfers may be more 
efficient for some shippers, particularly where large volumes of 
transactions are involved. Thus, to the extent Koch was seeking 
rehearing of the requirement to provide for EDI file transfers, the 
Commission denies the request.
    However, the Commission recognizes that some smaller pipelines 
already have been granted waivers or extensions of time to implement 
EDI file transfers. If smaller pipelines demonstrate that there is no 
demand to use EDI, they may file for waivers of the EDI requirement.
    National Fuel Distribution and PSCo/Cheyenne argue that those 
pipelines that currently provide non-EDI, flat file transfers should 
continue this practice, because non-EDI file transfers may be less 
expensive than EDI for some shippers. National Fuel Distribution 
contends that GISB should develop standardized flat file transfers.
    GISB is considering whether and how to standardize non-EDI flat 
file transfers,31 and the Commission encourages the industry 
to continue this inquiry. Even if standardizing non-EDI file transfers 
is not deemed worthwhile, pipelines that already provide this service 
must continue to provide it on a non-discriminatory basis, and other 
pipelines will be free to offer the service on a non-discriminatory 
basis.
---------------------------------------------------------------------------

    \31\ See July 28, 1998 Minutes of GISB EBB-Internet 
Implementation Task Force, http://www.gisb.org/eii.htm (Aug. 10, 
1998).
---------------------------------------------------------------------------

    The Commission recognizes that in the rapidly changing frontiers of 
electronic communication, technology does not remain stagnant. The 
movement from EBB technology to the Internet is one example, as is the 
movement from value-added-networks to the Internet for file transfers. 
The Commission's goal is to provide shippers with the ability to 
transact business interactively or through file transfers. If, however, 
changing commercial circumstances or evolving technology render any 
current technology, such as EDI, sub-optimal for purposes of bulk data 
transfer before the June 1, 2000 deadline, the Commission expects that 
GISB and the industry will begin to explore how to adopt the best 
solutions for the market. GISB and the industry should continue their 
efforts to explore new technological solutions and to adopt those 
technologies that prove to be more cost-effective and user-friendly.
    b. Level Playing Field. In Order No. 587-G, the Commission required 
pipelines to assure a level playing field for those using EDI and 
interactive web sites by ensuring that regardless of the format used, 
shippers receive the same service and the same response priority from 
the pipelines. The pipelines, as well as some shippers, maintain that 
shippers should not necessarily receive identical service from 
interactive web based systems and EDI. They contend interactive 
systems, by their very nature, are more responsive than EDI and a 
requirement for maintaining a level playing field will only serve to 
limit the services offered to shippers using interactive 
systems.32 The rehearing requests concern two issues: 
whether all transactions should be made available in EDI format; and 
how to ensure equality of treatment regardless of the communication 
modality a shipper adopts.
---------------------------------------------------------------------------

    \32\ See INGAA, El Paso/Tennessee, PG&E GT-NW, Western.
---------------------------------------------------------------------------

    (1) Transactions To Be Made Available in EDI File Transfer Format. 
Pipelines and shippers identify a number of transactions which are 
currently provided on EBBs, but are not provided through file 
transfers. These include on-line contracting, storage and other special 
reports.33 They want pipelines to continue to be able to 
provide these services even if they are not also provided using EDI. 
GISB requested pipelines to submit all their business transactions that 
are not currently provided using EDI and is having these items reviewed 
independently by Ernst & Young to determine whether these business 
transactions can be reasonably conducted using EDI file transfers.
---------------------------------------------------------------------------

    \33\ See El Paso/Tennessee, East-of-California Shippers, Pacific 
Northwest Shippers.
---------------------------------------------------------------------------

    While not every transaction may be suited to file transfer, 
pipelines must provide for EDI file transfer in every case where it is 
feasible. For instance, the ability to nominate by using file transfers 
may be of little value if the shipper has to go online to amend the 
receipt points in its contract. The Commission is encouraged by GISB's 
efforts to obtain an independent, impartial review of whether 
transactions should be provided through file transfers and looks 
forward to receiving that report.
    The Commission also recognizes that pipelines need to be able to 
develop and offer their customers new services on their interactive web 
sites. At the same time, to maintain equality between interactive web 
sites and EDI file transfers, services provided on the interactive web 
site must, whenever feasible, be provided using EDI or other 
standardized file transfers (if the industry determines to standardize 
non-EDI file transfers).
    Thus, when pipelines are developing new services for their 
interactive web sites, they must also consider the method for 
implementing the business practice using EDI and, in compliance with 
standard 1.2.2,34 provide advance notice of their proposed 
EDI solution to GISB for review. Before initiating the new service, 
pipelines should file under section 4 of the NGA at least 30 days prior 
to the proposed implementation date detailing the efforts they have 
made to develop a standardized file transfer. If the pipeline has 
complied with the requirement to provide GISB with advance notice of 
their proposed EDI solution, it would be permitted to implement its new 
service on schedule. This approach should not inhibit development of 
new interactive solutions while at the same time helping to ensure that 
those using file transfers are not denied a reasonable opportunity to 
obtain the same service.
---------------------------------------------------------------------------

    \34\ 18 CFR 284.10(b)(1)(i) (1998), Nominations Related 
Standards 1.2.2.
---------------------------------------------------------------------------

    (2) Ensuring Shippers are not Disadvantaged by their Choice of 
Communication Modality. The pipelines contend that the requirement to 
provide a level playing field will eviscerate the value of interactive 
web sites because it will prevent the pipelines from providing the 
immediate error checking and responsiveness that is the principal 
benefit of interactivity.35 They claim that interactive 
error checking is ill-suited to the EDI process

[[Page 53572]]

which relies on batch processing of requests. El Paso/Tennessee suggest 
that the requirement for a level playing field should be interpreted to 
mean that pipelines must ensure that EDI shippers are not disadvantaged 
by the use of EDI, not that pipelines must reduce all service to the 
EDI level.
---------------------------------------------------------------------------

    \35\ See INGAA, CNG, El Paso/Tennessee.
---------------------------------------------------------------------------

    The Commission continues to hold that pipelines should treat those 
using file transfers and interactive web communications similarly to 
ensure that users of EDI are not disadvantaged. This is important not 
only to ensure non-discrimination, but to prevent pipelines from 
attempting to limit competition by favoring their own interactive web 
system over the standardized file transfer system. At the same time, 
the Commission does not want to limit the ability of the pipelines to 
provide as efficient and responsive an interactive web site as is 
possible.
    The Commission agrees with El Paso/Tennessee that, in order to 
achieve both these goals, the proper formulation of the requirement is 
that pipelines must ensure that no business disadvantage accrues to 
shippers using EDI compared with those using interactive approaches. 
Pipelines can ensure equal treatment without compromising the value of 
interactive service. For instance, EDI is not necessarily restricted to 
batch communication and pipelines could assure equal treatment by 
processing EDI file transfers in real time so shippers using EDI will 
receive an error report in the same time frame as shippers using 
interactive modalities. If developing real-time EDI is too expensive, 
pipelines could provide those shippers using EDI with added time so 
that they can receive and respond to error messages. This would be 
similar to the 15-minutes of extra time given to third-parties 
processing nominations on behalf of shippers.36 GISB and the 
industry should work on developing whatever standards are necessary to 
ensure that those using file transfers are not placed at a business 
disadvantage to those using the pipelines' interactive web site.
---------------------------------------------------------------------------

    \36\ 18 CFR 284.10(b)(1)(i) (1998), Nominations Related 
Standards 1.3.2. Parties nominating directly to the pipeline using 
EBBs must send nominations by 11:30. Parties using third-parties 
also must send their information to the third-party by 11:30, but 
the third-party is accorded 15 minutes of processing time before it 
has to transmit the information to the pipeline.
---------------------------------------------------------------------------

    c. Implementation Date. Both shippers and pipelines 37 
contend that the June 1, 1999 implementation date does not allow 
sufficient time for development of standards and implementation of both 
EDI and interactive web sites, particularly given the industry's need 
during the same time period to devote information technology personnel 
to dealing with the Year 2000 computer problem.38 Some 
recommend that the Commission delay implementation until GISB develops 
the standards,39 while others recognize the need for a 
deadline to ensure compliance, but recommend that the deadline should 
be changed to June 1, 2000.40 NGSA and NGC argue that the 
Commission should adopt a staggered implementation schedule. They 
maintain pipelines reasonably should be able to implement standardized 
interactive web sites for nomination-related transactions by June 1, 
1999, with the remainder of functions made available on interactive web 
sites by June 1, 2000. GISB's EBB-Internet Transition Task Force also 
is working on a staged approach to implementation--with nominations and 
confirmations by June 1, 1999, allocation, imbalance, and measurement 
reporting by November 1999, invoice and payment information by April 
2000, and capacity release information by June 2000--although these are 
not firm dates. INGAA recommends that the pipelines be responsible for 
providing access to their current EBBs over the Internet by June 1, 
1999, with June 1, 2000 as the start for a phased-in compliance for 
interactive web sites and completion of EDI.
---------------------------------------------------------------------------

    \37\ AGA, et al., AGDF, Atlanta/Chattanooga, CNG, ECT, El Paso/
Tennessee, Engage, Florida Municipals, Great Lakes, INGAA, KN, 
Brooklyn Union/Long, MCV, National Fuel, NGSA, Pacific Northwest 
Shippers, Peoples, Peoples/NorthShore, Piedmont, PSCo/Cheyenne, 
Southern, TCGS, WGP.
    \38\ The Year 2000 problem refers to the use of two digits to 
represent the year in computer programs and embedded computer chips. 
If not corrected, the digits 00 may be interpreted as referring to 
the year 1900, rather than 2000.
    \39\ Atlanta/Chattanooga, CNG, ECT, MCV, TCGS.
    \40\ AGA, et al., NGSA, Pacific Northwest Shippers. See also KN 
(recognizing the need for a firm implementation date), INGAA 
(proposing an implementation schedule).
---------------------------------------------------------------------------

    Given the effort GISB is making to effectuate the transition to 
Internet communications, the Commission finds that providing additional 
time will help ensure a smooth transition. The Commission, therefore, 
will amend Sec. 284.10(c)(3)(i)(B) to require pipelines to complete the 
move to Internet communications by June 1, 2000.
    Even though the Commission has provided an extra year to achieve 
full compliance, the Commission expects the pipelines to be working 
throughout that period to develop their Internet sites. GISB's phased 
implementation to Internet transition makes sense because it not only 
provides shippers with the ability to conduct the crucial nomination 
and confirmation and flow gas transactions at an earlier date, but also 
enables the industry to begin testing initial transactions to see how 
the standards work. The Commission finds that the timetable for phased 
implementation laid out by GISB is reasonable and has every confidence 
that the industry can meet those targets. The Commission fully expects 
pipelines to implement the Internet transition according to this 
schedule. In setting out its implementation schedule, GISB has 
expressed concern about the potential need for regulatory 
approval.41 The Commission emphasizes that pipelines need 
not and should not wait for Commission adoption of the standards to 
begin implementation.
---------------------------------------------------------------------------

    \41\ See June 1, 1998 Report to the Board of Directors re EBB-
Internet Transition Plan at 30 (included in GISB's July 15, 1998 
filing in Docket No. RM96-1).
---------------------------------------------------------------------------

    So that the Commission is kept abreast of the industry's progress 
in meeting its staggered implementation schedule, GISB and others in 
the industry should submit quarterly reports starting December 1998 and 
running through December 1999 detailing the progress being made in the 
standardization process.42 While all pipelines are required 
to complete the transition to the Internet by June 1, 2000, the 
Commission recognizes that some pipelines may have more difficulty in 
meeting the interim implementation timetable than others. To keep the 
Commission apprised of the industry's progress, those pipelines that 
find themselves unable to meet the interim implementation dates must 
file with the Commission an explanation of the reasons for the delay 
and when implementation of the interim transactions will take place.
---------------------------------------------------------------------------

    \42\ The reports would be due at the end of December 1998, March 
1999, June 1999, September 1999, and December 1999.
---------------------------------------------------------------------------

    INGAA has suggested that, as an interim step, pipelines might 
simply provide access to their current EBBs over the Internet by June 
1, 1999. This, however, would not be the equivalent of a standardized 
Internet web site, since once logged on, shippers would still be using 
the pipelines' current EBB. The Commission is reluctant to require 
pipelines to provide such an interim option because it would take time 
and resources that would be more productively spent on meeting GISB's 
plan for staggered implementation of interactive web sites. While 
pipelines are free to make this option available as an interim measure, 
the Commission will not require them to do so.
    d. Cost Recovery. (1) Continuation of EBBs. In Order No. 587-G, the 
Commission found that pipelines

[[Page 53573]]

should be able to continue their EBB systems until they have converted 
to a standardized system (including an interactive web site) and could 
maintain their EBBs as a back-up system for one year thereafter. Upon 
conversion to the standardized system, however, the Commission 
concluded that pipelines should no longer be able to recover the costs 
for their EBBs in their cost-of-service.
    A number of shippers request clarification that pipelines can 
continue to use their EBBs until the implementation of a standardized 
interactive web site.43 Other shippers and pipelines 
maintain that pipelines should be permitted to continue to provide EBBs 
as an additional option.44
---------------------------------------------------------------------------

    \43\ See NGSA, Louisville.
    \44\ See CNG, El Paso/Tennessee, IPAA, Piedmont, PSCo/Cheyenne, 
RPC, Southern, Western.
---------------------------------------------------------------------------

    Once an interactive Internet-based system is implemented, there 
appears no reason for pipelines to continue to support a third, non-
standardized communication modality. Interactive web sites will provide 
users with the same interactive functionality they now receive from 
EBBs. Pipelines, therefore, should not receive recovery for the 
operation and continued maintenance or enhancements of EBBs in rate 
cases filed one year after implementation of the interactive web site 
and standardized file transfer systems. Pipelines, however, will be 
free to continue to provide EBB services as an additional option as 
long as they recover the costs for such services through a separate 
charge.
    (2) Recovery of Costs for Interactive Web Sites.
    In Order No. 587-G, the Commission concluded that pipelines could 
recover the costs for both EDI file transfers and standardized 
interactive web sites through their cost-of-service. The Commission 
concluded that including such costs did not provide an undue preference 
to the users of interactive web sites, because the costs for both EDI 
and interactive web sites would be recovered through cost-of-service 
and because attempting to separate the costs of implementing EDI and 
interactive web sites would be difficult due to the integrated nature 
of communication systems.
    The pipelines are concerned about the Commission's limitation of 
cost recovery to standardized Internet web sites. INGAA and KN maintain 
that the Commission should permit recovery of all costs in developing 
interactive web systems as long as the pipelines ultimately adhere to 
the standards developed by GISB. Enron and Columbia Gas/Columbia Gulf 
maintain that cost recovery should be determined in individual rate 
cases.
    As stated above, pipelines should be permitted to recover the costs 
for developing standardized interactive web sites. As long as the 
pipelines' web sites adhere to the standards being developed by GISB, 
pipelines generally should be permitted to recover those costs. 
Specific issues relating to cost recovery must be addressed in specific 
pipeline rate cases.
    TransCapacity seeks rehearing of the determination to include 
interactive web sites in cost-of-service, claiming the decision will 
limit competition between the pipelines' presentation systems and those 
sold by third-parties. Including the cost of presentation in cost-of-
service, which is recovered through transportation rates, TransCapacity 
asserts, will make the use of the pipelines' interactive web site 
essentially free to all customers, while customers will have to pay an 
added charge to obtain a presentation system from third 
parties.45 Providing the pipelines' presentation systems for 
free, TransCapacity argues, distorts customers' choices about which 
systems have greater value. Rather than having pipelines bear the 
entire cost of processing information, TransCapacity contends a fairer 
and more competitive approach would be to have the pipelines bear their 
costs of sending and receiving information and pipeline customers bear 
their costs of organizing and processing the data sent to the pipeline. 
TransCapacity urges the Commission either to remove pipeline 
interactive systems from cost-of-service or institute a form of 
crediting under which firm shippers using EDI or third-parties would 
receive a credit for not using the pipelines' interactive web site.
---------------------------------------------------------------------------

    \45\ TransCapacity maintains that for those shippers paying 
transportation rates, the pipelines' interactive system is 
effectively ``free,'' because the shippers have to pay the same 
transportation rate whether they decide to use the pipelines' or 
third parties' systems. Those who use the pipelines' communication 
systems but do not pay transportation rates, TransCapacity 
maintains, pay nothing to use the service.
---------------------------------------------------------------------------

    The Commission's determination to permit cost-of-service recovery 
for pipeline interactive web sites continues current policy. The 
Commission permitted pipelines to recover the costs of both EBB and EDI 
in their cost-of-service so that shippers could select the option that 
best fit their business needs.
    TransCapacity's argument is that EDI file transfers compete 
directly with pipeline provision of interactive web sites, because both 
approaches can be used to achieve the same result--the provision to the 
customer of an interactive presentation that enables them to enter 
information directly from their computer screen. If that were the 
primary benefit of EDI, however, there would be little need to require 
EDI file transfers in the first place; a standardized interactive web 
site, without file transfers, would be sufficient. Interactive webs 
sites and EDI file transfers are not simply two ways of achieving the 
same result; they provide two different options from which shippers can 
choose the approach that best fits their business needs.
    Interactive web sites permit human beings to conduct business from 
their computer desktops, but such web sites do not permit direct 
computer-to-computer communications, without human intervention. File 
transfers, on the other hand, permit customers to store and process 
information on their own computer systems. For instance, using a 
pipeline's interactive web site, a human being would have to access a 
pipeline's web site to view capacity release offerings on a screen, but 
would have to take notes on what offerings were available. In contrast, 
using EDI file transfers, the information could be automatically 
downloaded to the customer's computer system which would process the 
information to the customer's specification. Thus, providing cost-of-
service recovery for pipeline interactive web sites does not foreclose 
competition from third parties. Given the added advantages of file 
transfers in terms of processing and recordkeeping, third-parties still 
have a valuable service to provide to shippers even if interactive web 
site costs are included in cost-of-service.
    TransCapacity, in essence, is arguing that communications can be 
separated into two components: the transmission of information and the 
graphical interface or presentation of that information on the 
customer's computer. TransCapacity would include the costs of 
transmitting information in the pipelines' cost-of-service, but not the 
cost of the graphical interface, which would have to be recovered 
through a separate fee.
    But this model incorrectly views an interactive web site as two 
products. An interactive web site is an integrated product in which the 
transmission of information and the graphical interface are combined in 
a single product. While a pipeline conceivably could design a system 
that would transmit information in EDI format, and then use that 
information to create the graphical interface, most interactive web 
sites are not designed in this manner and TransCapacity has not shown 
that such

[[Page 53574]]

a dual approach would be as technologically, or cost, effective as an 
integrated product.46 Because interactive web sites combine 
information transmission and presentation, the costs of these two items 
cannot be separated, as TransCapacity suggests.
---------------------------------------------------------------------------

    \46\ See X Areeda, Antitrust Law Sec. 1746b at 227-229 (1996) 
(integrated products involve some physical or technological linkage 
that makes the single product superior to a product that the 
customer can produce by installing the components separately).
---------------------------------------------------------------------------

    As AGA, et al., correctly points out, TransCapacity's proposal 
would have the effect of subsidizing those shippers using EDI file 
transfers. Under TransCapacity's proposal, the costs of EDI file 
transfers would be included in the cost-of-service, while the total 
costs for interactive web sites would be excluded. TransCapacity itself 
does not propose attempting to segregate the transmission related costs 
from the presentation-related costs. Thus, shippers paying 
transportation rates would have to pay for EDI services in 
transportation rates even if they preferred to use interactive web 
sites.
    TransCapacity next argues that cost-of-service treatment for EDI is 
justifiable because it is far less expensive for pipelines to provide 
EDI file transfers than an interactive web site. According to 
TransCapacity, EDI costs only a few hundred thousand dollars while 
interactive web sites would cost $5-20 million per pipeline. 
TransCapacity analogizes to Order No. 636 in which the Commission 
required the pipelines to unbundle (separate) the costs of transmission 
and merchant service and recommends the Commission establish 
proceedings under section 5 of the NGA to require pipelines to disclose 
such costs.
    AGA, et al., sought leave to file an Answer to TransCapacity's 
rehearing request. AGA, et al., maintain that TransCapacity's $5-20 
million estimate for interactive web sites is misleading because the 
majority of costs would be back-office programming costs and personnel 
which would be a required cost of doing business regardless of whether 
an interactive web site is built. In other rehearing requests, 
pipelines and shippers contend that the costs for pipelines (and 
shippers) to obtain and install EDI translation software is itself 
expensive.47
---------------------------------------------------------------------------

    \47\ See INGAA, East-of-California Shippers, Pacific Northwest 
Shippers.
---------------------------------------------------------------------------

    As the Commission found in Order No. 587-G, attempting to allocate 
pipeline costs of implementing EDI and interactive web sites could be 
difficult. AGA, et al., point out that separating EDI from the costs of 
interactive web sites is particularly difficult given the integrated 
nature of pipeline computer systems. TransCapacity's analogy to the 
unbundling in Order No. 636 is inapt since there is no showing that 
potential competition in communications has nearly the competitive 
impact of bundled sales and transportation services. Indeed, before 
attempting to unbundle products, there should be some showing that 
customers favor unbundled services.48 Based on the large 
number of rehearing requests, most customers in the gas industry do not 
favor a policy where shippers must acquire their presentation interface 
independently from the transmission of the information.
---------------------------------------------------------------------------

    \48\ See X Areeda, Antitrust Law, para. 1743(a) at 192 (1996) 
(if buyers do not desire unbundled products, nothing useful could be 
accomplished by condemning the bundle).
---------------------------------------------------------------------------

    Moreover, even if costs of both systems could be segregated, 
establishing a rate would require pipelines to project estimated usage 
for each system without any actual experience. For instance, pipelines 
may initially project that few parties will use EDI which could raise 
the rate for using EDI even if its implementation costs were less. That 
higher unit cost might then discourage users from trying EDI. Since the 
gas industry has not had long experience with either EDI or interactive 
web-based technologies, the rate structure should not bias shippers' 
determination as to which approach they might prefer. At this stage, 
the Commission prefers to give shippers the option to choose which 
system they prefer.
    AGA, et al., agree with TransCapacity on one point: they both 
contend that all users, including non-shippers, should be required to 
pay the costs of using the pipelines' communication system. They argue 
that the current system of including all communication costs in cost-
of-service results in non-shippers paying none of the costs of the 
communication system.
    No other party to this proceeding has raised this issue, and the 
Commission is not convinced that non-shippers, such as producers, 
marketers, or point operators, should pay a special fee for using a 
pipelines' communication system. These non-shippers are acting on 
behalf of shippers and unless they can communicate easily with the 
pipeline, the efficiency of the industry may suffer. A producer or 
point operator, for example, needs to confirm a nomination for a 
shipper's gas to flow. While the producer or point operator is not a 
shipper, it is acting to benefit the shipper when it uses the 
pipelines' electronic communication system to confirm the nomination. 
Since the shipper is paying transportation rates, charging a separate 
fee to the producer or point operator is not necessarily justifiable. 
Moreover, neither AGA, et al., nor TransCapacity has shown that the 
costs of pipeline communication systems are so large that they 
significantly effect shippers' rates.
    If the concern is that providing communication service without a 
separate fee will encourage overuse of the system, the Commission has 
already given pipelines the ability to charge separate fees to deter 
overuse. In Order No. 636, the Commission found that pipelines could 
charge a usage fee to recover the variable costs for operating their 
communication systems.49 The majority of pipelines, however, 
have not seen a need to impose such usage charges.
---------------------------------------------------------------------------

    \49\ See 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), FERC Stats. & Regs. Regulations Preambles [Jan. 
1991-June 1996] para. 30,950 at 30,564 n.171.
---------------------------------------------------------------------------

    If the Commission cannot resolve these cost issues on the pleadings 
in this proceeding, TransCapacity recommends that the Commission 
establish a generic proceeding in this docket to deal with the cost 
issues. A generic conference to explore recovery of pipeline 
communication cost issues does not appear warranted. There has been no 
showing that these costs are so substantial that they seriously affect 
the level of rates. Issues about the provision of free service also 
require inquiry into the actual costs of constructing and operating 
systems. To the extent parties want to raise such issues, they can be 
considered in individual pipeline proceedings where actual costs and 
impacts can be evaluated.50
---------------------------------------------------------------------------

    \50\ As AGA, et al., point out, issues concerning recovery of 
communication costs have been raised in rate cases. See 
Transcontinental Gas Pipe Line Corporation, 82 FERC para. 63,019 
(1998) (initial decision).
---------------------------------------------------------------------------

2. Standards for Internet Web Sites
    In Order No. 587-G, the Commission adopted a regulation 
establishing certain minimum standards governing pipeline display of 
information on their Internet web sites to be implemented August 1, 
1998.51 The regulation requires that: 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; users must be able to search an entire document

[[Page 53575]]

online for selected words and users must be able to copy selected 
portions of the documents; and documents on the Web site should be 
directly downloadable without the need for users to first view the 
documents on the web site.
---------------------------------------------------------------------------

    \51\ 18 CFR 284.10(c)(3)(ii).
---------------------------------------------------------------------------

    KN contends that the Commission should delay implementation of 
these standards until GISB completes its review of ``look and feel'' 
standards for Internet web sites. KN maintains that implementation of 
two sets of standards may cause pipelines to incur duplicative 
development costs.
    The Commission denies the rehearing request. The regulation adopted 
by the Commission in Order No. 587-G provides a basic foundation to 
ensure that currently available web browser software will permit users 
access to all pipeline web sites and that, once at a site, users will, 
at a minimum, be able to search a document efficiently and copy, paste, 
and download material. As an example, the regulation ensures that when 
a pipeline posts its tariff on its web site,52 users will 
have the ability to search the entire tariff for the information they 
are seeking. The standards established in the regulation would be 
necessary regardless of whatever additional standards GISB devises.
---------------------------------------------------------------------------

    \52\ 18 CFR 284.10(b)(1)(iv) (1998), Electronic Delivery 
Mechanism Related Standards 4.3.6 (requiring pipelines to post 
tariff terms and conditions on the Internet).
---------------------------------------------------------------------------

3. Cross-Reference Table
    In Order No. 587-G, the Commission required pipelines to provide a 
table cross-referencing any numeric designation with the applicable 
name or other information being represented.53 This 
requirement was needed to ensure that the Commission and shippers can 
identify parties to transactions which Commission regulations require 
to be made public. The GISB standards currently rely on numbers 
published by Dun & Bradstreet (D&B) to identify shippers. If D&B, 
however, is unwilling to permit the development of a cross-reference 
table, the Commission required the pipelines either to cease using 
numeric designations or develop their numeric identifiers and post the 
cross-reference table.
---------------------------------------------------------------------------

    \53\ 18 CFR 284.10(c)(3)(iii).
---------------------------------------------------------------------------

    Koch contends the Commission should rescind this requirement, 
because the D&B numbers are proprietary information and development of 
a substitute cross-reference table would take a considerable amount of 
time and could require substantial changes in pipeline computer systems 
that are setup to use the D&B numbers.
    The Commission denies Koch's rehearing request. Pipelines are 
required by Commission regulations to publicly identify the names of 
shippers, such as those involved in capacity release transactions. 
Without a cross-reference table, no one receiving the numeric 
identifier will be able to identify the shipper. Koch suggests that 
this may not be information anyone wants. For one, the Commission 
itself needs a cross-reference table to be able to monitor capacity 
release transactions for possible discrimination. As other industry 
participants begin to use EDI and other file transfers to obtain 
information, they too are likely to need a cross-reference table to 
monitor capacity release transactions.
    Koch argues that the D&B information is proprietary, and D&B may 
not permit disclosure. As the Commission made clear in Order No. 587-G, 
if D&B is unwilling to permit development of a cross-reference table, 
the industry can agree to use actual shipper names or develop its own 
numeric identifier. If the industry took the latter course, no 
modification of computer systems would be necessary, since the 
identifier could use the same number of digits as the current D&B 
numbers. Having to modify computer systems to accept names also should 
not be unduly burdensome.
    As an alterative to pipelines providing the D&B information, Koch 
suggests the Commission should purchase the cross-reference table from 
D&B. The Commission does not find this to be an acceptable solution. It 
is the pipelines' responsibility to comply with Commission regulations 
and disclose public information and the pipelines must, therefore, 
choose a method that provides that information. After all, it was the 
pipelines together with other segments of the industry, not the 
Commission, who chose D&B numeric designations in the first 
place.54 Moreover, the pipelines are the best source for 
obtaining a complete database listing both the D&B numbers and shippers 
on each of their systems, and they are responsible for devising a means 
of providing publicly available information in an intelligible format.
---------------------------------------------------------------------------

    \54\ See Standards for Electronic Bulletin Boards Required Under 
Part 284 of the Commission's Regulations, Order No. 563-A, 59 FR 
23624 (May 9, 1994), FERC Stats. & Regs. Regulations Preambles [Jan. 
1991-June 1996] para. 30,994 at 31,043-44 (May 2, 1994).
---------------------------------------------------------------------------

4. Electronic Record Retention
    In Order No. 587-G, the Commission required pipelines to maintain 
for a period of three years all information displayed and all 
transactions conducted electronically and to be able to recover and 
regenerate all such electronic information when necessary.55 
The pipelines must make this archived information available to users in 
electronic form for a reasonable fee. This regulation essentially 
continued the three-year recordkeeping requirement that applies to 
pipeline EBBs.56
---------------------------------------------------------------------------

    \55\ 18 CFR 284.10(c)(3)(v).
    \56\ 18 CFR 284.10(a)(3).
---------------------------------------------------------------------------

    National Fuel requests clarification that the record retention 
requirement applies to the substance of the information and does not 
require the pipelines to maintain an exact visual image of the 
information on the pipelines' web site. The Commission agrees. The 
regulation does not require pipelines to maintain visual images of web 
site information. It requires only that pipelines maintain the 
substance of the information and provide that information, upon 
request, in an easy to use electronic format including an explanation 
describing the way in which the information is presented or formatted.

D. Issues on Which The Commission Did Not Promulgate Regulations

    In Order No. 587-G, the Commission did not implement regulations as 
requested by industry members in certain areas: title transfer 
tracking, cross-contract ranking, multi-tiered allocations, fuel 
reimbursement, and penalty determinations. The Commission did provide 
guidance to the industry as to its policies in these areas to assist 
the industry in developing standards and set a December 31, 1998 date 
for submission by GISB and others of standards in these areas. Requests 
for clarification were filed with respect to title transfer tracking 
and fuel reimbursement
1. Title Transfer Tracking
    Title transfer tracking refers to keeping records of transfers of 
title at nomination points when no transportation is involved. In Order 
No. 587-G, the Commission found insufficient justification to require 
pipelines to perform title transfer tracking services. The Commission 
concluded that shippers have responsibility for furnishing sufficient 
information to establish their title to gas. The Commission further 
recognized that shippers might want to use third-parties to track title 
transfers and required pipelines to accept title transfer information 
from third-parties. GISB

[[Page 53576]]

already is working on standards for dealing with title transfer 
tracking and the Commission set December 31, 1998 for the submission of 
proposed standards by GISB and others.
    NGSA requests clarification that the Commission's guidance on title 
transfer tracking should not foreclose the consideration by GISB of the 
option of having pipelines provide title transfer tracking. It also 
requests clarification that the Commission's statement does not 
represent a final decision by the Commission on the propriety of 
requiring pipelines to perform title transfer tracking. NGSA points to 
a number of outstanding issues at GISB that it claims makes any final 
Commission pronouncement on this issue premature.
    As the Commission found in Order No. 587-G, it does not see a basis 
for requiring pipelines to perform title transfer tracking service. The 
Commission provided guidance to the industry on its policies regarding 
title transfer tracking to ensure that continued debate over whether 
pipelines should provide this service did not stymy GISB's 
deliberations. GISB, and other industry participants, therefore, should 
develop a set of business practice and electronic communication 
standards dealing with the information a shipper needs to provide to 
pipelines to establish the shipper's title to gas, as well as standards 
establishing procedures for pipelines to receive title transfer 
tracking information from third parties.
    As the Commission stated in Order No. 587-G, its determination 
should not foreclose discussion at GISB regarding options for dealing 
with title transfer tracking. If GISB reaches a consensus that 
pipelines should be required to provide this service, the Commission 
will give such agreement great weight in future considerations of this 
issue. Once GISB files the standards with the Commission, parties will 
have an opportunity to file comments on the feasibility of particular 
standards.
2. Reimbursement for Compressor Fuel
    Fuel reimbursement refers to pipeline requirements that shippers 
provide gas greater than their nominated quantity to compensate the 
pipeline for the gas it uses to operate its compressors.57 
The applicable fuel percentages are included in pipeline tariffs. The 
process of calculating fuel reimbursement for shipment across multiple 
pipelines, and pipeline zones, can be complex and the Commission has 
adopted GISB standards to simplify this process. To further reduce the 
difficulty of calculating fuel reimbursement, the Commission, in Order 
No. 587-G, found that pipelines should accept fuel nominations from 
third parties, such as marketers. The Commission, however, determined 
not to impose this requirement until GISB had been given the 
opportunity to consider standards for how this process would work.
---------------------------------------------------------------------------

    \57\ For instance, if a shipper needs 100 MMBtus at its city-
gate, it may have to nominate an additional 10 MMBtus to compensate 
the pipeline for its compressor fuel requirements.
---------------------------------------------------------------------------

    Koch contends the cost and confusion of requiring pipelines to 
accept fuel nominations from third-parties would exceed any benefit and 
urges the Commission not to go forward with this requirement. Koch 
asserts, for example, that such a requirement has the potential to 
double the number of nominations pipelines have to process. KN also 
believes that establishing separate procedures for third-party fuel 
reimbursement is unnecessary, but urges the Commission to reserve 
judgment until after GISB seeks to develop standards.
    The Commission has set December 31, 1998 as the date for submission 
of standards and comments on fuel reimbursement by GISB and others. The 
Commission will evaluate its policy regarding third-party fuel 
reimbursement upon receipt of these filings.

III. Effective Date

    The amendments to the Commission's regulations adopted in this 
order on rehearing will become effective November 5, 1998.

List of Subjects in 18 CFR Part 284

    Continental shelf, Natural gas, Reporting and recordkeeping 
requirements.

    By the Commission.
David P. Boergers,
Secretary.

    In consideration of the foregoing, the Commission amends 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 Sec. 284.10, paragraph (c)(3)(i)(B) is revised to read as 
follows:


Sec. 284.10  Standards for Pipeline Business Operations and 
Communications.

* * * * *
    (c) * * *
    (3) * * *
    (i) * * *
    (B) A pipeline must implement this requirement no later than June 
1, 2000.
* * * * *
    Note--The following appendix will not appear in the Code of 
Federal Regulations.

           Parties Filing for Rehearing Docket No. RM96-1-009
------------------------------------------------------------------------
    Party filing rehearing
           request                            Abbreviation
------------------------------------------------------------------------
Altra Energy Technologies,     Altra.
 Inc.
American Gas Association,      AGA, et al.
 American Public Gas
 Association, Process Gas
 Consumers (Arizona Public
 Service Company, Boeing
 Company, Northwest
 Industrial Gas Users, Salt
 River Project and Phelps
 Dodge Corporation).
ANR Pipeline Company and       ANR/CIG.
 Colorado Interstate Gas
 Company.
Associated Gas Distributors    AGDF.
 of Florida, Inc.
Atlanta Gas Light Company and  Atlanta/Chattanooga.
 Chattanooga Gas Company.
The Brooklyn Union Gas         Brooklyn Union/Long Island.
 Company and Long Island
 Lighting Company.
CNG Transmission Corporation.  CNG.
Columbia Gas Transmission      Columbia Gas/Columbia Gulf.
 Corporation and Columbia
 Gulf Transmission Company.
Consumers Energy Company.....  Consumers.

[[Page 53577]]

Salt River Project             East-of-California Shippers.
 Agricultural Improvement and
 Power District, Arizona
 Public Service Company, El
 Paso Electric Company, PEMEX
 Gas y Petroquimica Basica,
 Phelps Dodge Corporation,
 ASARCO, Inc., BHP Copper,
 Inc., Cyprus Miami Mining
 Corp., PNM Gas Services, El
 Paso Municipal Customer
 Group (Cities of: Mesa, AZ,
 Safford, AZ, Benson, AZ,
 Wilcox, AZ, Las Cruces, NM,
 Socorro, NM, Deming, NM;
 Town of Ignacio, CO, Navajo
 Tribal Utility Authority;
 Graham County Utilities,
 Inc.; Duncan Rural Service
 Corp.; and Black Mountain
 Gas Company).
Eberly & Meade, Inc..........  Eberly & Meade.
El Paso Energy Corporation     El Paso/Tennessee.
 Interstate Pipelines.
Engage Energy US, L.P........  Engage.
Enron Capital & Trade          ECT.
 Resources Corporation.
Enron Interstate Pipelines...  Enron.
Exxon Company, U.S.A.........  Exxon.
Florida Cities, Southern       Florida Municipals.
 Cities, and Louisiana
 Municipal Gas Association.
Florida Power Corporation....  Florida Power.
Great Lakes Gas Transmission   Great Lakes.
 Limited Partnership.
Independent Petroleum          IPAA.
 Association of America.
Intermountain Gas Company,     Pacific Northwest Shippers.
 IGI Resources, Inc., Cascade
 Natural Gas Corporation,
 Northwest Natural Gas
 Company, and Washington
 Water Power Company.
Interstate Natural Gas         INGAA.
 Association of America.
KN Interstate Pipelines......  KN.
Koch Gateway Pipeline Company  Koch.
Louisville Gas & Electric      Louisville.
 Company.
Midland Cogeneration Venture   MCV.
 Limited Partnership.
NorAm Gas Transmission         NGT/MRT.
 Company and Mississippi
 River Transmission
 Corporation.
Missouri Gas Energy, a         MGE.
 Division of Southern Union
 Company.
National Fuel Gas              National Fuel Distribution.
 Distribution Corporation.
National Fuel Gas Supply       National Fuel.
 Corporation.
Natural Gas Clearinghouse....  NGC.
Natural Gas Supply             NGSA.
 Association.
Peoples Gas System...........  Peoples.
The Peoples Gas Light and      Peoples/NorthShore.
 Coke Company and North Shore
 Gas Company.
PG&E Gas Transmission,         PG&E GT-NW.
 Northwest Corporation.
Piedmont Natural Gas Company,  Piedmont.
 Inc.
Public Service Company of      PSCo/Cheyenne.
 Colorado and Cheyenne Light,
 Fuel and Power Company.
Reedy Creek Improvement        Reedy Creek.
 District.
Richardson Products Company..  RPC.
Southern Natural Gas Company.  Southern.
TransCanada Gas Services, a    TCGS.
 Division of TransCanada
 Energy Limited.
TransCapacity Limited          TransCapacity.
 Partnership.
Western Gas Resources, Inc...  Western.
Williams Gas Pipelines.......  WGP.
Williston Basin Interstate     Williston Basin.
 Pipeline Company.
------------------------------------------------------------------------

[FR Doc. 98-26677 Filed 10-5-98; 8:45 am]
BILLING CODE 6717-01-P