[Federal Register Volume 66, Number 103 (Tuesday, May 29, 2001)]
[Notices]
[Pages 29121-29124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13349]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RM01-9-000]


Notice of Order Proposing Reporting Requirement on Natural Gas 
Sales to California Market and Requesting Comments

May 18, 2001.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice.

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SUMMARY: The Commission is proposing to issue an order imposing certain 
reporting requirements on natural gas sellers and transporters serving 
the California market. This reporting requirement is intended to 
provide the Commission with the necessary information to determine what 
action, if any, it should take within its jurisdiction. The Order 
requests comments on the proposed information collection requirements.

DATES: Comments due June 18, 2001.

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

FOR FURTHER INFORMATION CONTACT: Jacob Silverman, Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street, N.E., 
Washington, DC 20426, (202) 208-2078.

SUPPLEMENTARY INFORMATION:

Federal Energy Regulatory Commission

Before Commissioners: Curt Hebert, Jr., Chairman; William L. Massey, 
and Linda Breathitt
Reporting of Natural Gas Sales to the California Market

[Docket No. RM01-9-000]

Order Proposing Reporting Requirement on Natural Gas Sales to 
California Market and Requesting Comments

Issued May 18, 2001.
    In the past year there has been a sharp increase in the price of 
natural gas sold in the California market, which has exceeded the 
increase in other markets. While natural gas prices have recently 
fallen, prices remain higher in California than in any other market in 
the United States, including those markets that are supplied by the 
same producing areas. The Commission is therefore proposing to issue an 
order imposing certain reporting requirements on natural gas sellers 
and transporters serving the California market. This reporting 
requirement is intended to

[[Page 29122]]

provide the Commission with the necessary information to determine what 
action, if any, it should take within its jurisdiction. As discussed 
below, the Commission requests comments on its proposed information 
collection requirements.

Background

    The year 2000 saw a dramatic change in the price of natural gas 
throughout the United States. Before December 2000, the spot price of 
natural gas in the California market was comparable to the spot price 
of natural gas in other markets.\1\ Thus, in January 2000, the spot 
price range for gas sold at the California border was $2.33-.52,\2\ 
similar to the spot price range in other markets. However, by December 
2000 the spot price range at the California border was $11.79-$18.80, 
while in other markets the spot price range was between $4 and $7.
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    \1\ The pricing information is contained in the Gas Daily 2000 
Annual Price Issue.
    \2\ The price is $/MMBTU.
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    The disparity in spot market prices continues. As reported in the 
May 18, 2001 Gas Daily, the most recent daily spot price for gas 
various points on the southern California border are in excess of 
$9.00, while in the producing basins and other downstream markets, the 
spot prices are in the $4 range. For example, the spot price for SoCal 
Gas, large packages was $9.60-11.00, while for El Paso Permian Basin 
area it was $3.80-4.08 , and for Transco, New York citygate it was 
$4.50-4.68.
    The price increases in California have led to the filing of several 
complaints with the Commission, requesting that the Commission take 
various actions. The requested actions include: (1) Reimposing price-
caps for short-term releases of capacity for service to the California 
border and to points of interconnection between interstate pipelines 
and California local distribution companies (LDCs); \3\ (2) requiring 
sellers to state separately the transportation and commodity components 
of bundled rates for sales at these points; \4\ and (3) setting a 
benchmark price for natural gas prices in the United States, and 
permitting complaints to be filed at the Commission alleging any sale 
prices above the benchmark to be unjust and unreasonable and seeking 
refunds for three years commencing January 1, 2001.\5\ The complaints 
assert that the current high price for natural gas in the California 
market is a factor contributing to the current high cost of electric 
power in California.
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    \3\ See Docket No. RP01-180-000, filed by San Diego Gas and 
Electric Company (SDG&E), and Docket No. RP01-222-000, filed by The 
Los Angeles Department of Water and Power.
    \4\ See Docket No. RP01-180-000.
    \5\ See Docket No. RP01-223-000, filed by the National 
Association of Gas Consumers (NAGC).
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    While the relatively high prices for natural gas in California are 
a matter of serious concern, the Commission's legal authority to take 
actions that would affect those prices is limited by the existing 
statutory framework. The Commission does have jurisdiction under 
sections 1, 4, and 5, of the Natural Gas Act (NGA) to regulate the 
transportation of natural gas by interstate pipelines, and NGA section 
7 authorizes the Commission to issue certificates for the construction 
of new interstate pipelines. However, the Commission's jurisdiction to 
regulate the prices charged by sellers of natural gas is limited in 
light of the Natural Gas Policy Act of 1979 (NGPA), and Congress' 
subsequent enactment of the Natural Gas Wellhead Decontrol Act.
    The NGA's grant of jurisdiction over natural gas sales in 
interstate commerce is limited to sales for resale.\6\ The NGPA and the 
Natural Gas Wellhead Decontrol Act substantially narrowed the 
Commission's NGA jurisdiction over sales for resale, with the Wellhead 
Decontrol Act removing all ``first sales'' from the Commission's NGA 
jurisdiction as of January 1, 1993.\7\ First sales include all sales 
other than sales by interstate or intrastate pipelines, LDCs, and their 
affiliates.\8\ In addition, Section 3(b) of the NGA now provides that 
all sales of gas imported from countries with free trade agreements, 
such as Canada and Mexico, have first sale status even when sold by 
pipelines, LDCs, or affiliates. The end result of these various 
statutory provisions is that the only sales that the Commission 
currently has jurisdiction to regulate are sales for resale of domestic 
gas by pipelines, LDCs, or their affiliates.
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    \6\ NGA section 1(b) provides:
    The provisions of this act shall apply * * * to the sale in 
interstate commerce of natural gas for resale for ultimate public 
consumption for domestic, commercial, industrial, or any other use. 
* * *
    \7\ The Wellhead Decontrol Act did this by amending section 
601(a)(1)(A) of the NGPA so that, since January 1, 1993, it has 
provided:
    For purposes of section 1(b) of the Natural Gas Act, the 
provisions of the Natural Gas Act and the jurisdiction of the 
Commission under such Act shall not apply to any natural gas solely 
by reason of any first sale of such natural gas.
    In addition, NGPA section 601(b)(1)(A), as amended by the 
Wellhead Decontrol Act, deems that whatever price the entity charges 
for a first sale is just and reasonable, and NGPA section 
601(a)(1)(C) provides that the Commission may not treat the entity 
as a ``natural gas company'' subject to the Commission's NGA 
jurisdiction.
    \8\ NGPA Section 2(21).
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Proposed Commission Action

    Ordinarily, in a competitive, seamless national market for natural 
gas, where gas can flow to wherever it can command the highest price, 
price disparities of the type that appear to have arisen between 
California and the rest of the country would not be expected to 
continue for sustained periods of time. The high price of natural gas 
in California would cause more sellers to direct gas towards the 
California market, thereby increasing the supply there, which would in 
turn lower the price in California and bring it in line with the 
national average. The Commission is therefore concerned that the price 
disparity between California and the rest of the country continues.
    In order to help the Commission understand why the disparity has 
occurred and continues to exist, the Commission proposes to collect 
information from sellers of natural gas to the California market, and 
interstate pipelines and local distribution companies (LDCs) serving 
the California market, and seeks comments on this proposal. The 
specific information that the Commission proposes to collect is set 
forth in an appendix to this order. The information to be reported 
would include data relating to the volumes and prices of sales to the 
California market including transportation rates, the daily operational 
capacity of pipelines to, and in the California market, and the actual 
volumes flowing to, and in California, and gas sales and the 
transportation requirements of the LDCs.
    This information should assist the Commission in carrying out its 
regulatory responsibilities. First, it will help the Commission 
determine what part of the problem, if any, is within the scope of its 
jurisdiction. For example, the information to be collected concerning 
sales should enable the Commission to determine what percentage of the 
volumes sold into the California market is domestically produced gas 
sold by marketers affiliated with pipelines and LDCs in sales for 
resales. As discussed above, those are the only sales now being made 
that the Commission has jurisdiction to regulate.\9\ The information 
proposed to be collected should also give the Commission an accurate 
picture of the overall average gas costs being incurred by all 
purchasers of natural gas moving into the California market. While the 
spot market prices for gas at the

[[Page 29123]]

California border have been relatively high, gas purchasers holding 
firm capacity on interstate pipelines can purchase natural gas at the 
spot market prices available in the producing basins, and then have the 
gas transported to California markets over their firm capacity. At 
present, the Commission does not have reliable information concerning 
the percentage of gas moving into the California market that is 
actually priced at the high spot market prices reported at the 
California borders.
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    \9\ For the most part, interstate pipelines no longer sell 
natural gas.
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    The information to be collected will also enable the Commission to 
determine the extent to which the cost of interstate transportation, 
which is subject to the Commission's jurisdiction, affects the price 
for the gas commodity at the California border. Currently, the 
Commission establishes maximum rates for interstate transportation, 
with the exception of short-term capacity releases for which maximum 
rates have been waived until September 30, 2002.
    The Commission recognizes that certain entities that will be 
required to respond to the data request may not be natural gas 
companies subject to the Commission's NGA section 1 jurisdiction. 
However, the Commission has extensive authority under NGA section 14 to 
collect information from participants in the natural gas market 
regardless of whether they are ``natural gas companies.'' Section 14(a) 
of the NGA states:

    The Commission may investigate any facts, conditions, practices, 
or matters which it may find necessary or proper in order to 
determine whether any person has violated or is about to violate any 
provision of [the NGA] or any rule, regulation, or order hereunder, 
or to aid in the enforcement of the provisions of this act or in 
prescribing rules or regulations thereunder, or in obtaining 
information to serve as a basis for recommending further legislation 
to the Congress.

    Section 14(c) also provides that, ``for the purpose of any 
investigation or any other proceeding under [the NGA], any member of 
the Commission or any officer designated by it is empowered to . . . 
take evidence and require the production of any books, papers, 
correspondence, memoranda, contracts, agreement or other records which 
the Commission finds material to the inquiry.''
    Section 14 is not limited to natural gas companies, but refers to 
``persons,'' which is defined in section 2(1) to include ``an 
individual or corporation.'' Clearly, the need for information cannot 
be limited to those subject to regulation when ``further legislation'' 
is a possible consideration. Moreover, NGA section 16 grants the 
Commission ``power to perform any and all acts. . . as it may find 
necessary or appropriate to carry out the provisions of this act.'' 
Together these sections empower the Commission with the authority to 
require any entity to furnish the Commission any information that the 
Commission needs to carry out its functions.
    In this case, the Commission must have an overall picture of what 
is occurring in the California market in order to determine the 
potential effectiveness of actions within the Commission's 
jurisdiction. Only by collecting information concerning all California 
sales can the Commission obtain the overall picture and feel confident 
that any actions it might take would have the intended consequences.
    The Commission proposes the submission be on a quarterly basis, and 
submitted within thirty days after the end of the quarter. The 
Commission will develop a form for electronic filing of the data in a 
standardized format that will be set forth in the request. Responses 
would be required to be verified under oath by a person having 
knowledge of the matters set forth. 18 CFR Sec. 385.2005(b) (2000). 
Parties responding to the request could request confidential treatment 
of their responses. See 18 CFR Sec. 388.112 (2000). The Commission 
would aggregate the data submitted and analyze it promptly. The 
Commission would then determine, what action, if any, is warranted.
    Because the Commission anticipates requesting the information as 
soon as possible, the Commission, pursuant to 5 CFR 1320.13 (2000), 
will request the Office of Management and Budget for emergency 
processing of the proposed collection of information.
    Comments on the proposed reporting requirement are to be submitted 
within thirty days of the date of issuance of this order. The 
Commission does not believe that reply comments are required. 
Accordingly, after receipt of the comments, the Commission will 
determine whether to proceed with the proposed reporting requirement.

    By the Commission.
Linwood A. Watson, Jr.,
Acting Secretary.

Appendix

    Answers to all questions below that require a statement of 
volumes should set forth the requested volumes on an MMBtu basis.

For Interstate Pipelines

    1. On a daily basis for the period ______ to ______, please 
provide the following information for each contract for 
transportation to the California border. Please provide this 
information by column from left to right:
    a. The transaction or contract identification number;
    b. Contract demand by shipper;
    c. The daily scheduled volume by shipper;
    d. The daily delivered volume by shipper;
    e. Whether the service is firm or interruptible;
    f. The rate charged;
    g. Receipt and delivery points associated with the contract; 
and,
    h. Whether the shipper is affiliated with the pipeline.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    2. On a daily basis for the period ______ to ______, please 
provide the following information for each capacity release 
transaction for transportation to the California border. Please 
provide this information by column from left to right:
    a. The transaction or contract identification number, or offer 
number; (This number should tie to contract number reported in 
Question 1,a., above)
    b. The name of the releasing shipper;
    c. The name of the acquiring shipper;
    d. The contract quantity;
    e. The acquiring shipper's contract rate; and,
    f. The releasing shipper's contract rate.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    3. On a daily basis for the period ______ to ______, please 
provide the following system information. Please provide this 
information by column from left to right:
    a. The maximum peak day design capacity;
    b The daily maximum flowing capacity;
    c The daily scheduled system volume;
    d. The daily scheduled volume at each California delivery point;
    e. An explanation of each instance that the daily maximum 
flowing capacity is below the maximum peak day design capacity; and,
    f. An explanation of any daily variance in the maximum flowing 
capacity.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    4. On a daily basis for May 1999 and May 2000, please provide 
the following system information. Please provide this information by 
column from left to right:
    a. The maximum peak day design capacity;
    b The daily maximum flowing capacity;
    c The daily scheduled system volume;
    d. The daily scheduled volume at each California delivery point;
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.

[[Page 29124]]

For Sellers of Natural Gas to the California Market

    1. State whether the seller is affiliated with an interstate or 
intrastate natural gas pipeline company or local distribution 
company, and, if so, give the name and address the affiliated 
company.
    2. On a daily basis for the period ______ to ______, please 
provide the following information for each sales contract under 
which the gas is physically delivered at or into the California 
market. Please provide this information by column from left to 
right:
    a. The sales contract's identification number;
    b. The term of the sales contract (beginning and ending dates);
    c. The name of the buyer identifying whether the buyer is an 
energy marketer, local distribution company, or end user;
    d. The volumes sold(on a MMBtu basis);
    e. Whether the buyer is affiliated with a pipeline and if so, 
which pipeline; and,
    f. The price paid by buyer.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    3. For each sales contract, identify separately the 
transportation component and the gas commodity component of the 
price. If these components are not specifically set forth in the 
contract, provide a valuation, with explanation, of each component.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    4. On a daily basis for the period ______ to ______, please 
provide the following information for each contract for 
transportation to the California border. Please provide this 
information by column from left to right:
    a. The contract demand;
    b. The daily nominated volume;
    c. The daily scheduled volume;
    d. The daily delivered volume;
    e. Whether the service is firm or interruptible;
    f. The rate charged; and
    g. Receipt and delivery points associated with the contract.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    5. For the period ______ to ______, please provide the following 
information for each gas purchase contract where the gas is 
physically delivered at or into the California market. Please 
provide this information by column from left to right:
    a. The purchase contract's identification number;
    b. The pipeline;
    c. The term of the purchase contract (beginning and ending 
dates);
    d. The volumes (on a MMBtu basis) purchased;
    e. The price paid; and,
    f. Identify the point where seller took title to the gas.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.

For Local Distribution Companies

    1. Provide your system's gas sales and transportation 
requirements, (i.e, contract demands and daily demands) by core, 
non-core, electric generation, and non-utility loads. Provide a 
break down of these demands by type of service (e.g., sales and 
transportation) and quality of service (firm/interruptible).
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    2. On a daily basis for the period ______ to ______, please 
provide the following information for each contract the local 
distribution company has with a transportation customer. Please 
provide this information by column from left to right:
    a. Contract demand by shipper;
    b. The daily scheduled volume by shipper;
    c. The daily delivered volume by shipper;
    d. Whether the service is firm or interruptible;
    e. The rate charged; and,
    f. Receipt and delivery points associated with the contract.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    3. On a daily basis for the period ______ to ______, please 
provide the following information for each contract the local 
distribution company has with a sales customer. Please provide this 
information by column from left to right:
    a. The contract demand by purchaser;
    b. The term of the sales contract (beginning and ending dates);
    c. The volumes (on a MMBtu basis) sold; and,
    d. The price paid by purchaser.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    4. On a daily basis for the period ______ to ______, please 
provide the following information for each gas purchase contract. 
Please provide this information by column from left to right:
    a. The purchase contract's identification number;
    b. The term of the purchase contract (beginning and ending 
dates);
    c. The volumes (on a MMBtu basis) bought;
    d. The price paid;
    e. Whether the price is fixed or indexed (identify the index); 
and,
    f. Identify the point where (name of local distribution company) 
took title to the gas.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    5. On a daily basis for the period ______ to ______, please 
provide by interstate pipeline the type and quantity of 
transportation service your system has under contract. At each 
receipt point, provide maximum peak day design capacity, the daily 
maximum flowing capacity, and the daily scheduled volumes of the 
local distribution system.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    6. On a daily basis for the period ______ to ______, please 
provide your storage service rights, by facility, i.e., capacity and 
deliverability rights. Additionally, provide daily storage balances, 
injections and withdrawls.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    7. On a daily basis for the period ______ to ______, please 
provide how much of your system's gas supply was from intrastate 
production sources. Separately identify the sources, volumes, 
receipt points, and prices. Include the total system supply in your 
response.
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.
    8. Provide a summary of your system's gas purchases in the 
following categories:
    a. Daily spot purchases;
    b. Monthly;
    b. Short-term (more than 1 month and less than 1 year);
    c. Medium-term (1-3 years); and,
    d. Long-term ( more than 3 years).
    By month for each of the last three years in the following 
format by column from left to right: 
    a. Price;
    b. Volume; and,
    c. Identify, by name, where these purchases were made (producing 
basin or at the California border).
    Along with the hard copy response, please provide a CD-ROM 
containing the response to this question. Please provide this 
information in Excel version 97 or 2000 format.

[FR Doc. 01-13349 Filed 5-25-01; 8:45 am]
BILLING CODE 6717-01-P