[Federal Register Volume 67, Number 52 (Monday, March 18, 2002)]
[Rules and Regulations]
[Pages 11906-11917]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6239]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM96-1-019; 
Order No. 587-N]


Standards for Business Practices of Interstate Natural Gas 
Pipelines

Issued March 11, 2002.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission is amending its 
regulations governing standards for interstate pipeline business 
operations and communications to require that pipelines permit 
releasing shippers, as a condition of a capacity release, to recall 
released capacity and renominate such recalled capacity at each 
nomination opportunity. Recalls of released capacity will not be 
permitted to reduce (bump) already scheduled volumes for replacement 
shippers unless the replacement shippers are provided with at least one 
opportunity to rescheduled any bumped volumes, which is similar to the 
protection afforded interruptible shippers. This rule creates greater 
flexibility for firm capacity holders on interstate pipelines by 
synchronizing the Commission's regulation of recalled capacity with its 
standards for intra-day nominations. The rule also will enhance 
competition by freeing up capacity that otherwise would not be released 
and creating greater parity between scheduling of capacity release 
transactions and pipeline interruptible service.

DATES: 1. The rule becomes effective April 17, 2002.
    2. Pipelines must make tariff filings by May 1, 2002, to become 
effective by July 1, 2002, to provide shippers with the ability to 
recall scheduled and unscheduled capacity at the Timely and Evening 
Nomination cycles and to recall unscheduled capacity at the two other 
standard nomination times.
    3. Comments are to be filed by the North American Energy Standards 
Board and others by October 1, 2002, regarding standards for 
implementing partial day or flowing day recalls. Reply comments must be 
filed by October 15, 2002.

ADDRESSES: Federal Energy Regulatory Commission, 888 First Street, NE., 
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 Markets, Tariffs, and Rates, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 208-1283.
Kay Morice, Office of Markets, Tariffs, and Rates, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 208-0507.

SUPPLEMENTARY INFORMATION:

Table of Contents

Paragraph Number

2. Background
11. Comments
15. Discussion
16. Overview
20. Regulatory Changes
35. Schedule for Implementation of Recalls for Evening Nomination 
Cycle and Unscheduled Capacity
43. Comments on Adoption of Partial Day Recall Requirement
57. Requests for Clarification
59. Applicability of Recall Conditions
62. Schedule for Notification of Recalls for Timely Nomination Cycle 
and Reputs

[[Page 11907]]

65. Penalty Exposure
67. Effect on Alternate Points
69. Pipelines Offering Non-Standard Nomination Opportunities
72. Effect on Already Accepted Partial Day Recall Programs
75. Pipeline Capacity
78. Notice of Use of Voluntary Consensus Standards
79. Information Collection Statement
86. Environmental Analysis
88. Regulatory Flexibility Act Certification
90. Document Availability
95. Implementation Dates
98. Effective Date

Federal Energy Regulatory Commission

Before Commissioners: Pat Wood, III Chairman; William L. Massey, Linda 
Breathitt, and Nora Mead Brownell.

[Docket No. RM96-1-019; Order No. 587-N]

Standards for Business Practices of Interstate Natural Gas Pipelines; 
Final Rule

Issued March 11, 2002.

    1. The Federal Energy Regulatory Commission (Commission) is 
amending Sec. 284.12(c)(1)(ii) of its open access regulations to 
require that interstate pipelines permit releasing shippers to recall 
released capacity and renominate that recalled capacity at any of the 
scheduling opportunities provided by interstate pipelines. Recalls of 
released capacity will not be permitted to reduce (bump) already 
scheduled volumes for replacement shippers unless the replacement 
shippers are provided with at least one opportunity to rescheduled any 
bumped volumes, which is similar to the protection afforded 
interruptible shippers. This rule creates greater flexibility for firm 
capacity holders on interstate pipelines by synchronizing the 
Commission's regulation of recalled capacity with its standards for 
intra-day nominations. The rule also will enhance competition by 
freeing up capacity that otherwise would not be released and creating 
greater parity between scheduling of capacity release transactions and 
pipeline interruptible service.

2. Background

    3. In Order No. 636, the Commission adopted regulations permitting 
shippers (releasing shippers) to release their capacity to other 
shippers (replacement shippers).\1\ Under these regulations, releasing 
shippers were permitted to ``release their capacity in whole or in 
part, on a permanent or short-term basis, without restriction on the 
terms and conditions of the release.'' \2\ The regulation permits 
releasing shippers to impose terms for a release transaction under 
which the releasing shipper reserves the right to recall that capacity 
to use the capacity itself. As an example, a shipper might include a 
recall condition in the event that temperature drops below a pre-
determined level.\3\
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    \1\ 18 CFR 284.8 (2001).
    \2\ 18 CFR 284.8(b).
    \3\ Pipeline Service Obligations and Revisions to Regulations 
Governing Self-Implementing Transportation Under Part 284 of the 
Commission's Regulations, Order No. 636, 57 FR 13267 (Apr. 16, 
1992), FERC Stats. & Regs. Regulations Preambles [Jan. 1991-June 
1996] para. 30,939, at 30,418 (Apr. 8, 1992).
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    4. In July 1996, in Order No. 587,\4\ the Commission incorporated 
by reference consensus standards approved by the Gas Industry Standards 
Board (now the North American Energy Standards Board (NAESB)) \5\ 
designed to standardize business practices and communication protocols 
of interstate pipelines in order to create a more integrated and 
efficient pipeline grid. NAESB is a private, consensus standards 
developer whose wholesale natural gas standards are developed by 
representatives from all segments of the natural gas industry.
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    \4\ Standards For Business Practices Of Interstate Natural Gas 
Pipelines, Order No. 587, 61 FR 39053 (Jul. 26, 1996), FERC Stats. & 
Regs. Regulations Preambles [July 1996-December 2000] para. 31,038 
(Jul. 17, 1996).
    \5\ The Commission is revising Sec. 284.12 to reflect the name 
change. The Commission finds good cause for making such a change 
without notice and comment since the change is purely 
administrative. See 5 U.S.C. Sec. 553(b)(A)&(B).
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    5. One aspect of NAESB's standards adopted in Order No. 587 covered 
capacity release transactions. Of relevance here, two standards, 5.3.6 
and 5.3.7, apply to recalls of capacity release transactions.

    Standard 5.3.6: If the releasing shipper wishes to recall 
capacity to be effective for a gas day, the notice should be 
provided to the transportation service provider and the acquiring 
shipper no later than 8 a.m. Central Clock Time on nomination 
day.\6\
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    \6\ 18 CFR 284.12(b)(1)(v) (2001), Capacity Release Related 
Standard 5.3.6.
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    Standard 5.3.7: There should be no partial day recalls of 
capacity. Transportation service providers should support the 
function of reputting by releasing shippers.\7\
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    \7\ 18 CFR 284.12(b)(1)(v) (2001), Capacity Release Related 
Standard 5.3.7.

In this context, a partial day recall (also referred to as a flowing 
gas recalls)\8\ refers to a recall condition that applies only to part 
of gas day, rather than the full gas day.\9\
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    \8\ Gulf South, in its comments, contends that the term 
``partial day recall'' is somewhat of a misnomer, and that the more 
apt term is ``flowing day recall.'' It states that the term partial 
day recall suggests the recall is for a specified portion of gas day 
when, in fact, the standard refers only to whether the recall occurs 
after gas has begun to flow. In this rule, the terms ``partial day 
recall'' and ``flowing day recall'' are used interchangeably to 
refer to recalls occurring during a gas day after gas has begun to 
flow, not to recalls between specified times.
    \9\ Under the NAESB standards, a gas day runs from 9 a.m. 
central clock time (CCT) on Day 1 to 9 a.m. CCT the next day (Day 
2). 18 CFR 284.12(b)(1)(i), Nominations Related Standards 1.3.1.
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    6. In 1996, when NAESB first adopted these standards, NAESB's 
standards provided for one nomination, at 11:30 a.m. CCT \10\ for the 
next gas day and only one intra-day nomination at an indeterminate 
time. In order to create a more standardized intra-day nomination 
schedule,\11\ NAESB amended its standards to provide for three 
standardized intra-day nomination opportunities: an Evening nomination 
at 6 p.m. CCT to take effect at 9 a.m. CCT the next gas day, an Intra-
Day 1 nomination at 10 a.m. CCT to take effect at 5 p.m. CCT on the 
same gas day, and an Intra-Day 2 nomination at 5 p.m. CCT to take 
effect at 9 p.m. CCT on the same gas day.\12\
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    \10\ CCT refers to Central Clock Time, which includes an 
adjustment for day light savings time. See 18 CFR 
Sec. 284.12(b)(1)(i), Nominations Related Standards 1.3.1.
    \11\ See Order No. 587-C, 62 FR at 10687, FERC Stats. & Regs. 
Regulations Preambles [July 1996-December 2000] para. 31,050, at 
30,585 (rejecting a proposed NAESB intra-day nomination standard for 
being vague and non-standardized and providing additional time for 
NAESB to develop a standardized intra-day nomination schedule).
    \12\ 18 CFR 284.12(b)(1)(i) (2001), Nominations Related Standard 
1.3.2.

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                                             Nomination deadline                    Effective time
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Timely Nomination......................  11:30 a.m.................  9 a.m. next gas day.
Evening Nomination.....................  6 p.m.....................  9 a.m. next gas day.
Intra-Day 1............................  10 a.m....................  5 p.m. same gas day.
Intra-Day 2............................  5 p.m.....................  9 p.m. same gas day.
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[[Page 11908]]

NAESB, however, has not amended its capacity release recall standards 
to take into account its adoption of these standardized intra-day 
nomination opportunities.
    7. In Order No. 637, the Commission adopted Sec. 284.12(c)(1)(ii) 
of its regulations which requires interstate pipelines to ``permit 
shippers acquiring released capacity to submit a nomination at the 
earliest available nomination opportunity after the acquisition of 
capacity.'' \13\ The purpose of this regulatory change was to permit 
capacity release transactions to take place on an intra-day basis so 
that released capacity can compete with pipeline capacity on a 
comparable basis.\14\ The adoption of Sec. 284.12(c)(1)(ii) permits 
shippers to acquire released capacity and nominate using that capacity 
at any of the four intra-day nomination opportunities.\15\
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    \13\ 18 CFR 284.12(c)(1)(ii) (2001).
    \14\ Regulation of Short-Term Natural Gas Transportation 
Services, Order No. 637, 65 FR 10156, 101-58-60 (Feb. 25, 2000), 
FERC Stats. & Regs. Regulations Preambles [July 1996-December 2000] 
para. 31,091, at 31,297 (Feb. 9, 2000).
    \15\ Prior to Order No. 637, NAESB's capacity release nomination 
standards had not been amended to reflect the intra-day nomination 
standards. Thus, prior to Order No. 637, a replacement shipper 
acquiring released capacity had to acquire the capacity and notify 
the pipeline by 9 a.m. CCT in order to nominate at the Timely 
Nomination cycle (11:30 a.m. CCT) for the next gas day and could not 
make use of any intra-day nomination opportunities for the current 
gas day. With the changes made in Sec. 284.12(c)(1)(ii), shippers 
will be able to acquire released capacity and submit a nomination at 
each intra-day nomination opportunity.
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    8. On February 1, 2001, NAESB filed a report with the Commission, 
in Docket No. RM98-10-000, concerning its development of standards 
regarding partial day recalls of capacity. According to NAESB, some 
members believed that partial day recalls fell within the purview of 
the scheduling equality requirements of Order No. 637, while others did 
not. Some members, NAESB asserts, believed that partial day recalls are 
a valid business practice, irrespective of whether this practice is 
required by Order No. 637. Due to these disagreements, NAESB reports it 
has been unable to reach consensus on how to proceed.
    9. On March 16, 2001, AGA filed a ``Reply to February 1, 2001, Gas 
Industry Standards Board Report and Petition for Clarification and 
Directive from FERC Regarding Requirement for Capacity Release 
Scheduling Equality.'' AGA argued that the Commission should require 
pipelines to allow partial day recalls as part of their compliance with 
Sec. 284.12(c)(1)(ii).
    10. On October 12, 2001, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) \16\ proposing to require pipelines to afford 
releasing shippers enhanced ability to recall released capacity by 
permitting them to use partial day recalls at any of the four 
nomination opportunities established by the NAESB standards.
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    \16\ Standards For Business Practices Of Interstate Natural Gas 
Pipelines, 66 FR 53134 (Oct. 19, 2001), IV FERC Stats. & Regs. 
Proposed Regulations para. 32,556 (Oct. 12, 2001).
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11. Comments

    12. Twenty-eight comments on the NOPR were filed.\17\ The comments 
can roughly be divided into three categories: those that supported the 
proposal, those that either supported or did not object to the 
proposal, but sought clarifications principally regarding 
implementation details, and those opposing the proposal. The majority 
of comments support the proposal.\18\ They contend it would provide 
greater flexibility to releasing shippers, enhance competition by 
freeing up capacity that otherwise would not be released, and better 
accommodate retail unbundling programs at the state level.\19\ The 
local distribution companies (LDCs) maintain that under state 
unbundling mechanisms, they are frequently the suppliers of last resort 
and, therefore, need to recall capacity in the event marketers fail to 
deliver.
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    \17\ The commenters and the abbreviations used in this order are 
listed on the Appendix.
    \18\ E.g., AGA, APGA, APS/PWEC, Con Edison, Dominion LDCs, ENA, 
Kentucky, Keyspan, MLGW, PSCNY, PA OCA, Xcel.
    \19\ Xcel provides a succinct summary of the position:
    The proposed rules would provide firm capacity holders, 
including the Xcel Energy utility operating companies, with 
increased flexibility in structuring capacity release transactions 
to best fit their business needs. The Xcel Energy utility operating 
companies could benefit from the potential increase in value of non-
recallable capacity release and from the greater flexibility when a 
recall is necessary.
    Comment at 2.
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    13. Those opposing the proposal \20\ contend it would decrease the 
reliability of the pipeline grid by reducing (bumping) volumes of 
already scheduled gas and thereby reduce liquidity. They maintain that 
partial day recalls will reduce reliability because bumping a 
replacement shipper's scheduled volumes may affect scheduling on a 
number of pipelines, and bumped replacement shippers will be forced to 
try and reschedule their gas. Those opposing the proposal also are 
concerned partial day recalls will reduce the value of released 
capacity and create less competition between pipeline firm capacity and 
capacity release. NiSource maintains that partial day recalls may 
decrease reliability for LDCs that permit marketers (using other LDCs' 
released capacity) to bring capacity to their city-gates by permitting 
a diversion of gas from one LDC market to another.
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    \20\ E.g., DETM, Dynegy, EIP, EPSA, NGSA, NiSource, Williston.
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    14. A number of comments raise operational issues relating 
principally to partial or flowing day recalls occurring during the gas 
day after capacity has begun to flow. These include: the need for 
advance notice to pipelines and replacement shippers of capacity to be 
recalled, and whether the pipeline or releasing shipper should provide 
the notice; \21\ allocating capacity as well as imbalances and 
penalties between releasing and replacement shippers when recalls take 
place during the gas day; \22\ and ensuring that total volumes 
delivered do not exceed original contract MDQ.\23\ Some comments 
suggest the Commission convene a technical conference to address these 
issues.\24\
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    \21\ See Comments by Algonquin/Texas Eastern; Dominion; Dynegy; 
ENA; Gulf South; INGAA; Kinder-Morgan; NiSource; Williston; 
Industrials.
    \22\ See Comments by Algonquin/Texas Eastern; Dynegy; Gulf 
South; ENA; INGAA; Kinder-Morgan; NiSource; Williston. As an 
example, a replacement shipper with capacity of 2400 Dth/day could 
nominate the entire 2400 Dth for the full gas day, but take 1200 Dth 
in the first five hours of the day, leaving only 1200 Dth remaining 
for the remainder of the gas day. If a releasing shipper sought to 
recall the full 2400 Dth at the Intra-Day 1 cycle taking, which 
would take effect at 5 p.m., the issue raised by the comments are 
how to allocate the 2400 Dth between the releasing and replacement 
shippers and how to determine imbalances and potential penalties. 
Williston also raises the issue of how to perform such an allocation 
when there are multiple capacity releases: e.g., a releasing shipper 
releases capacity to a single replacement shipper who re-releases 
that capacity to three other replacement shippers. If the initial 
releasing shipper recalls, the capacity, Williston requests 
clarification as to how the remaining daily quantity should be 
allocated among the three final replacement shippers.
    \23\ Williston.
    \24\ Comments by EPPG; ENA.
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15. Discussion

16. Overview

    17. The Commission is revising Sec. 284.12(c)(1)(ii) of its 
regulations to require pipelines to permit recalls of capacity at each 
nomination opportunity. Specifically, the Commission is requiring 
pipelines to permit releasing shippers, as a condition of a capacity 
release, to recall released capacity and renominate such recalled 
capacity at each nomination opportunity according to the notice and 
bumping provisions applicable to interruptible shippers.\25\ Recalls of

[[Page 11909]]

released capacity will not be permitted to reduce (bump) already 
scheduled volumes for replacement shippers unless the replacement 
shippers are provided with at least one opportunity to reschedule any 
bumped volumes.\26\
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    \25\ The Commission is rescinding the incorporation by reference 
of NAESB standard 5.3.6 (which requires notice of capacity release 
recalls by 8 a.m. CCT) and the first sentence of NAESB Standard 
5.3.7 (which prohibits partial day recalls of capacity). The 
Commission is retaining the portion of Standard 5.3.7 that requires 
transportation service providers to ``support the function of 
reputting by releasing shippers.'' Reputting refers to the ability 
of a releasing shipper to include a condition in a release under 
which it can recall capacity when needed and, after the recall has 
ended, the capacity will revert (be reputted) to the replacement 
shipper, without the need for a new release.
    \26\ The use of partial day recall rights is voluntary. As with 
any other recall condition, releasing shippers are free to offer 
their capacity without partial day recall rights. Whether partial 
day recall rights are permitted depends on the terms of the 
releasing shipper's offer.
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    18. The regulations adopted in this rule will be implemented in two 
phases. This two-phase approach will ensure an expeditious 
implementation of partial day recalls for recalls that do not raise the 
operational details addressed in the comments, while at the same time 
providing time for NAESB to further consider standards to address the 
operational issues raised. By May 1, 2002, each pipeline will be 
required to make a compliance filing, to be effective July 1, 2002, 
that will permit shippers to recall capacity at both the Timely 
Nomination cycle and the Evening Nomination Cycle and to recall 
capacity at any nomination time if the capacity has not been previously 
scheduled by the replacement shipper. To ease the compliance and review 
process, the Commission is establishing a standard tariff provision 
providing a notification schedule for these recalls.
    19. Second, the Commission will provide NAESB six months in which 
to develop standards to apply to the operational details involved in 
allowing partial or flowing day recalls. NAESB should file a report 
with the Commission by October 1, 2002, detailing the standards it has 
adopted (or those it has considered) and all other material relevant to 
its consideration of such standards. Other industry members can also 
submit comments by October 1, 2002, and will have an additional 15 days 
from the filing of the NAESB information to file additional comments on 
the NAESB report. Upon the receipt of these comments, the Commission 
will issue a further order regarding implementation of Intra-Day 1 
recalls.

20. Regulatory Changes

    21. The regulations adopted in this rule will ensure consistency 
with the original intent of the Commission's capacity release 
regulations by providing releasing shippers with the flexibility to 
structure capacity release transactions that best fit their business 
needs, by providing greater incentives for releasing shippers to 
release capacity, and by fostering greater competition for pipeline 
capacity by creating parity between scheduling of capacity release 
transactions and pipeline interruptible service. At the same time, the 
regulations will afford replacement shippers whose capacity is recalled 
the same advance notice and protection from bumping as provided to 
interruptible shippers under the Commission's regulations.
    22. In Order No. 636, the Commission established the capacity 
release mechanism to create competition with pipeline firm and 
interruptible transportation.\27\ One of the fundamental tenets of the 
Commission's capacity release regulations is that releasing shippers 
have the opportunity to establish any recall conditions for their 
capacity.
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    \27\ Order No. 636-A, 57 FR 36128 (Aug. 12, 1992), FERC Stats. & 
Regs. Regulations Preambles [Jan. 1991-June 1996] para. 30,950, at 
30,556 (Aug. 3, 1992) (``competition between pipeline capacity and 
released capacity helps ensure that customers pay only the 
competitive price for the available capacity'').
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    23. When NAESB first considered recall standards, it established 
one notification time for all recalls (8 a.m. CCT) and did not permit 
partial or flowing day recalls. When NAESB adopted this standard, 
however, the standards provided for only one nomination a day, at 11:30 
a.m. CCT and a single non-standardized intra-day nomination. But the 
circumstances under which the recall standards were developed have 
markedly changed as the number of nomination opportunities have now 
expanded to four nomination opportunities. At the same time, it is 
apparent from the comments in this rulemaking that the consensus 
supporting NAESB's existing recall standards no longer exists, and 
NAESB itself has recognized that it can no longer make progress in 
resolving this issue. Although the Commission places great reliance on 
NAESB's development of consensus standards,\28\ the Commission has 
found it necessary to resolve disputes between industry segments when 
NAESB has been unable to reach consensus on issues concerning 
Commission policy, so that the standards development process can 
proceed in line with Commission policies.\29\ In these circumstances 
(where consensus no longer exists on recall standards), the Commission 
must resolve the policy issue over whether to permit greater recall 
flexibility.
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    \28\ Order No. 587, 61 FR at 39057 (Jul. 26, 1996), FERC Stats. 
& Regs. Regulations Preambles [July 1996-December 2000] para. 
31,038, at 30,059.
    \29\ Standards For Business Practices Of Interstate Natural Gas 
Pipelines, Order No. 587-G, 63 FR 20072 (Apr. 23, 1998), FERC Stats. 
& Regs. Regulations Preambles [July 1996-December 2000] para. 
31,062, at 30-668-72 (Apr. 16, 1998) (resolving dispute over bumping 
of interruptible service by firm service).
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    24. An examination of both past and current Commission policy 
supports allowing releasing shippers to recall capacity more frequently 
than currently permitted under NAESB's standards.
    25. The Commission's general policy adopted in Order No. 636 would 
permit more extensive recall rights than those permitted by the NAESB 
standards. Section 284.8(b) of the Commission's regulations (adopted in 
Order No. 636) expressly permits shippers to ``release their capacity 
in whole or in part, on a permanent or short-term basis, without 
restriction on the terms and conditions of the release.'' \30\ In Order 
No. 636-A, the Commission recognized that ``a releasing shipper may 
include terms and conditions, such as recall rights, that will ensure 
it has adequate peak day capacity.'' \31\ In Texas Eastern Transmission 
Corporation, for example, the Commission rejected a pipeline's proposed 
restriction on recall rights, stating ``any provision relating to 
recall rights must not operate to impede the ability of releasing 
shippers to employ recall provisions as terms and conditions of their 
releases.''\32\ Thus, all recall conditions, including partial day 
recalls are consistent with the Commission's regulations.
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    \30\ 18 CFR 284.8(b) (emphasis added).
    \31\ Order No. 636-A, 57 FR 36128 (Aug. 12, 1992), FERC Stats. & 
Regs. Regulations Preambles [Jan. 1991-June 1996] para. 30,950, at 
30,558 (Aug. 3, 1992).
    \32\ 62 FERC para. 61,015, at 61,104 (1993).
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    26. Moreover, in Order No. 637, the Commission sought to create 
greater scheduling parity between capacity release transactions and 
pipeline services by enabling capacity release transactions to take 
place on an intra-day basis at each of the four scheduling 
opportunities.\33\ While this regulatory change will enable shippers to 
release capacity at any nomination opportunity, the existing NAESB 
recall standards do not permit releasing shippers to take full 
advantage of the intra-day nomination opportunities by recalling the 
capacity and renominating that capacity at each of the four scheduling 
opportunities. Allowing partial day recalls is, therefore, consistent 
with the overall regulatory changes promulgated in Order Nos. 636 and 
637.
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    \33\ 18 CFR 284.12(c)(1)(ii) (2001) (permitting shippers 
acquiring released capacity to submit a nomination at the earliest 
available nomination opportunity after the acquisition of capacity).

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[[Page 11910]]

    27. Policy considerations further support enhanced recall rights. 
Permitting enhanced recall rights will provide firm shippers with added 
flexibility and will better enable releasing shippers to offer released 
capacity that competes with the pipelines' interruptible service. The 
current NAESB standards inhibit the ability of shippers to release 
capacity because releasing shippers cannot quickly reclaim capacity 
when they require it for their own use. For example, under the current 
NAESB standards, in order to recall capacity for the next gas day, a 
shipper must notify the pipeline by 8 a.m. the day before the recall 
can take effect and cannot use partial or flowing day recalls. By 
establishing an 8 a.m. deadline for recall notifications, the standard 
effectively precludes a releasing shipper from recalling capacity at 
the Evening Nomination cycle. In fact, a shipper that misses the 8:00 
a.m. CCT recall notification time will miss four nomination 
opportunities and will be unable to have its volume flow until 48 hours 
after it submits the recall notification.\34\
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    \34\ A releasing shipper that misses the 8 a.m. CCT notification 
time cannot renominate that capacity until 11:30 a.m. CCT the next 
day, a nomination under which gas will not flow until 9:00 a.m. CCT 
the day after.
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    28. As a result of such lengthy delays, releasing shippers may not 
be able to use their recall rights as effectively as possible to ensure 
that they can retain adequate peak day capacity for their own needs. 
The delay in rescheduling recalled capacity also can have an adverse 
competitive impact on the market by reducing the amount of capacity 
available for release. As AGA points out, if an LDC is a provider of 
last resort under a state unbundling initiative and is given notice 
that insufficient supply is being delivered to its city-gate, the LDC 
will need to recall released capacity for later in the same day or, at 
least, for the next day. Without the ability to recall capacity more 
frequently, a releasing shipper with supplier-of-last-resort 
obligations will be reluctant to release capacity at all since it will 
not be able to recall that capacity when it is needed. In that event, 
replacement shippers will have less capacity from which to choose and 
will have fewer alternatives to purchasing pipeline interruptible 
service.
    29. Replacement shippers benefit from having a more open and 
competitive capacity market, with more capacity available to compete 
with pipeline interruptible transportation. As APS/PWEC states, ``as a 
captive shipper on a fully subscribed pipeline, APS/PWEC supports any 
initiative that would free up excess capacity (even in the short 
run).'' \35\ Replacement shippers will not be required to purchase 
released capacity with partial day recalls, but will be able to choose 
the capacity with terms that best fits their needs. Releasing shippers 
will be able to release capacity without a partial day recall condition 
and will have an incentive to do so, because a release not subject to 
recall will be more valuable (and higher priced) than a release subject 
to recall. Replacement shippers will know the terms of releases upfront 
and can determine whether to purchase recallable capacity or seek more 
reliable capacity, and can take the recall conditions into account in 
determining how much the capacity is worth.
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    \35\ APS/PWEC Comment, at 3.
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    30. Under the regulations adopted in this rule, the releasing 
shipper will be able to recall unscheduled capacity at any of the four 
nomination cycles and can recall scheduled capacity so long as the 
replacement shipper has an opportunity to reschedule its gas. The 
replacement shipper will receive protection against loss of service 
similar to that interruptible shippers currently receive.
    31. In Order No. 587-G, the Commission adopted a regulation stating 
that when an interruptible shipper's volumes are to be reduced as a 
result of a nomination by a firm shipper, the interruptible shipper 
must be provided with advanced notice of such reduction and must be 
notified whether penalties will apply on the day its volumes are 
reduced.\36\ The Commission further determined that interruptible 
shippers could be bumped by firm intra-day nominations at the first 
three nomination opportunities, but could not be bumped at the third 
intra-day nomination opportunity (5 p.m. CCT) since they would not have 
an opportunity to reschedule their gas for that gas day. The Commission 
provided this protection against bumping to provide stability in the 
nomination system, so that shippers can be confident by late afternoon 
that they will receive their scheduled flows.\37\
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    \36\ 18 CFR 284.12 (c)(1)(i)(A).
    \37\ Order No. 587-G, 63 FR at 20078, FERC Stats. & Regs. 
Regulations Preambles [July 1996-December 2000] para. 31,062, at 
30,671-72.
---------------------------------------------------------------------------

    32. This rationale applies equally to replacement shippers, which, 
under the regulations adopted in this rule, must be given advance 
notification of any recall and cannot have scheduled volumes reduced 
unless they have been given an opportunity to reschedule their gas. In 
addition, the Commission required pipelines to waive certain non-
critical penalties for bumped interruptible shippers, and the same 
penalty waiver will be applied to bumped replacement shippers.\38\
---------------------------------------------------------------------------

    \38\ Order No. 587-G, 63 FR at 20078-79, FERC Stats. & Regs. 
Regulations Preambles [July 1996-December 2000] para. 31,062, at 
30,672-73.
---------------------------------------------------------------------------

    33. The Commission recognizes that implementation of recalls at the 
Intra-Day 1 and 2 cycles can affect flowing gas and, as the comments 
point out, result in the need to allocate daily nominations (and 
potentially penalties) between releasing and replacement shippers. But 
these issues are not insurmountable and should not prevent 
implementation of partial day recalls. Some pipelines already have 
implemented partial day recalls on their systems.\39\ Rather than 
having pipelines implement partial day recalls based on their own 
distinct processes for handling allocation and other operational 
issues, the Commission is providing an opportunity for NAESB to reach 
consensus on a set of standards that can be applied to all partial day 
recalls. Therefore, the Commission will postpone implementation of 
partial or flowing day recalls of scheduled gas at the Intra-Day 1 and 
Intra-Day 2 cycles, and provide NAESB with six months to develop 
standards governing recalls at these cycles that affect flowing gas. At 
the end of this period, NAESB should file with the Commission the 
standards it has developed or, if it is unable to reach consensus, a 
report outlining the standards considered, the voting records with 
regard to these standards, and the reasons for its inability to reach 
consensus. Other industry members can also submit comments and will 
have an additional 15 days from the filing of the NAESB information to 
file additional comments on the NAESB report. Since NAESB has already 
been working on the partial day recall issue, six months should provide 
a sufficient time period for developing standards. Once the Commission 
receives the report from NAESB and the comments, it will issue an order 
establishing the requirements for partial day recalls.
---------------------------------------------------------------------------

    \39\ Dominion Transmission, Inc., 95 FERC para. 61,316, at 
62,080 (2001); National Fuel Gas Supply Corporation, 96 FERC para. 
61,182, at 61,804 (2001).
---------------------------------------------------------------------------

    34. The Commission, however, sees no reason for delaying 
implementation of partial day recalls for the Evening Cycle and for 
recalls of unscheduled capacity. Recalls in these situations will not 
present allocation or other operational difficulties for the pipelines. 
Such recalls do not affect flowing volumes and, therefore, do not 
result in the need to allocate daily gas supplies

[[Page 11911]]

between releasing and replacement shippers. In order to provide 
shippers more flexibility in their use of capacity, the Commission will 
require pipelines by May 1, 2002, to file tariff sheets, as discussed 
below, to implement partial day recalls for the Evening Cycle and for 
unscheduled capacity. These tariff sheets are to become effective by 
July 1, 2002.

35. Schedule for Implementation of Recalls for Evening Nomination 
Cycle and Unscheduled Capacity

    36. The NOPR proposed that no advance notice of recalls would be 
provided, so that the recall and a renomination of the releasing 
shipper would be provided at each of the standard nomination cycles. 
For example, under the proposal in the NOPR, the releasing shipper 
would notify the pipeline at 6 p.m. CCT (Evening Nomination) that 
capacity is being recalled and would simultaneously submit a nomination 
at the same time. The replacement shipper would not be notified of the 
bump, under this proposal, until the deadline for reporting of 
scheduled volumes (10 p.m. CCT).
    37. A number of comments, however, maintain that recall notices and 
nominations should not be simultaneous and that pipelines and 
replacement shippers need advance notice of recalls. Whether to 
establish an advance notification requirement for recalls, and how that 
notice should be provided, are issues NAESB needs to consider during 
its deliberations. The treatment of advance notification can determine 
whether recalls at the Intra-Day 2 cycle can bump scheduled volumes. If 
NAESB provides for advance notice of recalls to pipelines and 
replacement shippers, releasing shippers could be permitted to bump 
scheduled gas at the Intra-Day 2 cycle, since replacement shippers will 
have sufficient advance notice to reschedule bumped gas at the Intra-
Day 2 cycle.\40\ On the other hand, if advance notice is not provided, 
then, under this rule, recalls would not be permitted at the Intra-Day 
2 cycle since the replacement shipper would not have an opportunity to 
reschedule its gas.
---------------------------------------------------------------------------

    \40\ If advance notice of recalls is provided, the bumping rules 
for recalled capacity may not need to be identical to those for 
interruptible shippers. Interruptible shippers cannot be bumped at 
the Intra-Day 2 cycle because, under current NAESB standards, they 
are not provided with advance notice of the bump and so cannot 
renominate at the Intra-Day 2 cycle. 18 CFR 284.12(b)(1)(1), 
Nominations Related Standards 1.3.2 (Intra-Day 2 nomination is 
received at 5 p.m. CCT with no advance notice to interruptible 
shippers of volumes to be bumped). In contrast, if advance notice of 
recalls is provided to replacement shippers, their scheduled 
capacity can be recalled at the Intra-Day 2 cycle because the 
replacement shipper will have sufficient notice to renominate at the 
Intra-Day 2 cycle.
---------------------------------------------------------------------------

    38. Since the Commission is implementing recalls of scheduled gas 
at the Evening Nomination cycle and recalls of unscheduled gas at the 
Intra-Day 1 and Intra-Day 2 cycles, pipelines will need to implement an 
interim schedule for implementing recalls for these cycles. In order to 
assure expeditious compliance with these requirements, the Commission 
is establishing, as discussed below, an interim timeline for recalls 
and will require each pipeline to include standard tariff language in 
its tariff providing for such recalls.
    39. The fundamental precept of the interim schedule being adopted 
by the Commission is that releasing shippers must be provided with 
sufficient time after receipt of scheduled quantities to inform the 
pipeline of a recall. Releasing shippers, such as LDCs, need to be 
aware of the scheduled volumes for their systems prior to determining 
whether they will need to recall capacity. Thus, the advance 
notification period should give releasing shippers the time to evaluate 
the scheduled quantities information before having to submit the recall 
notice.\41\ Further, although the Commission is not convinced that the 
existing 3 \1/2\ hour advance notice requirement for the Timely 
Nomination cycle \42\ is necessary, the Commission will permit 
pipelines to continue to use this notification period for notification 
of recalls for the Timely Nomination cycle while NAESB considers the 
schedule for recalls.
---------------------------------------------------------------------------

    \41\ For example, under the Timely Nomination cycle, scheduled 
volumes are provided at 4:30 p.m. Releasing shippers need sufficient 
time to evaluate this information before determining whether to 
recall capacity for the 6 p.m. Evening Nomination cycle.
    \42\ Capacity Release Related Standards 5.3.6 (notice must be 
given by 8 a.m. CCT for recall effective at the 11:30 a.m. Timely 
Nomination cycle).
---------------------------------------------------------------------------

    40. Based on these precepts, the Commission is establishing the 
following interim schedule for notification to pipelines and 
replacement shippers of recalls of capacity at the Evening Nomination 
cycle and for recalls of unscheduled capacity.

----------------------------------------------------------------------------------------------------------------
                                    Receipt of                              Pipeline
Nomination cycle (all times in  scheduled volumes        Recall          notification to       Nomination time
             CCT)                  (from prior      notification to    replacement shipper       (same day)
                                nomination cycle)       pipeline            of recall
----------------------------------------------------------------------------------------------------------------
Timely........................  NA...............  8 a.m............  9 a.m...............  11:30 a.m.
Evening.......................  4:30 p.m. same     5 p.m............  6 p.m...............  6 p.m.
                                 day.
Intra-Day 1...................  10 p.m. CCT prior  8 a.m............  9 a.m...............  10 a.m.
                                 day.
Intra-Day 2...................  2 p.m. same day..  3 p.m............  4 p.m...............  5 p.m.
----------------------------------------------------------------------------------------------------------------

    41. To ease the compliance and review burden on both pipelines and 
shippers, each pipeline is required to file standard tariff language to 
implement such recalls stating the following:

    Releasing shippers may, to the extent permitted as a condition 
of the capacity release, recall released capacity (scheduled or 
unscheduled) at the Timely Nomination cycle and the Evening 
Nomination cycle, and recall unscheduled released capacity at the 
Intra-Day 1 and Intra-Day 2 Nomination cycles by providing notice to 
the Transporter by the following times for each cycle: 8 a.m. CCT 
for the Timely Nomination cycle; 5:00 p.m. CCT for the Evening 
Nomination Cycle; 8 a.m. CCT for the Intra-Day 1 Nomination cycle, 
and 3:00 p.m. for the Intra-Day 2 Nomination cycle. Notification to 
replacement shippers provided by Transporter within one hour of 
receipt of recall notification.

The Commission will revisit this schedule after NAESB has had an 
opportunity to develop standardized timelines for partial day recalls.
    42. The Commission will address below those comments opposing or 
suggesting changes in the regulation or requesting clarification. 
Comments addressing procedural issues will not be addressed since NAESB 
will be considering those issues.

[[Page 11912]]

43. Comments on Adoption of Partial Day Recall Requirement

    44. Those opposing adoption of a regulation permitting partial day 
recalls contend that permitting any partial day recalls will operate to 
diminish the attractiveness of released capacity, and will, therefore, 
result in limiting competition between pipeline firm and released 
capacity. They further maintain that allowing partial day recalls will 
be harmful to replacement shippers, because replacement shippers will 
be unable to reschedule gas bumped by the partial day recall. DETM 
contends that, for better or worse, all gas transactions occur for a 
full gas day, and that this will create difficulties for replacement 
shippers trying to reschedule gas subject to partial day recalls. DETM 
further maintains that no data supports the proposition that the 
availability of partial day recalls will have any measurable impact on 
the availability of released capacity.
    45. Since Order No. 636, the Commission's regulation of released 
capacity has proceeded from the presumption that the best way to 
improve access to capacity is to provide both releasing and replacement 
shippers as much flexibility as possible in structuring their capacity 
release transactions. In Order No. 637, for instance, the Commission 
required pipelines to permit releasing and replacement shippers to 
consummate capacity release transactions at each of the four intra-day 
nomination opportunities to ensure that replacement shippers could 
obtain capacity when they need it.\43\ Similarly, allowing partial day 
recalls will provide releasing shippers with similar flexibility to 
structure capacity releases that fit their requirements. Indeed, as the 
gas market has been developing, shippers want more flexibility, not 
less, to adjust nominations on an intra-day basis.\44\ Allowing partial 
day recalls is a step towards the Commission's, as well as the 
industry's, goal of providing shippers with enhanced scheduling 
opportunities so that they can adjust their gas nominations to accord 
with their market needs.\45\
---------------------------------------------------------------------------

    \43\ 18 CFR 284.12(c)(1)(ii).
    \44\ See Reliant Energy Gas Transmission Company, 93 FERC para. 
61,141 (2000) (proposal for hourly nominations to meet customer 
needs for quick adjustment due to demand changes).
    \45\ NAESB's standards recognize that the current nomination 
scheduling is merely ``an interim step to continuous and contiguous 
scheduling.'' Nominations Related Standards 1.1.2.
---------------------------------------------------------------------------

    46. Moreover, it is not clear that prohibiting partial day recalls 
would benefit replacement shippers in the long run. DETM and Dynegy 
appear to be assuming that without partial day recalls, firm shippers 
will release the same amount of capacity on a full day's basis as they 
would if partial day recalls are available. However, many of the 
comments point out that firm shippers that need capacity on short 
notice are reluctant to release their capacity at all if they are 
unable to recall that capacity in the event of changed circumstances, 
such as dropping temperatures or the failure of a marketer to deliver 
gas.\46\ According to the comments, this is particularly true for LDCs 
with supplier-of-last-resort obligations that need to be able to recall 
capacity quickly if marketers fail to provide gas to the LDCs city-
gate.\47\ Allowing partial day recalls will remove this disincentive to 
release capacity, thereby making incremental capacity available and 
benefitting replacement shippers by providing them with more options, 
particularly on fully subscribed pipelines.\48\
---------------------------------------------------------------------------

    \46\ See Comments of Dominion LDCs, at 4 (partial day recalls 
``will free up capacity that would otherwise be held by LDCs and 
other shippers that cannot risk releasing it for an extended 
period''); Kentucky (``the inability to reschedule recalled capacity 
will result in the reduction of the amount of capacity available, 
thereby adversely impacting competition'').
    \47\ See Comments of AGA, Dominion LDCs, APGA, Con Edison, 
Kentucky, KeySpan, PSCNY (partial day recalls crucial to retail 
access programs where recall is needed to ensure reliability).
    \48\ See Comment of APS/PWEC, at 3 (supporting partial day 
recalls as making incremental capacity available on fully subscribed 
pipelines).
---------------------------------------------------------------------------

    47. Dynegy, DETM, and EPSA further assert that allowing partial day 
recalls may make capacity releases subject to such recalls less 
valuable to replacement shippers. In the first place, as noted above, 
the commenters are assuming such capacity will be available for release 
if partial day recall rights were not available to the releasing 
shipper, an assumption that other comments show is not necessarily 
correct. Released capacity available subject to partial day recall is 
certainly more valuable to replacement shippers than not having that 
capacity available at all.
    48. Moreover, if replacement shippers find that released capacity 
with partial day recalls is too unreliable, they need not purchase that 
released capacity and can negotiate with the releasing shippers for 
conditions providing more reliable service. Under the regulations 
adopted here, releasing shippers are not required to include partial 
day recalls in their releases. Releasing shippers can release capacity 
on a full day basis (not subject to partial day recalls) and will have 
an incentive to do so, because a full day release will be more valuable 
(and higher priced) than a partial day recall release. The replacement 
shippers will know the terms of releases upfront and can determine 
whether to purchase that capacity, negotiate other terms with the 
releasing shipper, or seek more reliable capacity, and can take the 
recall conditions into account in determining how much the capacity is 
worth. In a fully functioning market, buyers and sellers negotiate over 
the terms of their deals so that the price and other components reflect 
terms that are mutually agreeable to both parties. Imposing artificial 
regulatory limits on the negotiating position of one party to the 
transaction, as proposed by those opposing partial day recalls, is the 
antithesis of fully functioning markets, and can only create a less 
efficient marketplace.
    49. DETM and Dynegy also contend that permitting partial day 
recalls will reduce the reliability of the pipeline grid because 
replacement shippers are subject to losing their capacity and may be 
unable to reschedule capacity. These arguments are reminiscent of the 
arguments made in 1998 against allowing firm intra-day nominations to 
bump interruptible transportation on the grounds that interruptible 
shippers would have difficulty rescheduling their gas.\49\ In that 
case, the Commission rejected such claims, finding that:
---------------------------------------------------------------------------

    \49\ See Order No. 587-G, 63 FR at 20077-78, FERC Stats. & Regs. 
Regulations Preambles [July 1996-December 2000] para. 31,062, at 
30,669-30,672.

    Firm shippers are paying reservation charges for priority rights 
and those rights should include the right to have a nomination 
become effective as early as possible on the gas day following the 
nomination. Interruptible shippers voluntarily take the risk that 
their service will be interrupted and while they are entitled to 
advance notice of such interruption, they should not be able to 
prevent firm shippers from having their nominations take effect at 
the earliest possible time. Gas flows on the interstate grid 24-
hours a day, and is consumed throughout the day, so interruptible 
shippers need to be prepared to adjust gas volumes even during non-
business hours.\50\
---------------------------------------------------------------------------

    \50\ Order No. 587-G, 63 FR at 20078, FERC Stats. & Regs. 
Regulations Preambles [July 1996-December 2000] para. 31,062, at 
30,671.

    50. In this instance, firm shippers paying reservation charges 
should similarly have the ability to control the use of their capacity 
by employing partial day recalls. Shippers purchasing released capacity 
subject to partial day recalls, like those purchasing interruptible 
transportation, are taking the risk that their scheduled quantities may 
be disrupted. As gas markets continue to develop, such adjustments will 
be increasingly necessary to provide those shippers holding firm

[[Page 11913]]

capacity with the utmost flexibility in their use of the capacity for 
which they pay.
    51. Moreover, like interruptible shippers, replacement shippers are 
protected, because bumping of scheduled volumes is only permitted if 
the replacement shipper has at least one opportunity to reschedule its 
gas. Replacement shippers also have tools available, such as pooling, 
gas package identifiers, and ranking, that they can use to manage their 
gas supplies in the event of a bump.\51\
---------------------------------------------------------------------------

    \51\ 18 CFR Sec. 284.12 (b)(1)(i), Nominations Related Standards 
1.3.18, 1.3.23, 1.3.24. Pooling together with ranking permit 
shippers to designate which supplies or markets should be cut first 
in the event scheduled volumes are reduced.
---------------------------------------------------------------------------

    52. WDG maintains that the Commission should not exempt the Intra-
Day 2 nomination from a partial day recall. It argues that the 
replacement shippers have fair notice that their capacity is 
recallable, and therefore are not prejudiced by having a recall at the 
Intra-Day 2 cycle.
    53. The regulation adopted in this rule does not prohibit all 
recalls at the Intra-Day 2 cycle. Recalls of unscheduled capacity can 
be made at the Intra-Day 2 cycle. As discussed earlier, NAESB is to 
consider establishing a notification schedule by which pipelines and 
replacement shippers are to be notified of recalls. Bumping at the 
Intra-Day 2 cycle may be permitted depending on whether the replacement 
shipper is given sufficient time to renominate any bumped gas at the 
Intra-Day 2 cycle.
    54. DETM maintains that the partial day recall issue is not a 
policy dispute, but a business issue that should be left to NAESB to 
resolve. It argues that the Commission has historically deferred to the 
determinations of NAESB on business issues and, therefore, should not 
overturn the business decision by NAESB to prohibit partial day 
recalls.
    55. The dispute here is not simply a question of business 
practices, but a question of regulatory policy regarding the relative 
rights of releasing and replacement shippers under the Commission's 
capacity release mechanism. Here, the Commission has determined that, 
under its regulations, releasing shippers should be given full rights 
to use their capacity flexibly by recalling that capacity on an intra-
day basis, and that the contrary NAESB standards should no longer be 
incorporated by reference.
    56. It is true that the Commission gives great weight to the 
standards adopted by NAESB, because these standards represent a 
consensus of the industry. In fact, the Commission initially adopted 
NAESB's consensus standards limiting capacity release recalls, even 
though the Commission's regulations (Sec. 284.8 (b)) would have 
permitted partial day recalls. Now, however, it is clear from the 
record of deliberations at NAESB, and the comments filed in this 
proceeding, that the existing NAESB standards on partial day recalls no 
longer command a consensus of the industry.\52\ At this point, NAESB is 
stalemated, without being able to achieve a consensus in either 
direction. Since consensus no longer obtains, the Commission needs to 
resolve the policy dispute and has determined that allowing partial day 
recalls is consistent with the Commission's regulations, will provide 
incentives to release additional capacity, and will foster enhanced 
competition.
---------------------------------------------------------------------------

    \52\ Under NAESB's procedures, a consensus is required to 
approve standards, but equally a consensus is needed to change or 
remove a standard. For example, if NAESB's current partial day 
recall standards (5.3.6 and 5.3.7) were resubmitted for a vote 
today, the comments make clear that these standards would not 
command a consensus at NAESB.
---------------------------------------------------------------------------

57. Requests for Clarification

    58. A number of the comments ask for clarification of aspects of 
the regulations and the way in which partial day recalls will operate.

59. Applicability of Recall Conditions

    60. NiSource maintains the Commission's regulation is vague and 
seems to imply that all released capacity is subject to partial day 
recalls. Williams and ENA similarly seek clarification that parties 
retain the flexibility to decide whether capacity is recallable on an 
intra-day basis. Williams further seeks clarification that the proposed 
rule is prospective only and does not affect previous capacity release 
contracts.
    61. The Commission has revised its proposed regulation to make 
clear that pipelines need only provide releasing shippers with the 
opportunity to include partial day recalls as a condition in capacity 
release offers. Whether a partial day recall applies to a capacity 
release will depend upon the terms of the agreement between the 
releasing and replacement shipper. Because the terms of the agreement 
govern, the Commission agrees with Williams that implementation of this 
regulation is prospective only and will not change the terms of already 
negotiated capacity release transactions.

62. Schedule for Notification of Recalls for Timely Nomination 
Cycle and Reputs

    63. The Industrials maintain that the Commission should not 
eliminate NAESB standard 5.3.6 which establishes 8 a.m. CCT as the 
deadline for notification of a recall applicable to the Timely 
Nomination cycle (11:30 a.m.). The Industrials are concerned that the 
elimination of this provision will force all recalls into the intra-day 
cycles or will mean that recall timing will be left either to the 
contract between the releasing and replacement shipper or to individual 
tariff provisions. The Industrials further request that the Commission 
consider a timeline for notification of reputs (in which recalled 
capacity reverts to the replacement shipper after a recall ends), or 
request NAESB to consider this issue.
    64. The Commission recognizes that a standard timeline for recall 
notification is needed and is referring this issue to NAESB for 
consideration of a new standard. In the interim while NAESB is 
considering a new standard, the Commission is permitting pipelines to 
continue to use the notification period in current standard 5.3.6 for 
the Timely Nomination cycle, and, as described earlier, has established 
an interim notification schedule for the other nomination cycles. NAESB 
also should consider whether a schedule or timeline for reput 
notification is necessary.

65. Penalty Exposure

    66. Dynegy and NGSA maintain that partial day recalls should not 
result in greater penalty exposure for shippers whose capacity has been 
recalled. As discussed earlier, the Commission in Order No. 587-G 
required pipelines to waive non-critical penalties for bumped 
interruptible shippers. Pipelines should apply the same waivers for gas 
bumped through partial day recalls.

67. Effect on Alternate Points

    68. NiSource seeks clarification that partial day recalls will not 
permit the releasing shipper recalling capacity to change to an 
alternate point and bump firm capacity that is already scheduled (by a 
third party) at that point. The recall only permits the releasing 
shipper to displace gas scheduled by the replacement shipper. The 
Commission agrees that partial day recalls will not give the recalling 
shipper any greater scheduling rights vis a vis third parties.

69. Pipelines Offering Non-Standard Nomination Opportunities

    70. Dominion requests clarification that pipelines offering more 
nomination opportunities than the four standard

[[Page 11914]]

times provided in the NAESB standards, need not offer partial day 
recall at non-standard nomination times. Dominion maintains that it 
provides additional nomination times early in the morning (7:45 a.m. 
CCT) and late in the evening (8:45 p.m.), and states that its staffing, 
and that of shippers, at these times does not permit processing of 
recalls. In addition, Dominion contends that other pipelines are not 
equipped to coordinate recalls at those hours.
    71. Pipelines are certainly free to provide for recalls at non-
standard nomination periods. However, in implementing recalls during 
the interim period in which NAESB is considering standards, the 
Commission will require recalls to be processed only at the standard 
nomination periods; pipelines need not permit recalls at any non-
standard nomination times. In considering standards for partial day 
recalls, NAESB should consider whether standards should be developed to 
permit recalls at certain non-standard nomination opportunities.

72. Effect on Already Accepted Partial Day Recall Programs

    73. Dominion requests clarification that the final rule does not 
affect Dominion's settlement in its Order No. 637 proceeding in which 
it provides partial day recalls at certain nomination opportunities. 
For example, Dominion states that it currently does not permit recalls 
at the Intra-Day 1 cycle, although it does not object to permitting 
such recalls if required by the Commission.
    74. All pipelines will be required to conform to the requirements 
of the Commission regulation, regardless of the terms of previous 
approved tariffs. The Commission is acting under section 5 of the 
Natural Gas Act in requiring pipelines to permit releasing shippers to 
use partial day recalls and is seeking to establish standards to apply 
to such recalls across the interstate grid. Accordingly, all pipelines 
with tariffs inconsistent with the Commission's regulation must comply 
with that regulation. Dominion, for instance, is required, as are the 
other pipelines, to permit recalls at the Intra-Day 1 cycle (to which 
it has no objection). Similarly, Dominion is required to permit recalls 
under the schedule established by the Commission in this rule for the 
interim period while NAESB is considering standards for partial day 
recalls, and will be required to comply with subsequent timeline NAESB 
develops and the Commission adopts.

75. Pipeline Capacity

    76. EIP is concerned that partial day recalls are at odds with the 
NAESB standards requiring that all nominations be for daily quantities. 
EIP maintains that if partial day recalls are permitted for released 
capacity, pipelines should be permitted to sell their capacity for less 
than a full day as well.
    77. EIP appears to be suggesting that a partial day recall refers 
to a sale of capacity for a time period of less than one day, whereas 
pipelines under the NAESB standards can only sell capacity for a full 
day's quantity. The Commission is not establishing different standards 
for pipeline capacity as compared to released capacity. As Gulf South 
explains in its comments, a partial day recall should not be viewed as 
a recall for a specific portion (number of hours) of a gas day. Rather, 
the recall is for a proportionate share of the total contract quantity. 
For example, if a capacity release is for a contract quantity of 2400 
Dth, and the replacement shipper flowed 800 Dth during the first eight 
hours prior to recall, the releasing shipper would still have a 
contract quantity of 1600 Dth remaining on the contract for the 
remainder of the gas day. In the same way, pipelines can sell capacity 
at each of the intra-day nomination opportunities whenever capacity is 
available.\53\
---------------------------------------------------------------------------

    \53\ Indeed, Commission policy requires pipelines to sell 
capacity at the maximum tariff rate whenever that capacity is 
available, including on an intra-day basis. Tennessee Gas Pipeline 
Company, 91 FERC para. 61,053, at 61,190 (2000); 18 CFR 284.7 & 
284.9 (must sell services without regard to duration of the 
service).
---------------------------------------------------------------------------

78. Notice of Use of Voluntary Consensus Standards

    Office of Management and Budget Circular A-119 (Sec. 11) (February 
10, 1998) provides that when a federal agency issues or revises a 
regulation containing a standard, the agency should publish a statement 
in the final rule identifying whether a voluntary consensus standard or 
a government-unique standard is being adopted. In this rulemaking, the 
Commission is issuing its own regulation and rescinding the 
incorporation by reference of NAESB standard 5.3.6 and part of 5.3.7, 
because the existing NAESB standard has not been revised to take into 
account changed circumstances, there is no longer consensus supporting 
this standard, and the existing standard fails to reflect Commission 
policy.

79. Information Collection Statement

    80. The Office of Management and Budget's (OMB) regulations in 5 
CFR 1320.11 require that it approve certain reporting and recordkeeping 
requirements (collections of information) imposed by an agency. Upon 
approval of a collection of information, OMB will assign an OMB control 
number and an expiration date. Respondents subject to the filing 
requirements of this Rule will not be penalized for failing to respond 
to these collections of information unless the collections of 
information display a valid OMB control number.
    81. The final rule will affect one existing data collection, FERC-
545 ``Gas Pipeline Rates: Rate Change (Non-Formal)'' (OMB Control No. 
1902-0154). The following burden estimates are related only to this 
rule and include the costs of complying with the tariff filing 
requirement. Since this final rule will be implemented in two phases, 
the number of responses per respondent has been increased from one, as 
proposed in the NOPR, to two because each respondent will need to make 
two tariff filings, one for phase one and one for phase two.

[[Page 11915]]



----------------------------------------------------------------------------------------------------------------
                                                                  Number of
               Data collection                   Number of      responses per      Hours per       Total annual
                                                respondents       respondent        response          hours
----------------------------------------------------------------------------------------------------------------
FERC-545....................................              93                2               38            7,068
----------------------------------------------------------------------------------------------------------------


 
                                                             FERC-545
------------------------------------------------------------------------
Annualized Capital/Startup Costs........................        $397,714
Annualized Costs (Operations & Maintenance).............               0
                                                         ---------------
    Total Annualized Costs..............................         397,714
------------------------------------------------------------------------

    The cost per respondent is $4,276.00 (rounded off).
    82. The Commission sought comments to comply with these 
requirements. Comments were received from twenty-eight entities. No 
comments addressed the reporting burden imposed by these requirements. 
The substantive issues raised by the commenters are addressed within 
the rule.
    83. The Commission's regulations adopted in this rule are necessary 
to further the process begun in Order No. 587 of creating a more 
efficient and integrated pipeline grid by standardizing the business 
practices and electronic communication of interstate pipelines. 
Adoption of these regulations will update the Commission's regulations 
relating to business practices and provide greater flexibility for 
capacity holders on interstate pipelines by synchronizing the 
Commission's regulation of recalled capacity with its standards for 
intra-day nominations. The public also benefits by having greater 
competition across the pipeline grid as a result of firm capacity 
holders having increased flexibility in structuring their capacity 
release transactions.
    84. The Commission has assured itself, by means of its internal 
review, that there is specific, objective support for the burden 
estimates associated with the information requirements. The information 
required in the Final Rule will help the Commission carry out its 
responsibilities under the Natural Gas Act and conforms to the 
Commission's plan for efficient information collection, communication, 
and management within the natural gas industry.
    85. Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426 [Attention: 
Michael Miller, Office of the Chief Information Officer, CI-1, (202) 
208-1415, or [email protected]] or the Office of Management and 
Budget, Office of Information and Regulatory Affairs, Attention: Desk 
Officer for the Federal Energy Regulatory Commission, 725 17th Street, 
NW., Washington, DC 20503. The Desk Officer can also be reached at 
(202) 395-7318, or fax: (202) 395-7285.

86. Environmental Analysis

    87. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\54\ The 
Commission has categorically excluded certain actions from these 
requirements as not having a significant effect on the human 
environment.\55\ The regulations adopted in this rule fall within 
categorical exclusions in the Commission's regulations for rules that 
are clarifying, corrective, or procedural, for information gathering, 
analysis, and dissemination, and for sales, exchange, and 
transportation of natural gas that requires no construction of 
facilities.\56\ Therefore, an environmental assessment is unnecessary 
and has not been prepared.
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    \54\ Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. Preambles 1986-1990 para. 30,783 (1987).
    \55\ 18 CFR 380.4.
    \56\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5), 380.4(a)(27).
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88. Regulatory Flexibility Act Certification

    89. The Regulatory Flexibility Act of 1980 (RFA) \57\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The regulations proposed here impose requirements only on interstate 
pipelines, which are not small businesses, and, these requirements are, 
in fact, designed to benefit all customers, including small businesses. 
Accordingly, pursuant to Sec. 605(b) of the RFA, the Commission hereby 
certifies that the regulations adopted herein will not have a 
significant adverse impact on a substantial number of small entities.
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    \57\ 5 U.S.C. 601-612.
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90. Document Availability

    91. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
    92. From FERC's Home Page on the Internet, this information is 
available in both the Commission Issuance Posting System (CIPS) and the 
Records and Information Management System (RIMS).

--CIPS provides access to the texts of formal documents issued by the 
Commission since November 14, 1994.
--CIPS can be accessed using the CIPS link or the Documents & Filing 
link. The full text of this document is available on CIPS in ASCII and 
WordPerfect 8.0 format for viewing, printing, and/or downloading.
--RIMS contains images 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 from FERC's Home Page using the RIMS 
link or the Documents & Filing link. Descriptions of documents back to 
November 16, 1981, are also available from RIMS-on-the-Web; requests 
for copies of these and other older documents should be submitted to 
the Public Reference Room.

    93. User assistance is available for RIMS, CIPS, and the Website 
during normal business hours from our Help line at (202) 208-2222 (E-
Mail to [email protected]) or the Public Reference at (202) 208-
1371 (E-Mail to [email protected]).
    94. During normal business hours, documents can also be viewed and/
or printed in FERC's Public Reference Room, where RIMS, CIPS, and the 
FERC Website are available. User assistance is also available.

[[Page 11916]]

95. Implementation Dates

    96. As discussed herein, interstate pipelines are required, by May 
1, 2002, to make tariff filings, to become effective by July 1, 2002, 
to comply with the requirement to implement recalls of scheduled and 
unscheduled capacity for the Timely and Evening Nomination cycles and 
for recalls of unscheduled capacity. Each tariff filing must include 
the tariff language set forth at P. 41.
    97. By October 1, 2002, NAESB should file comments with the 
Commission detailing the standards NAESB has adopted relating to 
partial day recalls or, if none has been adopted, those that were 
considered, as well as all other material relevant to NAESB's 
consideration of the standards. Other industry members also can submit 
comments by October 1, 2002, and will have until October 15, 2002 to 
file additional comments on the NAESB report.

98. Effective Date

    99. These regulations are effective April 17, 2002. The Commission 
has determined, with the concurrence of the Administrator of the Office 
of Information and Regulatory Affairs of OMB, that this rule is not a 
``major rule'' as defined in section 351 of the Small Business 
Regulatory Enforcement Fairness Act of 1996.

List of Subjects in 18 CFR Part 284

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

    By the Commission.
Magalie R. Salas,
Secretary.

    In consideration of the foregoing, the Commission amends Part 284, 
Chapter I, Title 18, Code of Federal Regulations, as follows.

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. Section 284.12 is amended as follows:
    a. The heading of paragraph (b) is revised by removing the word 
``GISB'' and adding, in its place, the word ``NAESB.''
    b. Paragraphs (b)(1) and (b)(2) are amended by removing the words 
``Gas Industry Standards Board'' and adding, in their place, the words 
``North American Energy Standards Board.''
    b. Paragraph (b)(1)(v) is revised.
    c. The heading of paragraph (c)(1)(ii) is revised, and the text of 
paragraph of (c)(1)(ii) is designated as (c)(1)(ii)(A).
    d. Paragraph (c)(1)(ii)(B) is added.
    The revised and added text reads as follows:


Sec. 284.12  Standards for pipeline business operations and 
communications.

* * * * *
    (b) * * *
    (1) * * *
    (v) Capacity Release Related Standards (Version 1.4, August 31, 
1999), with the exception of Standard 5.3.6 and the first sentence of 
Standard 5.3.7.
* * * * *
    (c) * * *
    (1) * * *
    (ii) Capacity release scheduling.
    (A) * * *
    (B) A pipeline must permit releasing shippers, as a condition of a 
capacity release, to recall released capacity and renominate such 
recalled capacity at each nomination opportunity. Each replacement 
shipper must be provided with advance notice of such recall and must be 
notified whether penalties will apply on the day its volumes are 
reduced.
* * * * *

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix

                             Comments Filed
                         [Docket No. RM96-1-019]
------------------------------------------------------------------------
           Commenter                          Abbreviation
------------------------------------------------------------------------
American Gas Association......  AGA.
Algonquin Gas Transmission      Algonquin/Texas Eastern.
 Company and Texas Eastern
 Transmission Corporation.
American Public Gas             APGA.
 Association.
Arizona Public Service Company  APS/PWEC.
 and Pinnacle West Energy
 Corporation.
Consolidated Edison Company of  Con Edison.
 New York and Orange and
 Rockland Utilities, Inc.
Dominion Transmission, Inc....  Dominion.
Duke Energy Trading and         DETM.
 Marketing, LLC.
Dynegy Marketing and Trade....  Dynegy.
East Ohio Gas Company, The      Dominion LDCs.
 Peoples Natural Gas Company,
 Hope Gas, Inc.
El Paso Pipeline Group........  EPPG.
Enron North America Corp......  ENA.
Enron Interstate Pipelines....  EIP.
Electric Power Supply           EPSA.
 Association.
Gulf South Pipeline Company...  Gulf South.
Interstate Natural Gas          INGAA.
 Association of America.
Public Service Commission,      Kentucky.
 Commonwealth of Kentucky.
KeySpan Delivery Companies....  Keyspan.
American Gas Association......  AGA.
Kinder Morgan Pipelines.......  Kinder Morgan.
Memphis Light, Gas and Water    MLGW.
 Division.
Natural Gas Supply Association  NGSA.
Public Service Commission of    PSCNY.
 New York.
NiSource, Inc.................  NiSource.
Pennsylvania Office of          PA. OCA.
 Consumer Advocate.
Process Gas Consumers Group,    Industrials.
 American Forest & Paper
 Association, and Georgia
 Industrial Group.
Williams Companies............  Williams.
Williston Basin Interstate      Williston.
 Pipeline Company.
Wisconsin Distributor Group...  WDG.

[[Page 11917]]

 
Xcel Energy Services, Inc.....  Xcel.
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[FR Doc. 02-6239 Filed 3-15-02; 8:45 am]
BILLING CODE 6717-01-P