[Federal Register Volume 68, Number 55 (Friday, March 21, 2003)]
[Rules and Regulations]
[Pages 13813-13819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6702]



[[Page 13813]]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM96-1-024; Order No. 587-R]


Standards for Business Practices of Interstate Natural Gas 
Pipelines

March 12, 2003.
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 conducting business practices with 
interstate natural gas pipelines. The Commission is incorporating by 
reference the most recent version of the standards, Version 1.6, 
promulgated July 31, 2002, by the Wholesale Gas Quadrant (WGQ) of the 
North American Energy Standards Board (NAESB) and the WGQ standards 
governing partial day recalls (recommendations R02002 and R02002-2), 
adopted October 31, 2002. These standards can be obtained from NAESB at 
1100 Louisiana, Suite 3625, Houston TX 77002, 713-356-0060, http://www.naesb.org.

DATES: The rule will become effective April 21, 2003. Pipelines must 
file tariff sheets to reflect the changed standards by May 1, 2003, 
with an effective date of July 1, 2003.

FOR FURTHER INFORMATION CONTACT:

Michael Goldenberg, Office of the General Counsel, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426. 
202-502-8685.
Marvin Rosenberg, Office of Markets, Tariffs, and Rates, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426. 
202-502-8292.
Kay Morice, Office of Markets, Tariffs, and Rates, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426. 
202-502-6507.

SUPPLEMENTARY INFORMATION:
    1. The Federal Energy Regulatory Commission (Commission) is 
amending Sec.  284.12 of its open access regulations governing 
standards for conducting business practices and electronic 
communications with interstate natural gas pipelines. The Commission is 
adopting the most recent version, Version 1.6, of the consensus 
standards promulgated by the Wholesale Gas Quadrant (WGQ) of the North 
American Energy Standards Board (NAESB), and the WGQ standards 
governing partial day recalls. This rule will benefit the public by 
adopting the most recent and up-to-date standards governing business 
practices and electronic communication and by providing shippers with 
enhanced flexibility to recall released capacity.

Background

    2. Since 1996, in the Order No. 587 series,\1\ the Commission has 
adopted regulations to standardize the business practices and 
communication methodologies of interstate pipelines in order to create 
a more integrated and efficient pipeline grid. In this series of 
orders, the Commission incorporated by reference consensus standards 
developed by the WGQ (formerly the Gas Industry Standards Board or 
GISB), a private consensus standards developer composed of members from 
all segments of the natural gas industry. The WGQ is an accredited 
standards organization under the auspices of the American National 
Standards Institute (ANSI).
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    \1\ 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) ] 31,038 (Jul. 
17, 1996), Order No. 587-B, 62 FR 5521 (Feb. 6, 1997), FERC Stats. & 
Regs. Regulations Preambles (July 1996-December 2000) ] 31,046 (Jan. 
30, 1997), Order No. 587-C, 62 FR 10684 (Mar. 10, 1997), FERC Stats. 
& Regs. Regulations Preambles (July 1996-December 2000) ] 31,050 
(Mar. 4, 1997), Order No. 587-G, 63 FR 20072 (Apr. 23, 1998), FERC 
Stats. & Regs. Regulations Preambles (July 1996-December 2000) ] 
31,062 (Apr. 16, 1998), Order No. 587-H, 63 FR 39509 (July 23, 
1998), FERC Stats. & Regs. Regulations Preambles (July 1996-December 
2000) ] 31,063 (July 15, 1998); Order No. 587-I, 63 FR 53565 (Oct. 
6, 1998), FERC Stats. & Regs. Regulations Preambles (July 1996-
December 2000) ] 31,067 (Sept. 29, 1998), Order No. 587-K, 64 FR 
17276 (Apr. 9, 1999), FERC Stats. & Regs. Regulations Preambles 
(July 1996-December 2000) ] 31,072 (Apr. 2, 1999); Order No. 587-M, 
65 FR 77285 (Dec. 11, 2000), FERC Stats. & Regs. Regulations 
Preambles (July 1996-December 2000) ] 31,114 (Dec. 11, 2000); Order 
No. 587-N, 67 FR 11906 (Mar. 18, 2002), III FERC Stats. & Regs. 
Regulations Preambles ] 31,125 (Mar. 11, 2002), Order No. 587-O, 67 
FR 30788 (May 8, 2002), III FERC Stats. & Regs. Regulations 
Preambles ] 31,129 (May 1, 2002).
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    3. On October 7, 2002, the WGQ filed with the Commission a report 
informing the Commission that it had adopted a new version of its 
standards, Version 1.6. The WGQ reports that while Version 1.5 
contained many of the standards designed to support Order No. 637,\2\ 
Version 1.6 includes additional standards that support Order No. 637. 
It states: ``development of standards to support FERC Order No. 637 was 
given the highest priority by all NAESB subcommittees and task 
forces.'' The WGQ further reports that the surety assessment performed 
by the Sandia National Laboratories on the GISB EDM (Electronic 
Delivery Mechanism) standards was accepted by GISB and forwarded to the 
EDM Subcommittee for review and development of standards in October 
2000. It states that some of the Sandia recommendations were 
implemented in Version 1.5, and the remainder were implemented in 
Version 1.6. Finally, the WGQ reports that work continues on requests 
for both new and revised business practices, information requirements, 
code value assignments, technical implementation and mapping or 
interpretations.
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    \2\ Regulation of Short-Term Natural Gas Transportation 
Services, Order No. 637, 65 FR 10156 (Feb. 25, 2000), FERC Stats. & 
Regs. Regulations Preambles (July 1996-December 2000) ] 31,091 (Feb. 
9, 2000).
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    4. In Order No. 587-N,\3\ the Commission adopted a regulation 
requiring that pipelines permit releasing shippers to recall released 
capacity and renominate that recalled capacity at any of the nomination 
opportunities provided by the pipelines. The Commission established a 
two-phased implementation for this regulation. In the first phase, the 
Commission established an interim schedule under which releasing 
shippers could recall capacity, as long as the recall did not involve a 
partial or flowing day recall (a recall of scheduled gas after the gas 
begins to flow). Pipelines implemented the first phase as of July 1, 
2002. In the second phase, the Commission asked the WGQ within six 
months to develop standards dealing with the operational details of 
permitting partial or flowing day recalls, in particular the method by 
which capacity would be allocated between releasing and replacement 
shippers. The Commission established October 1, 2002, as the date by 
which the WGQ and other industry members should submit a report and 
further provided for reply comments to be filed by October 15, 2002.
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    \3\ Order No. 587-N, 67 FR 11906 (Mar. 18, 2002), III FERC 
Stats. & Regs. Regulations Preambles ] 31,125 (Mar. 11, 2002).
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    5. On October 2, 2002, the WGQ filed a report stating that its 
Executive Committee had adopted standards governing partial or flowing 
day recalls in Recommendations R02002 and R02002-2. The WGQ membership 
ratified these standards on October 31, 2002.
    6. On November 29, 2002, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) \4\ that proposed to adopt Version 1.6 of the WGQ 
standards and the partial or

[[Page 13814]]

flowing day recall standards. Five comments \5\ and one reply comment 
\6\ were filed. The comments generally support adoption of the 
standards, although some comments raise questions about the timing of 
implementation.
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    \4\ Standards For Business Practices Of Interstate Natural Gas 
Pipelines, Notice of Proposed Rulemaking (NOPR), 67 FR 72870 (Dec. 
9, 2002), IV FERC Stats. & Regs. Proposed Regulations ] 32,566 (Nov. 
29, 2002).
    \5\ Those filing comments are: American Gas Association (AGA), 
Dominion Resources, Inc. (Dominion), Duke Energy Gas Transmission 
Corporation (Duke), Interstate Natural Gas Association of America 
(INGAA), Williston Basin Interstate Pipeline Company (Williston).
    \6\ The reply comment was filed by KeySpan Delivery Companies.
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Discussion

    7. The Commission is incorporating by reference Version 1.6 of the 
WGQ's consensus standards and the standards adopted for partial day 
recalls.\7\ Pipelines will be required to file tariff sheets to reflect 
the changed standards by May 1, 2003, with an effective date of July 1, 
2003, which is the first day of the month following 90 days after the 
issuance of this rule.
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    \7\ Pursuant to the regulations regarding incorporation by 
reference, copies of Version 1.6 and the partial day recall 
standards are available from NAESB. 5 U.S.C. 552(a)(1); 1 CFR 51 
(2001).
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    8. The adoption of Version 1.6 of the WGQ standards \8\ will help 
continue the process of implementing Order No. 637 and will update and 
improve the current standards.\9\ Adoption of the partial day recall 
standards \10\ will provide shippers with enhanced flexibility to 
recall capacity, while ensuring that replacement shippers receive 
notice sufficient to allow them to reschedule their capacity. The 
partial day recall standards also address the method for determining 
how capacity will be allocated among releasing and replacement shippers 
when capacity is recalled during the gas day. Among the most notable of 
these standards are: A revision to the capacity release timeline to 
permit prearranged non-biddable releases on non-Business as well as 
Business days (Standard 5.3.2); a revision to the Commission's interim 
timeline for recall transactions to permit recalls at any of the four 
nomination opportunities, while still providing sufficient notice to 
replacement shippers to enable them to reschedule their capacity 
(Standard 5.3.z1); the adoption of procedures governing notice to 
replacement shippers (Standards 5.3.z2 through 5.3.z4); and the use of 
elapsed prorata capacity as the allocation method for flowing day 
recalls, unless a different method is necessary to reflect the nature 
of the pipeline's tariff, services, or operational characteristics 
(Standard 5.3.z13).\11\
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    \8\ In Version 1.6, the WGQ made the following changes to its 
standards. It revised Standards 1.3.63, 4.3.4, 4.3.6, 4.3.8, 4.3.10, 
4.3.15, 4.3.21, 4.3.23, 4.3.61, 4.3.70, and 4.3.83, and Data Sets 
1.4.6, 5.4.1 through 5.4.4, 5.4.7, 5.4.8, 5.4.9, 5.4.13, 5.4.14, 
5.4.15, 5.4.18, and 5.4.19. It added Principle 4.1.39, Standard 
4.3.88, and Data Sets 5.4.20, 5.4.21, and 5.4.22. It deleted 
Principles 4.1.1 and 4.1.11.
    \9\ The Commission also is incorporating by reference Standards 
2.3.29 and 2.3.30 (dealing with operational balancing agreements and 
imbalance netting and trading, respectively) which in previous 
versions, the Commission had not incorporated because the standards 
conflicted with the Commission's regulations in these areas. 18 CFR 
284.12(b)(2)(i)&(ii). The WGQ has amended these standards so they no 
longer conflict with the Commission regulations.
    \10\ In the partial day recall standards, the WGQ made the 
following changes to its standards. It revised Standards 5.3.2, 
5.3.7, 5.3.41, and 5.3.42, and Data Sets 1.4.4, 5.4.1, 5.4.3, 5.4.4, 
5.4.7, and 5.4.9. It added Principles 5.1.z1, 5.1.z2, and 5.1.z3, 
Definition 5.2.z1, and Standards 5.3.z1 through 5.3.z15. It deleted 
Standard 5.3.6.
    \11\ Elapsed prorata capacity means the portion of the capacity 
that would have theoretically been available for use prior to the 
effective time of the intraday recall based on a cumulative uniform 
hourly use of the capacity. Definition 5.2.z1.
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    9. The WGQ approved the standards under its consensus 
procedures.\12\ As the Commission found in Order No. 587, adoption of 
consensus standards is appropriate because the consensus process helps 
ensure the reasonableness of the standards by requiring that the 
standards draw support from a broad spectrum of all segments of the 
industry. Moreover, since the industry itself has to conduct business 
under these standards, the Commission's regulations should reflect 
those standards that have the widest possible support. In Sec.  12(d) 
of the National Technology Transfer and Advancement Act of 1995 
(NTT&AA), Congress affirmatively requires federal agencies to use 
technical standards developed by voluntary consensus standards 
organizations, like the WGQ, as means to carry out policy objectives or 
activities.\13\
    10. The comments addressing various aspects of the standards will 
be addressed below.
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    \12\ This process first requires a super-majority vote of 17 out 
of 25 members of the WGQ's Executive Committee with support from at 
least two members from each of the five industry segments--
interstate pipelines, local distribution companies, gas producers, 
end-users, and services (including marketers and computer service 
providers). For final approval, 67% of the WGQ's general membership 
must ratify the standards.
    \13\ Pub L. 104-113, Sec.  12(d), 110 Stat. 775 (1996), 15 
U.S.C. 272 note (1997).
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A. Implementation Date

    11. The Commission had proposed that pipelines implement the new 
standards three months after issuance of a final rule. INGAA, Duke, 
Dominion, and Williston maintain that the Commission should establish 
the implementation date on the first day of the month, 90 days after 
the issuance of the rule. First-of-the-month implementation, they 
maintain, will provide for a more efficient transition for accounting 
and nomination systems and avoids middle-of-the-month billing period 
changes. The Commission agrees, and is requiring implementation on the 
first of the month, following 90 days after issuance of this final 
rule.

B. Implementation Date for Partial Day Recall Standards

    12. INGAA, Duke, and Williston argue that the Commission should 
delay implementation of the partial day recall standards until these 
standards are formally adopted in Version 1.7 of the WGQ standards. 
INGAA, Duke, and Williston all maintain that the standards already 
adopted are not complete, citing to certain examples of using elapsed 
prorated capacity that have not yet been approved by the NAESB 
membership. They argue that the Commission should not adopt these 
standards until they are complete. These three commenters also raise 
procedural issues with respect to adoption of the standards. INGAA 
maintains that the partial day recall standards are not numbered and 
could confuse pipeline customers who rely on the NAESB standards 
numbering system and implementation guide. Duke and Williston argue 
that without officially assigned numbers, pipelines will not be able to 
incorporate the standards by reference in their tariffs. Williston 
maintains that since the partial day recall standards are not 
published, parties who are not members of NAESB will not be able to 
obtain copies.
    13. KeySpan opposes any delay in implementing the partial day 
recall standards. It argues procedural problems, such as the absence of 
officially assigned numbers, should not deprive shippers of the 
benefits of using partial day recalls. It further argues that all NAESB 
standards evolve over time, and that is not a justification for 
delaying implementation of these standards.
    14. The Commission will not delay implementation of the partial day 
recall standards. NAESB developed these standards as a result of the 
Commission's March 12, 2002, determination in Order No. 587-N that 
permitting such recalls is necessary to improve the capacity release 
marketplace 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

[[Page 13815]]

service.\14\ The standards already adopted by the WGQ constitute an 
integrated, consistent, and reasonably complete set of standards 
governing partial day recalls. Like other standards, these standards 
too may be improved over time, but the potential for such improvement 
need not delay implementation and deprive shippers of the immediate 
benefits of using these standards. Waiting to approve these standards 
until the Commission incorporates Version 1.7 of the standards could 
result in unnecessarily deferring the benefits of these standards for 
upwards of a year. Moreover, if the WGQ's membership does approve the 
examples of elapsed prorated capacity, pipelines can rely on these 
examples in administering the standards.
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    \14\ Order No. 587-N, at P 21.
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    15. The Commission also finds no procedural reason to delay 
adoption of the standards. The set of adopted standards are readily 
identified by their Recommendation numbers (R02002 and R02002-2), are 
available from NAESB, and are posted on the Final Actions portion of 
NAESB's Web site.\15\ Each of the new standards is also identified by a 
discrete number using a ``z'' as a placeholder, such as 3.3.z2. 
Pipelines can therefore incorporate these standards by reference by 
identifying the number of the standard and indicating that it was 
adopted by Recommendation R02002 or R02002-2, as appropriate.
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    \15\ http://www.naesb.org/Final.htm.
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C. Capacity Release Timeline (Standard 5.3.2)

    16. Standard 5.3.2 establishes the timeline applicable to capacity 
release transactions. In Version 1.6 of the standards, Standard 5.3.2 
would provide that all capacity release transactions take place on a 
``Business Day.'' However, in the partial day recall standards 
(R02002), the WGQ revised this standard so that pre-arranged capacity 
release transactions could take place on any day; only biddable 
transactions would be limited to Business Days.
    17. Dominion (supported by KeySpan) contends that, despite this 
change, Standard 5.3.2 is overly restrictive because biddable releases 
(those of more than 31 days or at discounts) still cannot be conducted 
on weekends or holidays. It argues that shippers that need capacity on 
those days will be forced to buy from the pipeline. It further argues 
that pipelines have the resources to process capacity release 
transactions on weekends and holidays.
    18. The industry segments have reached consensus agreement on the 
timeline for conducting capacity release transactions, and the 
Commission will not modify this agreement based on the comments of two 
parties. What the Commission said in Order No. 587 regarding the need 
for unanimity on standards is equally applicable here:

    While these standards represent a broad consensus of the 
industry, the Commission recognizes that not every standard commands 
universal support. In a democratic society, unanimity on matters of 
common concern is neither expected nor necessary. Standardization, 
by definition, requires accommodation of varying interests and 
needs, and rarely can there be a perfect standard satisfactory to 
all.\16\

    \16\ Order No. 587, 61 FR, at 39057, FERC Stats. & Regs. 
Regulations Preambles (July 1996-December 2000) ] 31,038, at 30,059.
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    Moreover, there is a reasonable basis for the industry to conclude 
that bidding should take place on Business Days, and not on weekends 
and holidays. This requirement limits the need for additional pipeline 
personnel to process released transactions on a weekend. But, more 
importantly, the WGQ could reasonably find that requiring bidding 
during the business week would better ensure that all members of the 
industry have a reasonable opportunity to bid on capacity release 
postings. Posting long-term pre-arranged releases for bidding on a 
weekend, for instance, could limit the scrutiny of such releases and 
the ability of other shippers to offer competitive bids.
    19. While Dominion recognizes that shippers are able to enter into 
short-term pre-arranged releases (not subject to bidding) on weekends 
and holidays, it maintains that shippers seeking longer-term releases 
subject to bidding (more than 31 days, but less than one year, at less 
than maximum rates) will not be able to obtain released capacity on 
weekends and holidays, but will be forced to rely on capacity from the 
pipeline for those days.
    20. The standards do not preclude shippers from acquiring released 
capacity on weekends or holidays. Under the standards, shippers needing 
capacity on weekends or holidays can acquire released capacity by 
entering into pre-arranged, short-term capacity release transactions on 
a weekend.\17\ If the releasing shipper and replacement shipper seek a 
longer term transaction that is subject to bidding (as Dominion 
posits), they can enter into a pre-arranged releases to cover the 
weekend or holiday and then post the longer-term release on the next 
business day, so other shippers have an opportunity to bid for that 
capacity. The standards therefore do not make shippers dependent on 
obtaining pipeline capacity for weekends and holidays, while at the 
same time they ensure that long-term biddable transactions will be 
posted on business days when all shippers will have an opportunity to 
bid for the capacity.
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    \17\ Data the Commission has downloaded from pipeline Web sites 
show that 90% of all capacity releases are pre-arranged deals. See 
e.g., http://www.ferc.gov/gas/pl02-4/RawDataAboveCaps.xls (93% of 
above cap deals March 25, 2000 are pre-arranged); Secondary Market 
Transactions on Interstate Natural Gas Pipelines, Notice of Proposed 
Rulemaking, 61 FR 41046 (Aug. 7, 1996), FERC Stats. & Regs. Proposed 
Regulations (1988-1998) ] 32,520, at 33,252-53) (July 31, 1996) (92% 
of transactions from 5/1/95-5/31/96 are pre-arranged).
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D. Mechanisms for Allocating Partial Day Release Quantities

    21. Standard 5.3.z13 (R02002) states:

    In the event of an intra-day capacity recall, the Transportation 
Service Provider (TSP) should determine the allocation of capacity 
between the Releasing Shipper and the Replacement Shipper(s) based 
upon the Elapsed Prorata Capacity (EPC). Variations to the use of 
EPC may be necessary to reflect the nature of the TSP's tariff, 
services, and/or operational characteristics.

    In the NOPR, the Commission also proposed that the determination of 
reservation charges and credits and the potential liability for 
contract overruns should follow the allocation of capacity. The 
Commission stated that ``it sees no reason in this instance for 
pipelines to propose individual allocation methodologies.'' \18\
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    \18\ NOPR, at P 12.
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    22. Duke seeks clarification that the Commission's statement that 
it saw is no reason for pipelines to propose individual allocation 
methodologies will not preclude pipelines from following standard 
5.3.z13 and proposing variations to the use of Elapsed Prorata Capacity 
when necessary to reflect the nature of the pipeline's tariff, 
services, and/or operational characteristics. Duke claims that the 
Elapsed Prorata Capacity does not fully address the needs of its 
pipelines.
    23. As permitted by Standard 5.3.z13, pipelines may propose 
variations to the use of Elapsed Prorata Capacity to allocate capacity 
among releasing and replacement shippers after a recall if they can 
provide justification that such deviations are necessary to reflect 
specific services or operational characteristics on their systems and 
do not unduly limit the rights of

[[Page 13816]]

shippers.\19\ However, as the Commission stated in the NOPR, once such 
an allocation methodology is approved for each pipeline, the 
determination of reservation charges and credits and the potential 
liability for contract overruns should follow the allocation of 
capacity.
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    \19\ Cf. Algonquin Gas Transmission Company, 100 FERC ] 61,274 
(2002), reh'g denied, 102 FERC ] 61,149 (2003) (rejecting a proposal 
deviating from the standards when the proposal would have limited 
shippers' flexibility and was not necessary to protect the 
pipeline).
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E. Provision of Contract Information on Releases

    24. Standard 5.3.z1 (R02002) requires a releasing shipper recalling 
capacity to provide notice of recall to the pipeline and the first 
replacement shipper.\20\ Dominion contends that for biddable 
transactions,\21\ the releasing shipper will not have the information 
necessary to notify the first replacement shipper, and requests that 
the pipeline provide such contact information on the pipeline's 
Internet Web site.
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    \20\ The pipeline is also required to notify all replacement 
shippers affected by the recall one hour after the notification by 
the releasing shipper.
    \21\ Dominion recognizes, in any pre-arranged capacity release 
transaction, the releasing shipper will know the replacement 
shippers and will be aware of the necessary contact information.
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    25. While the current standards require pipelines to post the 
winning bidder's name and company code when they post capacity awards 
(Standard 5.4.3), it does not require the posting of contact 
information. The Commission agrees that for biddable deals subject to 
recall, pipelines need to make available to the releasing shipper 
information sufficient to enable it to contact the replacement shipper 
in the event of a capacity recall.

F. Standards Relating to Penalties

    26. In comments on the WGQ's October 1, 2002, report on partial day 
recalls, Process Gas Consumers Group claimed that two standards (not 
included in this proceeding) on which the WGQ was working involved the 
allocation of penalties between releasing and replacement shippers as a 
result of partial day recalls, and requested that the Commission find 
that all penalty standards are beyond the scope of the WGQ. In the 
NOPR, the Commission stated that it would not rule the development of 
penalty standards beyond the scope of the WGQ, although the Commission 
explained that it ``is not asking the WGQ specifically to develop 
standards for penalties.'' \22\ The Commission stated that the 
development of standards related to penalties can help reduce barriers 
to multi-pipeline shipments and improve the overall efficiency of the 
pipeline grid, and it encouraged the WGQ to examine seriously ``any 
such proposals that hold out the prospect of improving the efficiency 
of the pipeline grid.'' \23\
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    \22\ NOPR at P 13.
    \23\ NOPR at P 13.
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    27. A number of comments contend that the WGQ should not 
standardize penalties. AGA, INGAA, Duke, and Dominion generally assert 
that penalties are rate matters that should not be standardized, and 
that penalties and terms relating to penalties may need to vary by 
pipeline to reflect differences between the pipeline's needs and 
markets. AGA, however, asserts that some standards relating to 
penalties are within the scope of the WGQ, such as standards governing 
the allocation of penalties between releasing and replacement shippers.
    28. The Commission reiterates that it is not requesting the WGQ to 
consider or develop standards relating to penalties. But, the 
Commission also will not categorically determine that any proposal for 
a standard that relates to penalties is beyond the scope of the WGQ. In 
the first place, deciding whether a standard is beyond the WGQ's scope 
is a decision for the WGQ, not the Commission. As AGA notes, the WGQ is 
already considering standards that arguably relate to penalties, and 
the Commission sees no reason for it to interfere with the WGQ's 
determination of what proposals are within its scope. Moreover, the WGQ 
passed a series of standards that created a more uniform and systematic 
method for pipelines to receive reimbursement for fuel use,\24\ even 
though such standards bear on the rates charged for fuel. The 
Commission finds no reason here to prohibit the WGQ from considering 
similar standards with respect to penalties that will create a more 
uniform and efficient system for assessing penalties.
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    \24\ Standards 1.3.15-1.3.16 and 1.3.28-1.3.31.
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G. Incorporation by Reference

    29. Dominion takes issue with the Commission's incorporation by 
reference of the WGQ standards. Dominion asserts that the standards are 
not reasonably available as required by the Federal Register, because 
they are only available from NAESB after payment of significant fees. 
It further argues that neither the Commission nor the WGQ have clearly 
indicated where changes in standards have been made, so that the 
incorporation by reference does not make clear the conditions on which 
an entity will be bound. It requests (along with KeySpan) that the 
Commission direct NAESB to refile Version 1.6, and any future filings, 
with a redline comparison showing all changes from previous standards.
    30. As the Commission has pointed out on several occasions, 
incorporation by reference is the appropriate, and indeed the required, 
method for adopting copyrighted standards material.\25\ The Freedom of 
Information Act, and implementing regulations, establish that the 
proper method of adopting copyright material is to incorporate such 
material by reference upon approval by the Director of the Federal 
Register.\26\ In fact, Sec.  12(d) of the National Technology Transfer 
and Advancement Act of 1995 (NTT&AA) instructs federal agencies to use 
technical standards developed by voluntary consensus standards 
organizations, like the WGQ,\27\ and such standards are to be 
incorporated by reference.\28\ According to the Federal Register 
regulations, material is eligible for incorporation by reference if 
such material ``is * * * standards, specifications, * * * substantially 
reduces the volume of material published in the Federal Register, * * * 
and is reasonably available to and usable by the class of persons 
affected by the publication.\29\
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    \25\ Order No. 587-A, 61 FR 55208, 77 FERC ] 61,061, at 61,232 
(1996); Order No. 587-K, 64 FR 17277, FERC Stats. & Regs. 
Regulations Preambles (July 1996-December 2000) ] 31,072, at 30,775 
(1999).
    \26\ 5 U.S.C. 552(a)(1) (for the purpose of this paragraph, 
matter reasonably available to the class of persons affected thereby 
is deemed published in the Federal Register when incorporated by 
reference therein with the approval of the Director of the Federal 
Register); 1 CFR 51,7(4). Indeed, the Commission could not reproduce 
the WGQ standards in violation of the NAESB copyright. See 28 U.S.C. 
1498 (government not exempt from patent and copyright infringement).
    \27\ Pub. L. 104-113, Sec.  12(d), 110 Stat. 775 (1996), 15 
U.S.C. 272 note (1997).
    \28\ See Federal Participation in the Development and Use of 
Voluntary Standards, OMB Circular A-119, at 6 (a)(1) (Feb. 10, 
1998), http://www.whitehouse.gov/omb/circulars/a119/a119.html 
(``Use'' means incorporation of a standard in whole, in part, or by 
reference for procurement purposes, and the inclusion of a standard 
in whole, in part, or by reference in regulation(s)).
    \29\ 1 CFR 51.7 (a)(2)-(4).
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    31. The WGQ standards comply with these requirements: they are 
standards and specifications, their incorporation by reference is 
necessary since the standards cannot be reproduced and such 
incorporation would substantially limit the volume of material in the 
Federal Register, the standards are reasonably available from NAESB, 
and the standards can be readily used since the standard versions and 
all the standards are numbered. The Office of the Federal Register 
approved the

[[Page 13817]]

incorporation by reference pursuant to these guidelines.
    32. Dominion argues that the WGQ standards should not be found 
reasonably available, because they are available only to non-members 
paying ``required, significant fees'' (emphasis added). Neither the 
Freedom of Information Act, nor the regulations, require that standards 
be available at no charge. In fact, standards incorporated by reference 
are exempt from the requirement that any agency provide copies of 
documents according to its fee schedule.\30\ Moreover, Dominion's use 
of the adjective ``significant'' is inappropriate hyperbole. NAESB 
charges non-members an everyday low price of only $25 to obtain the 
booklet including all the business practice standards.\31\ Computer 
afficionados can obtain the booklet containing the datasets for an 
additional $25, and true computerphiles can obtain the SINGLE-CD ROM 
collection of the entire set of standards, including the Electronic 
Data Interchange requirements, at the new substantially reduced price 
of $100.\32\ If Dominion truly considers these prices ``significant,'' 
\33\ it can view copies of the standards at the Commission at no 
charge. Thus, by any stretch of language, the WGQ standards are 
``reasonably available to the class of persons affected by the 
publication.'' \34\
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    \30\ 5 U.S.C. 553(a)(3).
    \31\ NAESB Order Form, http://www.naesb.org/pdf/ordrform.pdf. 
(Feb. 13, 2003). If the Commission were to charge its standard rate 
for copying of $.20/page, the cost for Version 1.6 would be 
virtually identical to NAESB's charge, $24 for the booklet (120 
pages times $.20). 18 CFR 388.109.
    \32\ The paper-only version of the standards, including the EDI 
requirements, used to cost $2000. See Order No. 587-A, 61 FR, at 
55213, 77 FERC, at 61,232.
    \33\ Although $25 would appear eminently affordable for a 
company that reported operating revenue of $2.545 billion for the 
three month period ending September 30, 2002. Dominion Resources, 
Inc. Form 10-Q (for the quarterly period ended September 30, 2002). 
http://www.sec.gov/Archives/edgar/data/715957/000071595702000143/0000715957-02-000143-index.htm.
    \34\ Given the class of persons affected by these standards, 
Dominion's complaint could probably be dismissed under the doctrine 
of de minimis non curat lex.
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    33. Dominion further contends that the WGQ standards do not meet 
the requirement that the language incorporating the standards be as 
precise and complete as possible and that each incorporation by 
reference shall include an identification and subject description of 
the matter incorporated, in terms as precise and useful as practicable 
within the limits of reasonable brevity.\35\ Dominion maintains that 
the incorporation by reference does not meet these criteria because the 
Commission has not sufficiently identified which standards have changed 
when the WGQ publishes a new edition of the standards. Dominion 
asserts, for example, that in Version 1.5 of the standards, the WGQ 
added the term ``Business Day'' to the capacity release standards, but 
that this significant change was not highlighted by the Commission. 
Dominion further asserts that the Natural Gas Act requirements go 
beyond those of the Federal Register because they require the 
Commission to provide notice of the filing of new rate schedules. 
Dominion contends that the Commission should not adopt Version 1.6 of 
the standards until NAESB refiles the standards with ``redlined'' 
sheets showing all changes from the previous version.
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    \35\ Dominion cites to 1 CFR 51.6. But this section does not 
appear in the 2002 edition of the CFR.
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    34. The Federal Register regulations do not require the provision 
of notice of revised or modified standards, only that the incorporation 
by reference indicate the material to be incorporated with specificity. 
The regulations provide only that ``the language incorporating a 
publication by reference shall be as precise and complete as 
possible;'' and states ``language incorporating a publication by 
reference is precise and complete if it * * * uses the words 
``incorporated by reference;'' * * * states the title, date, edition, 
author, publisher, and identification number of the publication; * * * 
informs the user that the incorporated publication is a requirement; * 
* * makes an official showing that the publication is in fact available 
by stating where and how copies may be examined and readily obtained 
with maximum convenience to the user; and * * * refers to 5 U.S.C. 
552(a).\36\ The Commission regulations comply with these requirements.
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    \36\ 1 CFR 51.9(a)(b).
---------------------------------------------------------------------------

    35. Further, although not required by the regulations, the 
Commission endeavors in each NOPR to provide a listing of all the 
standards that have been revised, added, and deleted.\37\ The WGQ too 
includes in each Standards publication a Version Cross-Reference 
listing for each standard, the Version in which it was adopted, 
revised, and interpreted. In the WGQ's filings with the Commission, the 
WGQ also includes a List of New Standards, Standards Modifications, and 
Interpretations for the new Version.\38\ In fact, with respect to the 
change to Business Day in Standard 5.3.2 of Version 1.5 about which 
Dominion complains, the Commission not only included Standard 5.3.2 
among the list of standards revised,\39\ but specifically referenced 
the change to ``Business Day'' twice in the text of the Preamble.\40\ 
Thus, Dominion and all other users of the standards have sufficient 
notice of revisions of changes to the standards.
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    \37\ See Notice of Proposed Rulemaking, 67 FR 72870, IV FERC 
Stats. & Regs. Proposed Regulations ] 32.566, at P 8 n.5 (Proposed 
adoption of Version 1.6).
    \38\ See Report of the North American Energy Standards Board, 
Docket No. RM96-1 (filed 10/7/2002).
    \39\ See Notice of Proposed Rulemaking, 67 FR 44 (Jan. 2, 2002), 
IV FERC Stats. & Regs. Proposed Regulations [para]32,557 (Dec. 20, 
2001), at P 8 n.7 (Proposed adotion of Version 1.5).
    \40\ Notice of Proposed Rulemaking, 67 FR 44, IV FERC Stats. & 
Regs. Proposed Regulations ] 32,557, at P 15, 16.
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    36. Dominion further argues the Commission's incorporation by 
reference is at odds with the requirement of the Natural Gas Act to 
provide notice of filings by natural gas companies. The Commission has 
the ability to act through notice and comment rulemaking proceedings 
that comply with the Administrative Procedure Act.\41\ Here, the 
Commission complied with the requirements of the Administrative 
Procedure Act, the Freedom of Information Act, and the National 
Technology Transfer and Advancement Act in incorporating the WGQ 
standards by reference. The listing of added, revised, and deleted 
standards in the Preamble to the NOPR was sufficient to alert parties 
to substance of the proposed rule and the subjects and issues 
involved.\42\
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    \41\ Wisconsin Gas Co. v. FERC, 770 F.2d 1144, 1167 (DC Cir. 
1985).
    \42\ 5 U.S.C. 553(b)(3).
---------------------------------------------------------------------------

    37. The requirement for providing notice of a filing in section 4 
of the NGA applies only to filings by natural gas companies, and since 
NAESB is not a natural gas company, the Commission cannot compel it to 
file its standards with the Commission or provide a specific form of 
public notice. However, even if the notice requirement did apply, the 
statute requires only notice of the filing of new rate schedules, not 
detailed descriptions of all changes to prior rate schedules or the 
redlined comparisons requested by Dominion.\43\ The Commission's 
disclosure of the added, modified, or deleted standards is sufficient 
notice for parties to review the standards. Although the Commission, in 
addition, often tries to highlight what it thinks are important changes 
to the

[[Page 13818]]

standards, the Commission cannot, and is not responsible for trying to, 
anticipate the changes Dominion or other parties may find of particular 
interest. As the Commission has stated, ``the purpose of the Notice of 
Filing is to apprise the public of the fact that a filing has been made 
* * * after that, the burden is upon interested parties to inform 
themselves of the filing's precise contents.'' \44\
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    \43\ The requirement to file redlined comparisons, cited by 
Dominion, is not a statutory requirement under the NGA, but is a 
Commission regulatory requirement applying only to tariff filings by 
natural gas companies. 18 CFR 154.201(a). Since NAESB is not a 
natural gas company and is not making a tariff filing, this 
regulation would not apply to it, even if the notice requirements of 
section 4 of the NGA were deemed to apply in this situation.
    \44\ PJM Interconnection L.L.C, 101 FERC ] 61,135, P 17 (2002). 
See Filing and Reporting Requirements for Interstate Natural Gas 
Company Rate Schedules and Tariffs, FERC Stats. & Regs., Regulations 
Preambles (Jan. 1991-June 1996) ] 31,025, at 31,403 (The purpose of 
the notice is merely to get the attention of interested parties who 
may then review the full filing.)
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Notice of Use of Voluntary Consensus Standards

    38. 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 stating whether the adopted standard is a 
voluntary consensus standard or a government-unique standard. In this 
rulemaking, the Commission is incorporating by reference voluntary 
consensus standards developed by the WGQ.

Information Collection Statement

    39. 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.
    40. The final rule will affect the following existing data 
collection: FERC-549C ``Standards for Business Practices of Interstate 
Natural Gas Pipelines'' (OMB Control No. 1902-174). The following 
burden estimates are related only to this rule and include the costs of 
complying with Version 1.6 of the WGQ's consensus standards and the 
standards adopted by the WGQ for partial day recalls. The burden 
estimates for the FERC-549C data collection are related to implementing 
the latest version of the business practice standards and related data 
sets. The costs for this data collection are primarily related to 
start-up and will not be on-going costs.

----------------------------------------------------------------------------------------------------------------
                                                             Number of
           Data collection                Number of        respondent per       Hours per         Total annual
                                         respondents         respondent          response            hours
----------------------------------------------------------------------------------------------------------------
FERC-549C...........................                93                  1              2,248            209,064
----------------------------------------------------------------------------------------------------------------

    The total annual hours for collection is 209.064 hours.

------------------------------------------------------------------------
                                                             FERC-549C
------------------------------------------------------------------------
Annualized Capital/Start-up Costs.......................     $11,763,971
Annualized Costs (Operations & Maintenance).............               0
                                                         ---------------
    Total Annualized Costs..............................      11,763,971
------------------------------------------------------------------------

    The cost per respondent is $126,494 (rounded off).
    41. The Commission sought comments to comply with these 
requirements. Comments were received from six entities. No comments 
addressed the reporting burden imposed by these requirements. The 
substantive issues raised by the commenters are addressed in this 
preamble.
    42. 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 communication protocols to conform 
to the latest version, Version 1.6, of the WGQ's consensus standards 
and to include the standards adopted by the WGQ for partial day 
recalls.
    43. 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 this 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.
    44. 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) 
502-8415, 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) 395-7856, or fax: (202) 395-7285.

Environmental Analysis

    45. 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.\45\ The 
Commission has categorically excluded certain actions from these 
requirements as not having a significant effect on the human 
environment.\46\ The actions adopted here fall within categorical 
exclusions in the Commission's regulations for rules that are 
clarifying, corrective, or procedural, for information gathering, 
analysis, and dissemination, and for sales, exchange, and 
transportation of natural gas that requires no construction of 
facilities.\47\ Therefore, an environmental assessment is unnecessary 
and has not been prepared.
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    \45\ 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).
    \46\ 18 CFR 380.4.
    \47\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5), 380.4(a)(27).
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Regulatory Flexibility Act Certification

    46. The Regulatory Flexibility Act of 1980 (RFA) \48\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The regulations adopted 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.

[[Page 13819]]

Accordingly, pursuant to 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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    \48\ 5 U.S.C. 601-612.
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Document Availability

    47. 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.
    48. From FERC's home page on the Internet, this information is 
available in the Federal Energy Regulatory Records Information System 
(FERRIS). The full text of this document is available on FERRIS in PDF 
and WordPerfect format for viewing, printing, and/or downloading. To 
access this document in FERRIS, type the docket number excluding the 
last three digits of this document in the docket number field.
    49. User assistance is available for FERRIS and the FERC's Web site 
during normal business hours from FERC Online Support at 
[email protected] or toll-free at (866) 208-3676, or for TTY, 
contact (202) 502-8659.

Implementation Dates and Procedures

    50. Pipelines are required to file tariff sheets to reflect the 
changed standards by May 1, 2003, with an effective date of July 1, 
2003. Pipelines incorporating the Version 1.6 standards into their 
tariffs must include the standard number and Version 1.6. Pipelines 
incorporating by reference the partial day recall standards must refer 
to the standard number (e.g., 3.3.z2) and the Recommendation number 
(R02002 and R02002-2) in which the standard is adopted.

Effective Date

    51. These regulations are effective April 21, 2003. 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. 7101-7352; 
43 U.S.C. 1331-1356.


    2. Section 284.12 is amended by revising paragraphs (a)(1)(i), 
(ii), (iii), (iv) and (v), to read as follows:


Sec.  284.12  Standards for pipeline business operations and 
communications.

    (a) * * *
    (1) * * *
    (i) Nominations Related Standards (Version 1.6, July 31, 2002) and 
the standards contained in Recommendation R02002 (October 31, 2002);
    (ii) Flowing Gas Related Standards (Version 1.6, July 31, 2002);
    (iii) Invoicing Related Standards (Version 1.6, July 31, 2002);
    (iv) Electronic Delivery Mechanism Related Standards (Version 1.6, 
July 31, 2002) with the exception of Standard 4.3.4; and
    (v) Capacity Release Related Standards (Version 1.6, July 31, 
2002), with the exception of Standards 5.3.6 and 5.3.7, and including 
the standards contained in Recommendations R02002 and R02002-2 (October 
31, 2002).
* * * * *

[FR Doc. 03-6702 Filed 3-20-03; 8:45 am]
BILLING CODE 6717-01-P