[Federal Register Volume 69, Number 193 (Wednesday, October 6, 2004)]
[Notices]
[Pages 59917-59918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2506]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket Nos. PL04-17-000 and AD04-11-000]


State of the Natural Gas Industry Conference; Staff Report on 
Natural Gas Storage; Notice of Public Conference

September 30, 2004.
    The Federal Energy Regulatory Commission (FERC) will hold a 
conference on October 21, 2004, to engage industry members and the 
public in a dialogue about policy issues facing the natural gas 
industry today and the Commission's regulation of the industry for the 
future. In each of the prior two years, the Commission held wide-
ranging discussions concerning its regulatory goals for the natural gas 
industry (Docket Nos. PL02-9-000 and PL03-6-000). This year's 
conference on the state of the natural gas industry will focus on 
underground storage and other factors that differentiate regional 
natural gas deliverability and market needs. The conference will have 
panels and an open forum that will give all interested individuals an 
opportunity to raise issues.

I. Scope of Inquiry

A. Responses to Report

    The Commission seeks comments on certain findings in the FERC Staff 
Report, Current State of and Issues Concerning Underground Natural Gas 
Storage, released concurrently with this notice. These findings are:
     The market's various methods for the valuation of storage 
are a challenge in matching storage's value with the cost of new 
storage development.
     Storage may be the best way of managing gas commodity 
price volatility, so the long-term adequacy of storage investment 
depends on how much price volatility customers consider ``acceptable.''
     Storage projects in certain geographic areas often fail 
the Commission's market-based rates tests.

[[Page 59918]]

 Thus, creative policy, certificate and ratemaking approaches may 
encourage storage development. Examples of these approaches are:
    --Re-examining current cost-based pricing flexibility.
    --Re-examining criteria for storage market-based rates.
    --Re-examining certificate review and service policies.

B. Investment in Storage and Pipeline Infrastructure

    How do existing Commission policies impact the development of new 
storage or pipeline infrastructure? The Commission would like to hear a 
discussion from entities that have recently developed new storage or 
pipeline projects. The Commission is also interested in hearing from 
parties that have recently canceled or postponed the development of new 
storage or pipeline infrastructure. The discussions should focus on how 
the decisions to develop these projects were impacted by existing 
Commission policies.

C. Need for Uncommitted Reserve Storage and Pipeline Capacity

    Would a program for creating more uncommitted reserve storage and 
pipeline capacity be useful? In the next several years, the natural gas 
industry could experience increased capacity constraints and service 
interruptions or outages associated with facility inspection compliance 
activities required by the Department of Transportation. Also, recent 
experience with colder than normal weather has shown that certain 
regions' pipeline infrastructure is very near maximum capacity during 
such times. Other regions may approach their pipeline infrastructure's 
maximum capacity during peak electric generation seasons.
    What actions, if any, should the Commission take to create more 
uncommitted reserve storage and pipeline capacity? Further, if 
uncommitted reserve storage and pipeline capacity is needed, what level 
of ``reserve margin'' might be appropriate? What options could be used 
to recover the costs of such capacity reserve margins? Should certain 
costs of uncommitted reserve storage and pipeline capacity be given 
presumptive rolled-in rate treatment in pipeline rate cases, or should 
cost tracking mechanisms for these types of costs be developed?

D. Changing Roles of Industry Segments and Commodity Price Volatility

    As the natural gas industry matures and experiences more service 
unbundling down to end use levels, the various service provider roles 
will continue to change/evolve. One trend that seems to be emerging is 
a preference to purchase gas supplies at hubs in market areas, and a 
corresponding desire to shed upstream capacity commitments. This market 
evolution may have service implications depending on who holds upstream 
capacity contracts, and may lead to additional service balancing issues 
for supply aggregators and end users alike and increased commodity 
price volatility. Many local distribution companies (LDCs) are still 
redefining their role in the industry--will they continue their supply 
aggregation functions or will they become local ``pipes'' companies? 
When marketers were on the rise in many states, LDCs wanted to shed 
upstream capacity and supply aggregation roles in favor of having 
marketers handling these roles. Also, we believe that electric 
generators may be reluctant to commit to long-term capacity 
obligations, preferring to rely on downstream gas markets. In general, 
increased reliance on downstream markets as a substitute for capacity 
commitments may tend to increase seasonal commodity price volatility.
    The Commission is interested in hearing views on how much seasonal 
commodity price volatility the industry and consumers can tolerate? Are 
customers and the industry, in general, willing to contract for the 
additional storage and pipeline capacity that may be necessary to 
mitigate commodity price volatility? Would we be better served with 
more storage and pipeline capacity as insurance against commodity price 
volatility?

II. Open Forum

    In addition to addressing the above mentioned issues, the 
Commission also seeks input from industry representatives and 
interested individuals regarding other issues they believe are ripe for 
Commission consideration in shaping its future natural gas industry 
regulatory policies.

III. Participation

    The conference will be held on October 21, 2004 at the Commission's 
headquarters, 888 First Street, NE., in Washington, DC beginning at 9 
a.m. (EST) in the Commission's Meeting Room. The public is invited to 
attend. Anyone interested in being considered as a speaker to present 
their views at the conference should contact Richard Foley at (202) 
502-8955 or at [email protected] by October 12, 2004. Requests to 
speak should include information concerning the issue or issues the 
participant would like to speak on. Time constraints may not allow all 
requests to speak to be fulfilled. Persons requesting to speak on the 
same topic, with the same views, may be asked to consolidate their 
remarks through a single representative. We will issue further details 
on the conference, including the agenda and a list of participants, as 
plans evolve. Interested parties are urged to watch for further notices 
providing more information on the conference. You may register online 
at http://www.ferc.gov/docs-filing/esubscriptions.asp to be notified 
via e-mail of new issuances and filings related to these dockets.
    The conference will be transcribed. Those interested in acquiring 
the transcript should contact Ace Reporters at (202) 347-3700 or (800) 
336-6646. Transcripts will be placed in the public record ten days 
after the Commission receives the transcripts. Additionally, Capitol 
Connection offers the opportunity for remote listening and viewing of 
the conference. It is available for a fee, live or over the Internet, 
via C-Band Satellite. Persons interested in receiving the broadcast, or 
who need information on making arrangements should contact David 
Reininger or Julia Morelli at Capitol Connection (703-993-3100) as soon 
as possible or visit the Capitol Connection Web site at http://www.capitolconnection.gmu.edu and click on ``FERC.''

Magalie R. Salas,
Secretary.
 [FR Doc. E4-2506 Filed 10-5-04; 8:45 am]
BILLING CODE 6717-01-P