Natural Gas: Costs, Benefits, and Concerns Related to FERC's Order 636
(Letter Report, 11/08/93, GAO/RCED-94-11).

The Federal Energy Regulatory Commission's (FERC) Order 636 is intended
to spur development of a more open and accessible pipeline system for
buyers and sellers of natural gas.  The order requires many interstate
pipeline companies to offer their customers transportation, storage, and
other services separately or as part of a "bundled" package by the 1993
winter heating season.  The pipeline companies will be able to recover
from their customers the costs that can be directly attributed to the
new regulation as long as FERC determines that these costs were
prudently incurred.  Order 636 changes how FERC sets the pipeline
transportation rates.  Under the new rate design, customers requiring
uninterrupted service--mainly local distribution companies serving
residential or commercial users--will pay more of the pipeline
companies' fixed costs.  Customers that can tolerate "interruptible"
service, such as manufacturers of fertilizer or glass, could end up
paying less. In response to congressional concerns about the effect of
Order 636 on consumers' gas bills, this report (1) estimates the
potential shift in fixed costs among pipeline consumers resulting from
the changes in the way that transportation rates are designed, (2)
reports the pipeline companies' estimates of the transition costs of
implementing the new rule, and (3) summarizes available information on
the benefits of the new order and the costs and benefits arising from
changes in the law and FERC regulations since 1978.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-94-11
     TITLE:  Natural Gas: Costs, Benefits, and Concerns Related to 
             FERC's Order 636
      DATE:  11/08/93
   SUBJECT:  Cost effectiveness analysis
             Natural gas
             Gas pipeline operations
             Fossil fuels
             Energy costs
             Fuel supplies
             Price regulation
             Transportation rates
             Transportation operations
             Independent regulatory commissions

             
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