FERC Issues Show Cause Order to Interstate Pipelines to Comply with Capacity Release Regulations

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At its monthly meeting on March 20, 2014, the Commission initiated a show cause proceeding, pursuant to section 5 of the Natural Gas Act. The Order requires all pipelines to either (1) revise their tariffs in accordance with the Commission’s capacity release posting regulations; or (2) otherwise demonstrate that they are in full compliance.

Under Order No. 636-A, pipelines must post offers to release or to purchase released capacity, as well as the terms and conditions of such offers, on their websites for a reasonable period. The purpose of these postings is to facilitate communications between buyers and sellers of capacity. These postings provide releasing shippers greater information as to who is interested in obtaining released capacity and what rates they are willing to pay, as well as providing parties interested in purchasing released capacity a greater ability to communicate that interest to potential releasing shippers. This increased communication between buyers and sellers of released capacity is intended to maximize the benefits of the capacity release programs and promote efficient use of firm capacity by those who value capacity most.

At an April 2013 technical conference, comments were made expressing interest in the ability for buyers of capacity to post offers to purchase capacity when needed (for example, to transport gas to a gas-fired electric generator). Based on these comments, the Commission decided to evaluate whether pipelines are in compliance with its posting regulations, 18 C.F.R. 284.8(d). A review of ten pipeline websites revealed that none provided a location to post such offers. Furthermore, none of the tariffs reviewed contained provisions providing for the posting of offers to purchase released capacity or describing the terms to be included in such offers. This review prompted the Commission’s show cause order.

Additionally, the Commission requested that the North American Energy Standards Board (“NAESB”) develop standards specifying: “(1) the information required for requests to acquire capacity; (2) the methods by which such information is to be exchanged; and (3) the location of the information on a pipeline’s website.” In their compliance filings, each pipeline must explain how it will comply with 18 C.F.R. 284.8(d) until NAESB develops, and the Commission implements, these standards.

All pipelines must submit their filings within 60 days of the Order, by May 19, 2014. Each filing will be assigned a separate RP docket and provide for intervention by interested parties. In addition, any person wishing to intervene in the show cause order docket (RP14-442) must do so by April 1, 2014.

If you have questions or would like more information on the issues discussed in this article, please feel free to contact us.

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