The Federal Energy Regulatory Commission Thursday (Mar. 21) opened an investigation into a practice of interstate natural gas pipelines to bundle essential gas pipeline capacity contracts with less-desirable, non-contiguous capacity, which might unfairly increase gas prices to consumers.
In June 2022, the American Gas Association (AGA), the American Public Gas Association (APGA), the Process Gas Consumers Group (PGCG), and the Natural Gas Supply Association (NGSA) petitioned FERC for a rulemaking (Docket No. RM22-17-000) to stop the bundling practice, charging that it was “unjust, unreasonable, and discriminatory” under the Natural Gas Act and FERC regulations. Interstate gas pipelines, whom FERC regulates, responded the following month, asserting that the practice was legal and appropriate.
FERC at its regular monthly meeting decided to issue a “notice of inquiry” rather than determine the issue.
In a news release Monday, Casey Hollers, senior director of regulatory affairs and policy for NGSA, praised FERC, saying that the pipeline practice “forces pipeline customers to bid on unwanted and operationally unrelated pipeline capacity or else lose access to the high value capacity that is needed to get natural gas to customers. The practice has become increasingly common and unnecessarily inflates the price of pipeline service, thus harming shippers, especially captive industrial customers, local gas utilities, marketers and the millions of customers that together we serve.”
NGSA is the Washington lobby for gas producers and marketers. AGA represents investor-owned local gas distribution companies, APGA represents publicly-owned gas distributors, and PGCG represents industrial gas consumers.
Also on Thursday, a spokesperson for the Interstate Natural Gas Association of America, the Washington pipeline lobby, told The Quad Report, “INGAA stands by its prior comments and urges the commission to maintain the sound policy that has been in place for over two decades. By allowing pipelines to structure packages of capacity in a way that maximizes revenue and the use of pipeline capacity, the commission’s policy benefits the entire pipeline system and the long-term firm capacity holders whose support built it, by, among other things, increasing billing determinants; avoiding, delaying, or deferring rate increases; attracting new shippers to the system; and maximizing the capacity made available to market.
“If the Commission were to abandon this holistic approach, the change could force pipelines to increase rates for shippers in future rate cases as pipelines attempt to capture the cost of service for un- or underutilized capacity of their system as a whole. The cost shift will be felt disproportionately by captive customers. We plan to file comments in response to the NOI.”
On electric issues, FERC agreed to clarify its ground-breaking July 2023 order aimed at clearing out the clogged process for new generation to access the transmission grid. That action, Order 2023, drew numerous requests for clarifications.
In a news release, FERC said, “The rehearing order addresses the respective roles and responsibilities of transmission providers and interconnection customers in the interconnection process. It also clarifies many topics ranging from public interconnection information and the cluster study process to withdrawal and study delay penalties, and the consideration of alternative transmission technologies.”
The order also responded to compliance filings by Duke Energy Florida, Duke Energy Carolinas, Duke Energy Progress, Arizona Public Service Co., and Idaho Power Co. The commission said those filings “partially comply with Order 2023,” but require “a further compliance filing.”
Chairman Willie Phillips said the refined interconnection rule is the first of more to come this spring. “There is no single action that the commission can take that will contribute more to enhancing the reliability, resilience, and affordability of our electric grid than to facilitate the development of needed electric transmission at just and reasonable rates. Stay tuned.”
The new order (2023-A) extends the deadline for transmission providers to submit compliance filings until 30 days after Federal Register publication.
The commission also created a new, beefed-up federal-state collaborative with the National Association of Regulatory Commissioners (NARUC). The move is based on an earlier three years of discussion with state utility regulators in a transmission-related task force.
According to FERC, the new collaboration will look at topics such as where to best work together on reliability, resource adequacy, gas-electric coordination, wholesale and retail markets, new technologies, and infrastructure.
Phillips said, “The past three years of our task force work have proven just how important it is for FERC and state regulators to meet and expand our shared perspectives on important electricity sector matters that we all grapple with on a daily basis.”
Julie Fedorchak, NARUC president and a member of the North Dakota Public Service Commission, said, “The role of state utility commissioners is increasingly more challenging and consequential to the quality of life, safety, and economic health of this nation. Ensuring the reliability of the grid as the energy sector evolves at a rapid pace is crucial.”
Twice easily elected to the North Dakota commission after an initial 2012 appointment, Fedorchak is currently running for the Republican nomination to the state’s open, at large, Congressional seat in the June 11 primary. She faces former North Dakota House member Rick Becker. A journalist by training, Fedorchak has had a long career in state Republican politics. It’s solid Republican state.
The new FERC-NARUC collaborative will hold its first meeting this fall and will end in the fall of 2027. According to FERC, it will consist of all sitting FERC commissioners and representatives from 10 state commissions, nominated by NARUC with two nominees from each NARUC region. The state members will serve one-year terms.
–Kennedy Maize