[Federal Register: January 2, 2008 (Volume 73, Number 1)]
[Rules and Regulations]
[Page 38-41]
[DOCID:fr02ja08-8]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 38 and 284

[Docket Nos. RM96-1-028 and RM05-5-004; Order No. 698-A]

Standards for Business Practices for Interstate Natural Gas
Pipelines; Standards for Business Practices for Public Utilities

Issued December 20, 2007.
AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Order on clarification and rehearing.

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SUMMARY: This order denies requests for rehearing, and provides
clarification of the final rule issued on July 16, 2007 that
incorporated by reference standards dealing with coordination of
scheduling between electric utilities and natural gas pipelines that
were promulgated by the Wholesale Gas Quadrant (WGQ) and the Wholesale
Electric Quadrant (WEQ) of the North American Energy Standards Board
(NAESB), and provided policy guidance on issues relating to such
coordination.

DATES: Effective Date: January 2, 2008.

FOR FURTHER INFORMATION CONTACT: Eric Winterbauer (Legal), Office of
the General Counsel, Federal Energy Regulatory Commission, 888 First
Street, NE., Washington, DC 20426,<PHONE_NUMBER>.
    Susan Pollonais (Technical), Office of Energy Market Regulation,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426,<PHONE_NUMBER>.
    Kay Morice (Technical), Office of Energy Market Regulation, Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426,<PHONE_NUMBER>.

Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. Kelly,
Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

    1. On June 25, 2007, the Federal Energy Regulatory Commission
(Commission) issued Order No. 698,\1\ in which the Commission amended
parts 38 and 284 of its open access regulations governing standards for
business practices and electronic communications with public utilities
and interstate natural gas pipelines. The Commission incorporated by
reference certain standards promulgated by the North American Energy
Standards Board (NAESB) \2\ in order to improve coordination between
the electric and gas industries. Specifically, the Commission sought to
improve communications about scheduling of gas-fired generators.
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    \1\ Standards for Business Practices for Interstate Natural Gas
Pipelines; Standards for Business Practices for Public Utilities,
Order No. 698, 72 FR 38757 (July 16, 2007) FERC Statutes and
Regulations ] 31,251 (June 25, 2007).
    \2\ The standards for the Wholesale Electric Quadrant are: Gas/
Electric Coordination Standards WEQ-011-0.1 through WEQ-011-0.3 and
WEQ-011-1.1 through WEQ-011-1.6. The standards for the Wholesale Gas
Quadrant are: Additional Standards, Definitions 0.2.1 through 0.2.3
and Standards 0.3.11 through 0.3.15.
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    2. In addition, the Commission provided policy guidance on issues
raised by NAESB relating to scheduling coordination and to the possible
development of additional standards by NAESB. First, the Commission
discussed the use of gas indices for pricing capacity release
transactions, stating that the Commission's regulations permit
releasing shippers to use price indices or other formula rates on all
pipelines, regardless of whether the pipeline has a provision allowing
the use of indices as part of its discounting provisions, so long as
the prices are less than the maximum rate in the pipeline's tariff.\3\
Second, the Commission discussed, but did not modify, the shipper's
ability to choose alternate delivery points, stating that the ability
to shift a delivery point when a pipeline constraint occurs upstream
would make it easier for shippers to redirect gas supplies to
generators when capacity is scarce. Lastly, the Commission discussed
possible changes to the gas intraday nomination schedule, clarifying
that NAESB should actively consider whether changes to existing intra-
day schedules would benefit all shippers.
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    \3\ Order No. 698, FERC Statutes and Regulations ] 31,251 at P
55.
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I. Requests for Rehearing

    3. The Interstate Natural Gas Association of America (INGAA)
requests clarification, or in the alternative rehearing, on the date
pipelines are required to implement changes with regard to the three
issues on which the Commission provided guidance. INGAA notes that
industry participants were required to implement the NAESB standards by
November 1, 2007, and requests that the Commission clarify that it
would be appropriate for NAESB to propose additional standards and then
for the Commission to have another rulemaking proceeding before
pipelines are required to implement changes.
    4. Specifically, with regard to capacity release, INGAA notes that
in the Final Rule the Commission acknowledges that NAESB may need to
develop standards to ensure that the terms and conditions of a release
and the means of implementing a formula rate are clearly set out.\4\
INGAA contends that prior to Order No. 698, the Commission's
regulations were never interpreted to allow unrestricted pricing in
capacity release transactions. INGAA argues that while pipelines had
the ability to file non-conforming agreements, there was never a policy
in place for releasing shippers to file non-conforming capacity release
agreements based on index-based rates. INGAA further contends that
pipelines are not currently equipped to allow unrestricted pricing in
capacity release transactions, and that requiring them to do so raises
implementation issues concerning bid evaluation and awards, scheduling
and billing.
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    \4\ Id. at P 56.
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    5. INGAA further contends that unrestricted pricing in releases
raises scheduling priority issues. It argues that index-based or other
formula prices raise the issue of how such prices can be compared to a
fixed, discounted rate for scheduling purposes. INGAA adds that the
Commission should be aware that, depending on the rate formula
utilized, there may be several methodologies that can be used to
determine a rate for scheduling purposes and that one methodology may
favor some shippers over others.
    6. INGAA requests that the Commission clarify the procedures needed
for pipeline billing of capacity release transactions that use index-
based or formula rates. INGAA argues that pipelines should not be
required to calculate the rates under such pricing mechanisms, nor
should pipelines be placed in the position of arbitrating disputes
between a releasing shipper and a replacement shipper about the rate to
be charged under the formula used. INGAA requests that the Commission
clarify that (1) in any release that does not utilize a fixed stated
rate, the releasing shipper must inform the pipeline of the rate to be
charged to the replacement shipper in time for the pipeline to bill
such rate; and (2) the pipeline is entitled to rely on the rate
provided by the releasing shipper such that the only recourse a
replacement shipper has if it disagrees with such rate is against the
releasing shipper. INGAA adds that pipelines should not be required to
determine the rate to be charged under such releases or be placed in
the middle of disputes between its shippers and their replacement
shippers over such rates.\5\
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    \5\ INGAA Request for Rehearing at 6.
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    7. INGAA also requests that the Commission clarify when pipelines
are required to implement changes regarding intra-day scheduling, and
that, rather, it is appropriate to wait for NAESB to consider any
industry-wide standards.\6\
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    \6\ Id. at 7.
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    8. INGAA requests that the Commission clarify that Order No. 698
does not require pipelines to convey any non-public information. As an
example, INGAA states that information concerning a pipeline's methods
for dealing with hourly flow variances, the administration of
operational balancing agreements, the operation of compressor units,
and the operation of meter stations, all on a real-time or nearly real-
time basis, may be implicated by or be part of, the required
communications discussed in the Order No. 698. INGAA states that this
information is not public information, which pipelines do not usually
communicate.
    9. The American Gas Association (AGA) filed an answer.

II. Discussion

A. Procedural Matters

    10. We reject AGA's answer. Rule 713 of the Commission's Rules of
Practice and Procedures does not allow answers to requests for
rehearing.\7\
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    \7\ 18 CFR 385.713(d) (2007).
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Indexed Releases

Relation to NAESB Standards Development
    11. INGAA requests clarification or in the alternative rehearing,
arguing that pipelines should not have to permit shippers to use gas
price indices as part of released transactions until NAESB develops
standards for using price indices and they are adopted by the
Commission. The Commission denies the clarification and the alternative
rehearing request.
    12. As we explained in Order No. 698, our existing regulations
already permit releasing shippers to use price indices

or other formula rates on all pipelines, regardless of whether the
pipeline has included a provision allowing the use of indices as part
of its discounting provisions, so long as the prices are less than the
maximum rate in the pipeline's tariff.\8\ Section 284.8(b) \9\ of the
Commission's regulations states that ``firm shippers must be permitted
to release their capacity, in whole or in part, on a permanent or
short-term basis, without restrictions on the terms or conditions of
the release,'' and section 284.8(e) \10\ mandates that such a release
may not be ``over the maximum rate.'' Releasing shippers are permitted
under these regulations to set the appropriate price governing the
release. In Order No. 698, we did not impose any additional regulatory
requirements on the pipelines, and therefore we find no basis to delay
implementation of our existing regulations.
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    \8\ In a Notice of Proposed Rulemaking, the Commission has
proposed to lift the price ceiling for short-term capacity releases.
Promotion of a More Efficient Capacity Release Market, Notice of
Proposed Rulemaking, 121 FERC ] 61,170 (2007).
    \9\ 18 CFR 284.8(b) (2007).
    \10\ 18 CFR 284.8(e) (2007).
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    13. INGAA maintains that the Commission's regulations were never
previously interpreted to permit unrestricted pricing in capacity
release transactions. INGAA cites no support for the proposition that
the Commission did not interpret its regulations to permit pricing
flexibility. In fact, in Order No. 636-A, the Commission explained that
releasing shippers are not required to rely on default provisions in
the pipeline's tariff, but can structure their own pricing terms:

    Due to the variety of releasing conditions that may exist, the
Commission will not establish only one methodology for evaluating
best bids, but will use the following approach. The pipeline's
tariff must include an objective and non-discriminatory economic
standard for determining best bids. Releasing shippers may rely upon
this standard in structuring their capacity releases, but are not
required to do so. If a releasing shipper does not specify a
standard, the standard in the pipeline's tariff will apply.
Releasing shippers may include in their offers to release capacity
reasonable and non-discriminatory terms and conditions to
accommodate individual release situations, including provisions for
evaluating bids.\11\
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    \11\ Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation, Order No. 636-A, 57 FR
36128 (Aug.12, 1992), FERC Statutes and Regulations January 1991--
June 1996 ] 30,950, at 30,557 (Aug. 3, 1992). See El Paso Natural
Gas Co., 61 FERC ] 61,333, at 62,289 (1992).

The Commission also has explained that these regulatory provisions
provide releasing shippers with the flexibility to price using gas
price indices.\12\
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    \12\ See Panhandle Eastern Pipe Line Co., 106 FERC ] 61,194, P 6
(2006);
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    14. Contrary to INGAA's implication, the Commission did not ask
NAESB to develop standards for indexed releases because such releases
were not previously permitted. In this proceeding, due to the interest
by shippers in such releases, the Commission requested NAESB to
consider developing standards to make these releases quicker and more
efficient.\13\ The existing WGQ NAESB standards recognize that non-
standard pricing terms may be included in release transactions, but do
not necessarily permit such releases to be accorded the same processing
timeline as standard releases.\14\ The Commission requested NAESB to
consider standards that would create a standardized indexing
methodology so that the use of indexed releases could become faster and
could compete on a more equal footing with pipeline discounts and
negotiated rate transactions.
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    \13\ Order No. 698, FERC Statutes and Regulations ] 31,251 at P
56.
    \14\ Standards 5.3.1 and 5.3.3 (18 CFR 284.12(a)((1)(vi))
provide that as long as releasing shippers use defined, standard bid
methodologies, the pipelines are required to adhere to the NAESB
timelines in processing such bids. However, these standards
recognize that the releasing shipper might elect other bid
evaluation methodologies for which pipeline processing can take
longer than the standard timelines.
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    15. INGAA suggests that permitting index pricing prior to the
development of the NAESB standards may create difficulty in evaluating
competing bids or completing the bid evaluation process in the time
needed to implement the release. We do not find this to be a sufficient
basis to delay shippers' ability to implement indexed releases to
compete with the pipeline's use of such practices. The Commission
required in Order No. 636 that the terms and conditions of all
releases, including the methods for evaluating competing bids, must be
objective, applicable to all shippers, and non-discriminatory.\15\ The
releasing shipper has the burden of ensuring that the bid evaluation
method is clear enough for the pipeline to administer. Further, the
standard capacity release timelines do not apply to bid evaluation
methods that are out of the ordinary or difficult to apply. Releasing
shippers that want indexed deals implemented expeditiously therefore
have an incentive to ensure that their bid evaluation methodologies are
relatively simple to apply.
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    \15\ Order No. 636-A, FERC Statutes and Regulations January
1991-June 1996 ] 30,950, at 30,557.
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    16. INGAA also maintains that allowing unrestricted pricing
discretion may cause problems for some pipelines that use price to
prioritize the scheduling of secondary firm transportation.\16\
However, the Commission does not require that pipelines employ such a
method for scheduling firm transportation, and we find that a possible
inconvenience to some pipelines does not justify prohibiting releasing
shippers from choosing pricing methods permitted by the regulations.
Those pipelines that may have such provisions would either need to
apply their priced-based scheduling provisions to those capacity
release transactions that use index pricing or file under section 4 of
the Natural Gas Act to amend their tariffs to provide for such
scheduling.\17\
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    \16\ The Commission requires pipelines to permit shippers,
including replacement shippers, the flexibility to temporarily
schedule the receipt and delivery of gas at points other than those
listed in their contracts if capacity is available.
    \17\ INGAA does not explain why the same procedures used to
schedule pipeline index discount transactions and negotiated rate
transactions, which employ a variety of pricing techniques, cannot
be applied to capacity release transactions.
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1. Billing Under Index-Priced Releases
    17. INGAA requests that we clarify that in any release that does
not utilize a fixed stated rate, the releasing shipper must inform the
pipeline of the rate to be charged to the replacement shipper in time
for the pipeline to bill such rate; and the pipeline is entitled to
rely on the rate provided by the releasing shipper such that the only
recourse a replacement shipper has if it disagrees with such rate is
against the releasing shipper.
    18. We will not permit pipelines to delay acceptance of index price
deals on this basis. Pipelines ought to be able to calculate prices
under index releases, because, as the Commission required in Order No.
636, the terms and conditions of such releases must be objective and
clearly stated. Many pipelines also currently bill shippers under their
own negotiated rate and index price transactions, and, therefore,
should be able to calculate the rates under released transactions in
the same way. However, if after experience with index releases, a
pipeline believes that the volume of such releases or other conditions
warrants revisions in the method used to bill for index releases, the
pipeline may file under section 4 of the Natural Gas Act to propose
such revisions, and the Commission will consider those changes after
evaluating the position of the pipeline's shippers.

B. Intra-Day Scheduling

    19. INGAA also requests that we clarify that any changes regarding
intra-day scheduling need not be implemented by November 1, 2007, and
that instead it is appropriate for NAESB to consider and propose any
industry-wide standards. We agree with INGAA. Order No. 698 did not
adopt changes in the intra-day nomination timeline, so the November 1,
2007 deadline does not apply to any such change. While the Commission
did not require the pipelines to make any changes in nomination
schedules, we did indicate that such standards could be very beneficial
to the industry and that pipelines with gas-fired generators should, on
their own, consider the addition of other intra-day nomination
opportunities that would be of benefit to the shippers.\18\ Pipelines
are free to propose additional intra-day nomination opportunities prior
to any proposal by NAESB if they so choose.
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    \18\ Order No. 698, FERC Stats. & Regs. [Regulations Preambles]
] 31,251 at P 69.
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C. Non-Public Information

    20. INGAA maintains that the Commission should clarify that Order
No. 698 does not require pipelines to convey any non-public information
as a result of the standards incorporated by reference in the Final
Rule. In particular, INGAA points to information concerning a
pipeline's methods for dealing with hourly flow variances, the
administration of operational balancing agreements, the operation of
compressor units, and the operation of meter stations.
    21. INGAA does not point to which, if any, standards it believes
would require the dissemination of this information, so we cannot
provide a definitive answer. The standards themselves do not generally
detail the type of information that should be provided. For example, it
appears from the examples that INGAA may be referring to standard
0.3.12, which states that: ``The Power Plant Operator (PPO) and the
Transportation Service Provider(s) (TSP) that is directly connected to
the PPO's Facility(ies) should establish procedures to communicate
material changes in circumstances that may impact hourly flow rates.''
This standard does not require the dissemination of detailed
information about why the hourly flow rates are affected; it requires
only that the pipeline establish communication procedures so that the
power plant operator and the pipeline are made timely aware that such
hourly flow changes may occur. Without a more detailed explanation of
which other standards would require the disclosure of information that
INGAA wishes to keep non-public, we cannot address this issue further.
INGAA and the pipelines may bring any specific issue to the
Commission's attention.
    The Commission orders:
    The requests for rehearing and clarification are resolved as
discussed in the body of the order.

    By the Commission.
Kimberly D. Bose,
Secretary.
[FR Doc. E7-25121 Filed 12-31-07; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register: April 5, 2007 (Volume 72, Number 65)] [Corrections]                [Page 16875-16876] [DOCID:fr05ap07-163]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 40

[Docket ID OCC-2007-0003] RIN 1557-AC80

FEDERAL RESERVE SYSTEM

12 CFR Part 216

[Docket No. R-1280]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 332

RIN 3064-AD16

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 573

[Docket ID OTS-2007-0005] RIN 1550-AC12

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 716

RIN 3133-AC84

FEDERAL TRADE COMMISSION

16 CFR Part 313

[Project No. 034815] RIN 3084-AA94

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 160

RIN 3038-AC04

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 248

[Release Nos. 34-55497, IA-2598, IC-27755; File No. S7-09-07] RIN 3235-AJ06

  Interagency Proposal for Model Privacy Form Under the Gramm- Leach-Bliley Act

Correction

    In proposed rule document 07-1476 beginning on page 14939 in the  issue of Thursday, March 29, 2007, make the following corrections:     On pages 14948, 14963, 14968, 14973, 14978, 14983, 14988, 14993 and  14998, the corrected ``Model Privacy Form, p. 3 of 3'' appears as  follows:

[GRAPHIC] [TIFF OMITTED] TP29MR07.031

[FR Doc. C7-1476 Filed 4-5-07; 8:45 am]

BILLING CODE 1505-01-D