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Standards for Business Practices of Interstate Natural Gas Pipelines
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: March 18, 2002 (Volume 67, Number 52)]
[Rules and Regulations]
[Page 11906-11917]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18mr02-9]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 284
[Docket No. RM96-1-019;
Order No. 587-N]
Standards for Business Practices of Interstate Natural Gas
Pipelines
Issued March 11, 2002.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission is amending its
regulations governing standards for interstate pipeline business
operations and communications to require that pipelines permit
releasing shippers, as a condition of a capacity release, to recall
released capacity and renominate such recalled capacity at each
nomination opportunity. Recalls of released capacity will not be
permitted to reduce (bump) already scheduled volumes for replacement
shippers unless the replacement shippers are provided with at least one
opportunity to rescheduled any bumped volumes, which is similar to the
protection afforded interruptible shippers. This rule creates greater
flexibility for firm capacity holders on interstate pipelines by
synchronizing the Commission's regulation of recalled capacity with its
standards for intra-day nominations. The rule also will enhance
competition by freeing up capacity that otherwise would not be released
and creating greater parity between scheduling of capacity release
transactions and pipeline interruptible service.
DATES: 1. The rule becomes effective April 17, 2002.
2. Pipelines must make tariff filings by May 1, 2002, to become
effective by July 1, 2002, to provide shippers with the ability to
recall scheduled and unscheduled capacity at the Timely and Evening
Nomination cycles and to recall unscheduled capacity at the two other
standard nomination times.
3. Comments are to be filed by the North American Energy Standards
Board and others by October 1, 2002, regarding standards for
implementing partial day or flowing day recalls. Reply comments must be
filed by October 15, 2002.
ADDRESSES: Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426.
FOR FURTHER INFORMATION CONTACT:
Michael Goldenberg, Office of the General Counsel, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
(202) 208-2294.
Marvin Rosenberg, Office of Markets, Tariffs, and Rates, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
(202) 208-1283.
Kay Morice, Office of Markets, Tariffs, and Rates, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
(202) 208-0507.
SUPPLEMENTARY INFORMATION:
Table of Contents
Paragraph Number
2. Background
11. Comments
15. Discussion
16. Overview
20. Regulatory Changes
35. Schedule for Implementation of Recalls for Evening Nomination
Cycle and Unscheduled Capacity
43. Comments on Adoption of Partial Day Recall Requirement
57. Requests for Clarification
59. Applicability of Recall Conditions
62. Schedule for Notification of Recalls for Timely Nomination Cycle
and Reputs
[[Page 11907]]
65. Penalty Exposure
67. Effect on Alternate Points
69. Pipelines Offering Non-Standard Nomination Opportunities
72. Effect on Already Accepted Partial Day Recall Programs
75. Pipeline Capacity
78. Notice of Use of Voluntary Consensus Standards
79. Information Collection Statement
86. Environmental Analysis
88. Regulatory Flexibility Act Certification
90. Document Availability
95. Implementation Dates
98. Effective Date
Federal Energy Regulatory Commission
Before Commissioners: Pat Wood, III Chairman; William L. Massey, Linda
Breathitt, and Nora Mead Brownell.
[Docket No. RM96-1-019; Order No. 587-N]
Standards for Business Practices of Interstate Natural Gas Pipelines;
Final Rule
Issued March 11, 2002.
1. The Federal Energy Regulatory Commission (Commission) is
amending Sec. 284.12(c)(1)(ii) of its open access regulations to
require that interstate pipelines permit releasing shippers to recall
released capacity and renominate that recalled capacity at any of the
scheduling opportunities provided by interstate pipelines. Recalls of
released capacity will not be permitted to reduce (bump) already
scheduled volumes for replacement shippers unless the replacement
shippers are provided with at least one opportunity to rescheduled any
bumped volumes, which is similar to the protection afforded
interruptible shippers. This rule creates greater flexibility for firm
capacity holders on interstate pipelines by synchronizing the
Commission's regulation of recalled capacity with its standards for
intra-day nominations. The rule also will enhance competition by
freeing up capacity that otherwise would not be released and creating
greater parity between scheduling of capacity release transactions and
pipeline interruptible service.
2. Background
3. In Order No. 636, the Commission adopted regulations permitting
shippers (releasing shippers) to release their capacity to other
shippers (replacement shippers).\1\ Under these regulations, releasing
shippers were permitted to ``release their capacity in whole or in
part, on a permanent or short-term basis, without restriction on the
terms and conditions of the release.'' \2\ The regulation permits
releasing shippers to impose terms for a release transaction under
which the releasing shipper reserves the right to recall that capacity
to use the capacity itself. As an example, a shipper might include a
recall condition in the event that temperature drops below a pre-
determined level.\3\
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\1\ 18 CFR 284.8 (2001).
\2\ 18 CFR 284.8(b).
\3\ Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation Under Part 284 of the
Commission's Regulations, Order No. 636, 57 FR 13267 (Apr. 16,
1992), FERC Stats. & Regs. Regulations Preambles [Jan. 1991-June
1996]
para. 30,939, at 30,418 (Apr. 8, 1992).
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4. In July 1996, in Order No. 587,\4\ the Commission incorporated
by reference consensus standards approved by the Gas Industry Standards
Board (now the North American Energy Standards Board (NAESB)) \5\
designed to standardize business practices and communication protocols
of interstate pipelines in order to create a more integrated and
efficient pipeline grid. NAESB is a private, consensus standards
developer whose wholesale natural gas standards are developed by
representatives from all segments of the natural gas industry.
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\4\ Standards For Business Practices Of Interstate Natural Gas
Pipelines, Order No. 587, 61 FR 39053 (Jul. 26, 1996), FERC Stats. &
Regs. Regulations Preambles [July 1996-December 2000]
para. 31,038
(Jul. 17, 1996).
\5\ The Commission is revising Sec. 284.12 to reflect the name
change. The Commission finds good cause for making such a change
without notice and comment since the change is purely
administrative. See 5 U.S.C. Sec. 553(b)(A)&(B).
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5. One aspect of NAESB's standards adopted in Order No. 587 covered
capacity release transactions. Of relevance here, two standards, 5.3.6
and 5.3.7, apply to recalls of capacity release transactions.
Standard 5.3.6: If the releasing shipper wishes to recall
capacity to be effective for a gas day, the notice should be
provided to the transportation service provider and the acquiring
shipper no later than 8 a.m. Central Clock Time on nomination
day.\6\
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\6\ 18 CFR 284.12(b)(1)(v) (2001), Capacity Release Related
Standard 5.3.6.
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Standard 5.3.7: There should be no partial day recalls of
capacity. Transportation service providers should support the
function of reputting by releasing shippers.\7\
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\7\ 18 CFR 284.12(b)(1)(v) (2001), Capacity Release Related
Standard 5.3.7.
In this context, a partial day recall (also referred to as a flowing
gas recalls)\8\ refers to a recall condition that applies only to part
of gas day, rather than the full gas day.\9\
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\8\ Gulf South, in its comments, contends that the term
``partial day recall'' is somewhat of a misnomer, and that the more
apt term is ``flowing day recall.'' It states that the term partial
day recall suggests the recall is for a specified portion of gas day
when, in fact, the standard refers only to whether the recall occurs
after gas has begun to flow. In this rule, the terms ``partial day
recall'' and ``flowing day recall'' are used interchangeably to
refer to recalls occurring during a gas day after gas has begun to
flow, not to recalls between specified times.
\9\ Under the NAESB standards, a gas day runs from 9 a.m.
central clock time (CCT) on Day 1 to 9 a.m. CCT the next day (Day
2). 18 CFR 284.12(b)(1)(i), Nominations Related Standards 1.3.1.
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6. In 1996, when NAESB first adopted these standards, NAESB's
standards provided for one nomination, at 11:30 a.m. CCT \10\ for the
next gas day and only one intra-day nomination at an indeterminate
time. In order to create a more standardized intra-day nomination
schedule,\11\ NAESB amended its standards to provide for three
standardized intra-day nomination opportunities: an Evening nomination
at 6 p.m. CCT to take effect at 9 a.m. CCT the next gas day, an Intra-
Day 1 nomination at 10 a.m. CCT to take effect at 5 p.m. CCT on the
same gas day, and an Intra-Day 2 nomination at 5 p.m. CCT to take
effect at 9 p.m. CCT on the same gas day.\12\
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\10\ CCT refers to Central Clock Time, which includes an
adjustment for day light savings time. See 18 CFR
Sec. 284.12(b)(1)(i), Nominations Related Standards 1.3.1.
\11\ See Order No. 587-C, 62 FR at 10687, FERC Stats. & Regs.
Regulations Preambles [July 1996-December 2000]
para. 31,050, at
30,585 (rejecting a proposed NAESB intra-day nomination standard for
being vague and non-standardized and providing additional time for
NAESB to develop a standardized intra-day nomination schedule).
\12\ 18 CFR 284.12(b)(1)(i) (2001), Nominations Related Standard
1.3.2.
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Nomination deadline Effective time
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Timely Nomination...................... 11:30 a.m................. 9 a.m. next gas day.
Evening Nomination..................... 6 p.m..................... 9 a.m. next gas day.
Intra-Day 1............................ 10 a.m.................... 5 p.m. same gas day.
Intra-Day 2............................ 5 p.m..................... 9 p.m. same gas day.
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[[Page 11908]]
NAESB, however, has not amended its capacity release recall standards
to take into account its adoption of these standardized intra-day
nomination opportunities.
7. In Order No. 637, the Commission adopted Sec. 284.12(c)(1)(ii)
of its regulations which requires interstate pipelines to ``permit
shippers acquiring released capacity to submit a nomination at the
earliest available nomination opportunity after the acquisition of
capacity.'' \13\ The purpose of this regulatory change was to permit
capacity release transactions to take place on an intra-day basis so
that released capacity can compete with pipeline capacity on a
comparable basis.\14\ The adoption of Sec. 284.12(c)(1)(ii) permits
shippers to acquire released capacity and nominate using that capacity
at any of the four intra-day nomination opportunities.\15\
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\13\ 18 CFR 284.12(c)(1)(ii) (2001).
\14\ Regulation of Short-Term Natural Gas Transportation
Services, Order No. 637, 65 FR 10156, 101-58-60 (Feb. 25, 2000),
FERC Stats. & Regs. Regulations Preambles [July 1996-December 2000]
para. 31,091, at 31,297 (Feb. 9, 2000).
\15\ Prior to Order No. 637, NAESB's capacity release nomination
standards had not been amended to reflect the intra-day nomination
standards. Thus, prior to Order No. 637, a replacement shipper
acquiring released capacity had to acquire the capacity and notify
the pipeline by 9 a.m. CCT in order to nominate at the Timely
Nomination cycle (11:30 a.m. CCT) for the next gas day and could not
make use of any intra-day nomination opportunities for the current
gas day. With the changes made in Sec. 284.12(c)(1)(ii), shippers
will be able to acquire released capacity and submit a nomination at
each intra-day nomination opportunity.
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8. On February 1, 2001, NAESB filed a report with the Commission,
in Docket No. RM98-10-000, concerning its development of standards
regarding partial day recalls of capacity. According to NAESB, some
members believed that partial day recalls fell within the purview of
the scheduling equality requirements of Order No. 637, while others did
not. Some members, NAESB asserts, believed that partial day recalls are
a valid business practice, irrespective of whether this practice is
required by Order No. 637. Due to these disagreements, NAESB reports it
has been unable to reach consensus on how to proceed.
9. On March 16, 2001, AGA filed a ``Reply to February 1, 2001, Gas
Industry Standards Board Report and Petition for Clarification and
Directive from FERC Regarding Requirement for Capacity Release
Scheduling Equality.'' AGA argued that the Commission should require
pipelines to allow partial day recalls as part of their compliance with
Sec. 284.12(c)(1)(ii).
10. On October 12, 2001, the Commission issued a Notice of Proposed
Rulemaking (NOPR) \16\ proposing to require pipelines to afford
releasing shippers enhanced ability to recall released capacity by
permitting them to use partial day recalls at any of the four
nomination opportunities established by the NAESB standards.
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\16\ Standards For Business Practices Of Interstate Natural Gas
Pipelines, 66 FR 53134 (Oct. 19, 2001), IV FERC Stats. & Regs.
Proposed Regulations para. 32,556 (Oct. 12, 2001).
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11. Comments
12. Twenty-eight comments on the NOPR were filed.\17\ The comments
can roughly be divided into three categories: those that supported the
proposal, those that either supported or did not object to the
proposal, but sought clarifications principally regarding
implementation details, and those opposing the proposal. The majority
of comments support the proposal.\18\ They contend it would provide
greater flexibility to releasing shippers, enhance competition by
freeing up capacity that otherwise would not be released, and better
accommodate retail unbundling programs at the state level.\19\ The
local distribution companies (LDCs) maintain that under state
unbundling mechanisms, they are frequently the suppliers of last resort
and, therefore, need to recall capacity in the event marketers fail to
deliver.
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\17\ The commenters and the abbreviations used in this order are
listed on the Appendix.
\18\ E.g., AGA, APGA, APS/PWEC, Con Edison, Dominion LDCs, ENA,
Kentucky, Keyspan, MLGW, PSCNY, PA OCA, Xcel.
\19\ Xcel provides a succinct summary of the position:
The proposed rules would provide firm capacity holders,
including the Xcel Energy utility operating companies, with
increased flexibility in structuring capacity release transactions
to best fit their business needs. The Xcel Energy utility operating
companies could benefit from the potential increase in value of non-
recallable capacity release and from the greater flexibility when a
recall is necessary.
Comment at 2.
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13. Those opposing the proposal \20\ contend it would decrease the
reliability of the pipeline grid by reducing (bumping) volumes of
already scheduled gas and thereby reduce liquidity. They maintain that
partial day recalls will reduce reliability because bumping a
replacement shipper's scheduled volumes may affect scheduling on a
number of pipelines, and bumped replacement shippers will be forced to
try and reschedule their gas. Those opposing the proposal also are
concerned partial day recalls will reduce the value of released
capacity and create less competition between pipeline firm capacity and
capacity release. NiSource maintains that partial day recalls may
decrease reliability for LDCs that permit marketers (using other LDCs'
released capacity) to bring capacity to their city-gates by permitting
a diversion of gas from one LDC market to another.
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\20\ E.g., DETM, Dynegy, EIP, EPSA, NGSA, NiSource, Williston.
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14. A number of comments raise operational issues relating
principally to partial or flowing day recalls occurring during the gas
day after capacity has begun to flow. These include: the need for
advance notice to pipelines and replacement shippers of capacity to be
recalled, and whether the pipeline or releasing shipper should provide
the notice; \21\ allocating capacity as well as imbalances and
penalties between releasing and replacement shippers when recalls take
place during the gas day; \22\ and ensuring that total volumes
delivered do not exceed original contract MDQ.\23\ Some comments
suggest the Commission convene a technical conference to address these
issues.\24\
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\21\ See Comments by Algonquin/Texas Eastern; Dominion; Dynegy;
ENA; Gulf South; INGAA; Kinder-Morgan; NiSource; Williston;
Industrials.
\22\ See Comments by Algonquin/Texas Eastern; Dynegy; Gulf
South; ENA; INGAA; Kinder-Morgan; NiSource; Williston. As an
example, a replacement shipper with capacity of 2400 Dth/day could
nominate the entire 2400 Dth for the full gas day, but take 1200 Dth
in the first five hours of the day, leaving only 1200 Dth remaining
for the remainder of the gas day. If a releasing shipper sought to
recall the full 2400 Dth at the Intra-Day 1 cycle taking, which
would take effect at 5 p.m., the issue raised by the comments are
how to allocate the 2400 Dth between the releasing and replacement
shippers and how to determine imbalances and potential penalties.
Williston also raises the issue of how to perform such an allocation
when there are multiple capacity releases: e.g., a releasing shipper
releases capacity to a single replacement shipper who re-releases
that capacity to three other replacement shippers. If the initial
releasing shipper recalls, the capacity, Williston requests
clarification as to how the remaining daily quantity should be
allocated among the three final replacement shippers.
\23\ Williston.
\24\ Comments by EPPG; ENA.
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15. Discussion
16. Overview
17. The Commission is revising Sec. 284.12(c)(1)(ii) of its
regulations to require pipelines to permit recalls of capacity at each
nomination opportunity. Specifically, the Commission is requiring
pipelines to permit releasing shippers, as a condition of a capacity
release, to recall released capacity and renominate such recalled
capacity at each nomination opportunity according to the notice and
bumping provisions applicable to interruptible shippers.\25\ Recalls of
[[Page 11909]]
released capacity will not be permitted to reduce (bump) already
scheduled volumes for replacement shippers unless the replacement
shippers are provided with at least one opportunity to reschedule any
bumped volumes.\26\
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\25\ The Commission is rescinding the incorporation by reference
of NAESB standard 5.3.6 (which requires notice of capacity release
recalls by 8 a.m. CCT) and the first sentence of NAESB Standard
5.3.7 (which prohibits partial day recalls of capacity). The
Commission is retaining the portion of Standard 5.3.7 that requires
transportation service providers to ``support the function of
reputting by releasing shippers.'' Reputting refers to the ability
of a releasing shipper to include a condition in a release under
which it can recall capacity when needed and, after the recall has
ended, the capacity will revert (be reputted) to the replacement
shipper, without the need for a new release.
\26\ The use of partial day recall rights is voluntary. As with
any other recall condition, releasing shippers are free to offer
their capacity without partial day recall rights. Whether partial
day recall rights are permitted depends on the terms of the
releasing shipper's offer.
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18. The regulations adopted in this rule will be implemented in two
phases. This two-phase approach will ensure an expeditious
implementation of partial day recalls for recalls that do not raise the
operational details addressed in the comments, while at the same time
providing time for NAESB to further consider standards to address the
operational issues raised. By May 1, 2002, each pipeline will be
required to make a compliance filing, to be effective July 1, 2002,
that will permit shippers to recall capacity at both the Timely
Nomination cycle and the Evening Nomination Cycle and to recall
capacity at any nomination time if the capacity has not been previously
scheduled by the replacement shipper. To ease the compliance and review
process, the Commission is establishing a standard tariff provision
providing a notification schedule for these recalls.
19. Second, the Commission will provide NAESB six months in which
to develop standards to apply to the operational details involved in
allowing partial or flowing day recalls. NAESB should file a report
with the Commission by October 1, 2002, detailing the standards it has
adopted (or those it has considered) and all other material relevant to
its consideration of such standards. Other industry members can also
submit comments by October 1, 2002, and will have an additional 15 days
from the filing of the NAESB information to file additional comments on
the NAESB report. Upon the receipt of these comments, the Commission
will issue a further order regarding implementation of Intra-Day 1
recalls.
20. Regulatory Changes
21. The regulations adopted in this rule will ensure consistency
with the original intent of the Commission's capacity release
regulations by providing releasing shippers with the flexibility to
structure capacity release transactions that best fit their business
needs, by providing greater incentives for releasing shippers to
release capacity, and by fostering greater competition for pipeline
capacity by creating parity between scheduling of capacity release
transactions and pipeline interruptible service. At the same time, the
regulations will afford replacement shippers whose capacity is recalled
the same advance notice and protection from bumping as provided to
interruptible shippers under the Commission's regulations.
22. In Order No. 636, the Commission established the capacity
release mechanism to create competition with pipeline firm and
interruptible transportation.\27\ One of the fundamental tenets of the
Commission's capacity release regulations is that releasing shippers
have the opportunity to establish any recall conditions for their
capacity.
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\27\ Order No. 636-A, 57 FR 36128 (Aug. 12, 1992), FERC Stats. &
Regs. Regulations Preambles [Jan. 1991-June 1996]
para. 30,950, at
30,556 (Aug. 3, 1992) (``competition between pipeline capacity and
released capacity helps ensure that customers pay only the
competitive price for the available capacity'').
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23. When NAESB first considered recall standards, it established
one notification time for all recalls (8 a.m. CCT) and did not permit
partial or flowing day recalls. When NAESB adopted this standard,
however, the standards provided for only one nomination a day, at 11:30
a.m. CCT and a single non-standardized intra-day nomination. But the
circumstances under which the recall standards were developed have
markedly changed as the number of nomination opportunities have now
expanded to four nomination opportunities. At the same time, it is
apparent from the comments in this rulemaking that the consensus
supporting NAESB's existing recall standards no longer exists, and
NAESB itself has recognized that it can no longer make progress in
resolving this issue. Although the Commission places great reliance on
NAESB's development of consensus standards,\28\ the Commission has
found it necessary to resolve disputes between industry segments when
NAESB has been unable to reach consensus on issues concerning
Commission policy, so that the standards development process can
proceed in line with Commission policies.\29\ In these circumstances
(where consensus no longer exists on recall standards), the Commission
must resolve the policy issue over whether to permit greater recall
flexibility.
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\28\ Order No. 587, 61 FR at 39057 (Jul. 26, 1996), FERC Stats.
& Regs. Regulations Preambles [July 1996-December 2000]
para.
31,038, at 30,059.
\29\ Standards For Business Practices Of Interstate Natural Gas
Pipelines, Order No. 587-G, 63 FR 20072 (Apr. 23, 1998), FERC Stats.
& Regs. Regulations Preambles [July 1996-December 2000]
para.
31,062, at 30-668-72 (Apr. 16, 1998) (resolving dispute over bumping
of interruptible service by firm service).
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24. An examination of both past and current Commission policy
supports allowing releasing shippers to recall capacity more frequently
than currently permitted under NAESB's standards.
25. The Commission's general policy adopted in Order No. 636 would
permit more extensive recall rights than those permitted by the NAESB
standards. Section 284.8(b) of the Commission's regulations (adopted in
Order No. 636) expressly permits shippers to ``release their capacity
in whole or in part, on a permanent or short-term basis, without
restriction on the terms and conditions of the release.'' \30\ In Order
No. 636-A, the Commission recognized that ``a releasing shipper may
include terms and conditions, such as recall rights, that will ensure
it has adequate peak day capacity.'' \31\ In Texas Eastern Transmission
Corporation, for example, the Commission rejected a pipeline's proposed
restriction on recall rights, stating ``any provision relating to
recall rights must not operate to impede the ability of releasing
shippers to employ recall provisions as terms and conditions of their
releases.''\32\ Thus, all recall conditions, including partial day
recalls are consistent with the Commission's regulations.
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\30\ 18 CFR 284.8(b) (emphasis added).
\31\ Order No. 636-A, 57 FR 36128 (Aug. 12, 1992), FERC Stats. &
Regs. Regulations Preambles [Jan. 1991-June 1996]
para. 30,950, at
30,558 (Aug. 3, 1992).
\32\ 62 FERC para. 61,015, at 61,104 (1993).
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26. Moreover, in Order No. 637, the Commission sought to create
greater scheduling parity between capacity release transactions and
pipeline services by enabling capacity release transactions to take
place on an intra-day basis at each of the four scheduling
opportunities.\33\ While this regulatory change will enable shippers to
release capacity at any nomination opportunity, the existing NAESB
recall standards do not permit releasing shippers to take full
advantage of the intra-day nomination opportunities by recalling the
capacity and renominating that capacity at each of the four scheduling
opportunities. Allowing partial day recalls is, therefore, consistent
with the overall regulatory changes promulgated in Order Nos. 636 and
637.
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\33\ 18 CFR 284.12(c)(1)(ii) (2001) (permitting shippers
acquiring released capacity to submit a nomination at the earliest
available nomination opportunity after the acquisition of capacity).
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[[Page 11910]]
27. Policy considerations further support enhanced recall rights.
Permitting enhanced recall rights will provide firm shippers with added
flexibility and will better enable releasing shippers to offer released
capacity that competes with the pipelines' interruptible service. The
current NAESB standards inhibit the ability of shippers to release
capacity because releasing shippers cannot quickly reclaim capacity
when they require it for their own use. For example, under the current
NAESB standards, in order to recall capacity for the next gas day, a
shipper must notify the pipeline by 8 a.m. the day before the recall
can take effect and cannot use partial or flowing day recalls. By
establishing an 8 a.m. deadline for recall notifications, the standard
effectively precludes a releasing shipper from recalling capacity at
the Evening Nomination cycle. In fact, a shipper that misses the 8:00
a.m. CCT recall notification time will miss four nomination
opportunities and will be unable to have its volume flow until 48 hours
after it submits the recall notification.\34\
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\34\ A releasing shipper that misses the 8 a.m. CCT notification
time cannot renominate that capacity until 11:30 a.m. CCT the next
day, a nomination under which gas will not flow until 9:00 a.m. CCT
the day after.
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28. As a result of such lengthy delays, releasing shippers may not
be able to use their recall rights as effectively as possible to ensure
that they can retain adequate peak day capacity for their own needs.
The delay in rescheduling recalled capacity also can have an adverse
competitive impact on the market by reducing the amount of capacity
available for release. As AGA points out, if an LDC is a provider of
last resort under a state unbundling initiative and is given notice
that insufficient supply is being delivered to its city-gate, the LDC
will need to recall released capacity for later in the same day or, at
least, for the next day. Without the ability to recall capacity more
frequently, a releasing shipper with supplier-of-last-resort
obligations will be reluctant to release capacity at all since it will
not be able to recall that capacity when it is needed. In that event,
replacement shippers will have less capacity from which to choose and
will have fewer alternatives to purchasing pipeline interruptible
service.
29. Replacement shippers benefit from having a more open and
competitive capacity market, with more capacity available to compete
with pipeline interruptible transportation. As APS/PWEC states, ``as a
captive shipper on a fully subscribed pipeline, APS/PWEC supports any
initiative that would free up excess capacity (even in the short
run).'' \35\ Replacement shippers will not be required to purchase
released capacity with partial day recalls, but will be able to choose
the capacity with terms that best fits their needs. Releasing shippers
will be able to release capacity without a partial day recall condition
and will have an incentive to do so, because a release not subject to
recall will be more valuable (and higher priced) than a release subject
to recall. Replacement shippers will know the terms of releases upfront
and can determine whether to purchase recallable capacity or seek more
reliable capacity, and can take the recall conditions into account in
determining how much the capacity is worth.
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\35\ APS/PWEC Comment, at 3.
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30. Under the regulations adopted in this rule, the releasing
shipper will be able to recall unscheduled capacity at any of the four
nomination cycles and can recall scheduled capacity so long as the
replacement shipper has an opportunity to reschedule its gas. The
replacement shipper will receive protection against loss of service
similar to that interruptible shippers currently receive.
31. In Order No. 587-G, the Commission adopted a regulation stating
that when an interruptible shipper's volumes are to be reduced as a
result of a nomination by a firm shipper, the interruptible shipper
must be provided with advanced notice of such reduction and must be
notified whether penalties will apply on the day its volumes are
reduced.\36\ The Commission further determined that interruptible
shippers could be bumped by firm intra-day nominations at the first
three nomination opportunities, but could not be bumped at the third
intra-day nomination opportunity (5 p.m. CCT) since they would not have
an opportunity to reschedule their gas for that gas day. The Commission
provided this protection against bumping to provide stability in the
nomination system, so that shippers can be confident by late afternoon
that they will receive their scheduled flows.\37\
---------------------------------------------------------------------------
\36\ 18 CFR 284.12 (c)(1)(i)(A).
\37\ Order No. 587-G, 63 FR at 20078, FERC Stats. & Regs.
Regulations Preambles [July 1996-December 2000]
para. 31,062, at
30,671-72.
---------------------------------------------------------------------------
32. This rationale applies equally to replacement shippers, which,
under the regulations adopted in this rule, must be given advance
notification of any recall and cannot have scheduled volumes reduced
unless they have been given an opportunity to reschedule their gas. In
addition, the Commission required pipelines to waive certain non-
critical penalties for bumped interruptible shippers, and the same
penalty waiver will be applied to bumped replacement shippers.\38\
---------------------------------------------------------------------------
\38\ Order No. 587-G, 63 FR at 20078-79, FERC Stats. & Regs.
Regulations Preambles [July 1996-December 2000]
para. 31,062, at
30,672-73.
---------------------------------------------------------------------------
33. The Commission recognizes that implementation of recalls at the
Intra-Day 1 and 2 cycles can affect flowing gas and, as the comments
point out, result in the need to allocate daily nominations (and
potentially penalties) between releasing and replacement shippers. But
these issues are not insurmountable and should not prevent
implementation of partial day recalls. Some pipelines already have
implemented partial day recalls on their systems.\39\ Rather than
having pipelines implement partial day recalls based on their own
distinct processes for handling allocation and other operational
issues, the Commission is providing an opportunity for NAESB to reach
consensus on a set of standards that can be applied to all partial day
recalls. Therefore, the Commission will postpone implementation of
partial or flowing day recalls of scheduled gas at the Intra-Day 1 and
Intra-Day 2 cycles, and provide NAESB with six months to develop
standards governing recalls at these cycles that affect flowing gas. At
the end of this period, NAESB should file with the Commission the
standards it has developed or, if it is unable to reach consensus, a
report outlining the standards considered, the voting records with
regard to these standards, and the reasons for its inability to reach
consensus. Other industry members can also submit comments and will
have an additional 15 days from the filing of the NAESB information to
file additional comments on the NAESB report. Since NAESB has already
been working on the partial day recall issue, six months should provide
a sufficient time period for developing standards. Once the Commission
receives the report from NAESB and the comments, it will issue an order
establishing the requirements for partial day recalls.
---------------------------------------------------------------------------
\39\ Dominion Transmission, Inc., 95 FERC para. 61,316, at
62,080 (2001); National Fuel Gas Supply Corporation, 96 FERC para.
61,182, at 61,804 (2001).
---------------------------------------------------------------------------
34. The Commission, however, sees no reason for delaying
implementation of partial day recalls for the Evening Cycle and for
recalls of unscheduled capacity. Recalls in these situations will not
present allocation or other operational difficulties for the pipelines.
Such recalls do not affect flowing volumes and, therefore, do not
result in the need to allocate daily gas supplies
[[Page 11911]]
between releasing and replacement shippers. In order to provide
shippers more flexibility in their use of capacity, the Commission will
require pipelines by May 1, 2002, to file tariff sheets, as discussed
below, to implement partial day recalls for the Evening Cycle and for
unscheduled capacity. These tariff sheets are to become effective by
July 1, 2002.
35. Schedule for Implementation of Recalls for Evening Nomination
Cycle and Unscheduled Capacity
36. The NOPR proposed that no advance notice of recalls would be
provided, so that the recall and a renomination of the releasing
shipper would be provided at each of the standard nomination cycles.
For example, under the proposal in the NOPR, the releasing shipper
would notify the pipeline at 6 p.m. CCT (Evening Nomination) that
capacity is being recalled and would simultaneously submit a nomination
at the same time. The replacement shipper would not be notified of the
bump, under this proposal, until the deadline for reporting of
scheduled volumes (10 p.m. CCT).
37. A number of comments, however, maintain that recall notices and
nominations should not be simultaneous and that pipelines and
replacement shippers need advance notice of recalls. Whether to
establish an advance notification requirement for recalls, and how that
notice should be provided, are issues NAESB needs to consider during
its deliberations. The treatment of advance notification can determine
whether recalls at the Intra-Day 2 cycle can bump scheduled volumes. If
NAESB provides for advance notice of recalls to pipelines and
replacement shippers, releasing shippers could be permitted to bump
scheduled gas at the Intra-Day 2 cycle, since replacement shippers will
have sufficient advance notice to reschedule bumped gas at the Intra-
Day 2 cycle.\40\ On the other hand, if advance notice is not provided,
then, under this rule, recalls would not be permitted at the Intra-Day
2 cycle since the replacement shipper would not have an opportunity to
reschedule its gas.
---------------------------------------------------------------------------
\40\ If advance notice of recalls is provided, the bumping rules
for recalled capacity may not need to be identical to those for
interruptible shippers. Interruptible shippers cannot be bumped at
the Intra-Day 2 cycle because, under current NAESB standards, they
are not provided with advance notice of the bump and so cannot
renominate at the Intra-Day 2 cycle. 18 CFR 284.12(b)(1)(1),
Nominations Related Standards 1.3.2 (Intra-Day 2 nomination is
received at 5 p.m. CCT with no advance notice to interruptible
shippers of volumes to be bumped). In contrast, if advance notice of
recalls is provided to replacement shippers, their scheduled
capacity can be recalled at the Intra-Day 2 cycle because the
replacement shipper will have sufficient notice to renominate at the
Intra-Day 2 cycle.
---------------------------------------------------------------------------
38. Since the Commission is implementing recalls of scheduled gas
at the Evening Nomination cycle and recalls of unscheduled gas at the
Intra-Day 1 and Intra-Day 2 cycles, pipelines will need to implement an
interim schedule for implementing recalls for these cycles. In order to
assure expeditious compliance with these requirements, the Commission
is establishing, as discussed below, an interim timeline for recalls
and will require each pipeline to include standard tariff language in
its tariff providing for such recalls.
39. The fundamental precept of the interim schedule being adopted
by the Commission is that releasing shippers must be provided with
sufficient time after receipt of scheduled quantities to inform the
pipeline of a recall. Releasing shippers, such as LDCs, need to be
aware of the scheduled volumes for their systems prior to determining
whether they will need to recall capacity. Thus, the advance
notification period should give releasing shippers the time to evaluate
the scheduled quantities information before having to submit the recall
notice.\41\ Further, although the Commission is not convinced that the
existing 3 \1/2\ hour advance notice requirement for the Timely
Nomination cycle \42\ is necessary, the Commission will permit
pipelines to continue to use this notification period for notification
of recalls for the Timely Nomination cycle while NAESB considers the
schedule for recalls.
---------------------------------------------------------------------------
\41\ For example, under the Timely Nomination cycle, scheduled
volumes are provided at 4:30 p.m. Releasing shippers need sufficient
time to evaluate this information before determining whether to
recall capacity for the 6 p.m. Evening Nomination cycle.
\42\ Capacity Release Related Standards 5.3.6 (notice must be
given by 8 a.m. CCT for recall effective at the 11:30 a.m. Timely
Nomination cycle).
---------------------------------------------------------------------------
40. Based on these precepts, the Commission is establishing the
following interim schedule for notification to pipelines and
replacement shippers of recalls of capacity at the Evening Nomination
cycle and for recalls of unscheduled capacity.
----------------------------------------------------------------------------------------------------------------
Receipt of Pipeline
Nomination cycle (all times in scheduled volumes Recall notification to Nomination time
CCT) (from prior notification to replacement shipper (same day)
nomination cycle) pipeline of recall
----------------------------------------------------------------------------------------------------------------
Timely........................ NA............... 8 a.m............ 9 a.m............... 11:30 a.m.
Evening....................... 4:30 p.m. same 5 p.m............ 6 p.m............... 6 p.m.
day.
Intra-Day 1................... 10 p.m. CCT prior 8 a.m............ 9 a.m............... 10 a.m.
day.
Intra-Day 2................... 2 p.m. same day.. 3 p.m............ 4 p.m............... 5 p.m.
----------------------------------------------------------------------------------------------------------------
41. To ease the compliance and review burden on both pipelines and
shippers, each pipeline is required to file standard tariff language to
implement such recalls stating the following:
Releasing shippers may, to the extent permitted as a condition
of the capacity release, recall released capacity (scheduled or
unscheduled) at the Timely Nomination cycle and the Evening
Nomination cycle, and recall unscheduled released capacity at the
Intra-Day 1 and Intra-Day 2 Nomination cycles by providing notice to
the Transporter by the following times for each cycle: 8 a.m. CCT
for the Timely Nomination cycle; 5:00 p.m. CCT for the Evening
Nomination Cycle; 8 a.m. CCT for the Intra-Day 1 Nomination cycle,
and 3:00 p.m. for the Intra-Day 2 Nomination cycle. Notification to
replacement shippers provided by Transporter within one hour of
receipt of recall notification.
The Commission will revisit this schedule after NAESB has had an
opportunity to develop standardized timelines for partial day recalls.
42. The Commission will address below those comments opposing or
suggesting changes in the regulation or requesting clarification.
Comments addressing procedural issues will not be addressed since NAESB
will be considering those issues.
[[Page 11912]]
43. Comments on Adoption of Partial Day Recall Requirement
44. Those opposing adoption of a regulation permitting partial day
recalls contend that permitting any partial day recalls will operate to
diminish the attractiveness of released capacity, and will, therefore,
result in limiting competition between pipeline firm and released
capacity. They further maintain that allowing partial day recalls will
be harmful to replacement shippers, because replacement shippers will
be unable to reschedule gas bumped by the partial day recall. DETM
contends that, for better or worse, all gas transactions occur for a
full gas day, and that this will create difficulties for replacement
shippers trying to reschedule gas subject to partial day recalls. DETM
further maintains that no data supports the proposition that the
availability of partial day recalls will have any measurable impact on
the availability of released capacity.
45. Since Order No. 636, the Commission's regulation of released
capacity has proceeded from the presumption that the best way to
improve access to capacity is to provide both releasing and replacement
shippers as much flexibility as possible in structuring their capacity
release transactions. In Order No. 637, for instance, the Commission
required pipelines to permit releasing and replacement shippers to
consummate capacity release transactions at each of the four intra-day
nomination opportunities to ensure that replacement shippers could
obtain capacity when they need it.\43\ Similarly, allowing partial day
recalls will provide releasing shippers with similar flexibility to
structure capacity releases that fit their requirements. Indeed, as the
gas market has been developing, shippers want more flexibility, not
less, to adjust nominations on an intra-day basis.\44\ Allowing partial
day recalls is a step towards the Commission's, as well as the
industry's, goal of providing shippers with enhanced scheduling
opportunities so that they can adjust their gas nominations to accord
with their market needs.\45\
---------------------------------------------------------------------------
\43\ 18 CFR 284.12(c)(1)(ii).
\44\ See Reliant Energy Gas Transmission Company, 93 FERC para.
61,141 (2000) (proposal for hourly nominations to meet customer
needs for quick adjustment due to demand changes).
\45\ NAESB's standards recognize that the current nomination
scheduling is merely ``an interim step to continuous and contiguous
scheduling.'' Nominations Related Standards 1.1.2.
---------------------------------------------------------------------------
46. Moreover, it is not clear that prohibiting partial day recalls
would benefit replacement shippers in the long run. DETM and Dynegy
appear to be assuming that without partial day recalls, firm shippers
will release the same amount of capacity on a full day's basis as they
would if partial day recalls are available. However, many of the
comments point out that firm shippers that need capacity on short
notice are reluctant to release their capacity at all if they are
unable to recall that capacity in the event of changed circumstances,
such as dropping temperatures or the failure of a marketer to deliver
gas.\46\ According to the comments, this is particularly true for LDCs
with supplier-of-last-resort obligations that need to be able to recall
capacity quickly if marketers fail to provide gas to the LDCs city-
gate.\47\ Allowing partial day recalls will remove this disincentive to
release capacity, thereby making incremental capacity available and
benefitting replacement shippers by providing them with more options,
particularly on fully subscribed pipelines.\48\
---------------------------------------------------------------------------
\46\ See Comments of Dominion LDCs, at 4 (partial day recalls
``will free up capacity that would otherwise be held by LDCs and
other shippers that cannot risk releasing it for an extended
period''); Kentucky (``the inability to reschedule recalled capacity
will result in the reduction of the amount of capacity available,
thereby adversely impacting competition'').
\47\ See Comments of AGA, Dominion LDCs, APGA, Con Edison,
Kentucky, KeySpan, PSCNY (partial day recalls crucial to retail
access programs where recall is needed to ensure reliability).
\48\ See Comment of APS/PWEC, at 3 (supporting partial day
recalls as making incremental capacity available on fully subscribed
pipelines).
---------------------------------------------------------------------------
47. Dynegy, DETM, and EPSA further assert that allowing partial day
recalls may make capacity releases subject to such recalls less
valuable to replacement shippers. In the first place, as noted above,
the commenters are assuming such capacity will be available for release
if partial day recall rights were not available to the releasing
shipper, an assumption that other comments show is not necessarily
correct. Released capacity available subject to partial day recall is
certainly more valuable to replacement shippers than not having that
capacity available at all.
48. Moreover, if replacement shippers find that released capacity
with partial day recalls is too unreliable, they need not purchase that
released capacity and can negotiate with the releasing shippers for
conditions providing more reliable service. Under the regulations
adopted here, releasing shippers are not required to include partial
day recalls in their releases. Releasing shippers can release capacity
on a full day basis (not subject to partial day recalls) and will have
an incentive to do so, because a full day release will be more valuable
(and higher priced) than a partial day recall release. The replacement
shippers will know the terms of releases upfront and can determine
whether to purchase that capacity, negotiate other terms with the
releasing shipper, or seek more reliable capacity, and can take the
recall conditions into account in determining how much the capacity is
worth. In a fully functioning market, buyers and sellers negotiate over
the terms of their deals so that the price and other components reflect
terms that are mutually agreeable to both parties. Imposing artificial
regulatory limits on the negotiating position of one party to the
transaction, as proposed by those opposing partial day recalls, is the
antithesis of fully functioning markets, and can only create a less
efficient marketplace.
49. DETM and Dynegy also contend that permitting partial day
recalls will reduce the reliability of the pipeline grid because
replacement shippers are subject to losing their capacity and may be
unable to reschedule capacity. These arguments are reminiscent of the
arguments made in 1998 against allowing firm intra-day nominations to
bump interruptible transportation on the grounds that interruptible
shippers would have difficulty rescheduling their gas.\49\ In that
case, the Commission rejected such claims, finding that:
---------------------------------------------------------------------------
\49\ See Order No. 587-G, 63 FR at 20077-78, FERC Stats. & Regs.
Regulations Preambles [July 1996-December 2000]
para. 31,062, at
30,669-30,672.
Firm shippers are paying reservation charges for priority rights
and those rights should include the right to have a nomination
become effective as early as possible on the gas day following the
nomination. Interruptible shippers voluntarily take the risk that
their service will be interrupted and while they are entitled to
advance notice of such interruption, they should not be able to
prevent firm shippers from having their nominations take effect at
the earliest possible time. Gas flows on the interstate grid 24-
hours a day, and is consumed throughout the day, so interruptible
shippers need to be prepared to adjust gas volumes even during non-
business hours.\50\
---------------------------------------------------------------------------
\50\ Order No. 587-G, 63 FR at 20078, FERC Stats. & Regs.
Regulations Preambles [July 1996-December 2000]
para. 31,062, at
30,671.
50. In this instance, firm shippers paying reservation charges
should similarly have the ability to control the use of their capacity
by employing partial day recalls. Shippers purchasing released capacity
subject to partial day recalls, like those purchasing interruptible
transportation, are taking the risk that their scheduled quantities may
be disrupted. As gas markets continue to develop, such adjustments will
be increasingly necessary to provide those shippers holding firm
[[Page 11913]]
capacity with the utmost flexibility in their use of the capacity for
which they pay.
51. Moreover, like interruptible shippers, replacement shippers are
protected, because bumping of scheduled volumes is only permitted if
the replacement shipper has at least one opportunity to reschedule its
gas. Replacement shippers also have tools available, such as pooling,
gas package identifiers, and ranking, that they can use to manage their
gas supplies in the event of a bump.\51\
---------------------------------------------------------------------------
\51\ 18 CFR Sec. 284.12 (b)(1)(i), Nominations Related Standards
1.3.18, 1.3.23, 1.3.24. Pooling together with ranking permit
shippers to designate which supplies or markets should be cut first
in the event scheduled volumes are reduced.
---------------------------------------------------------------------------
52. WDG maintains that the Commission should not exempt the Intra-
Day 2 nomination from a partial day recall. It argues that the
replacement shippers have fair notice that their capacity is
recallable, and therefore are not prejudiced by having a recall at the
Intra-Day 2 cycle.
53. The regulation adopted in this rule does not prohibit all
recalls at the Intra-Day 2 cycle. Recalls of unscheduled capacity can
be made at the Intra-Day 2 cycle. As discussed earlier, NAESB is to
consider establishing a notification schedule by which pipelines and
replacement shippers are to be notified of recalls. Bumping at the
Intra-Day 2 cycle may be permitted depending on whether the replacement
shipper is given sufficient time to renominate any bumped gas at the
Intra-Day 2 cycle.
54. DETM maintains that the partial day recall issue is not a
policy dispute, but a business issue that should be left to NAESB to
resolve. It argues that the Commission has historically deferred to the
determinations of NAESB on business issues and, therefore, should not
overturn the business decision by NAESB to prohibit partial day
recalls.
55. The dispute here is not simply a question of business
practices, but a question of regulatory policy regarding the relative
rights of releasing and replacement shippers under the Commission's
capacity release mechanism. Here, the Commission has determined that,
under its regulations, releasing shippers should be given full rights
to use their capacity flexibly by recalling that capacity on an intra-
day basis, and that the contrary NAESB standards should no longer be
incorporated by reference.
56. It is true that the Commission gives great weight to the
standards adopted by NAESB, because these standards represent a
consensus of the industry. In fact, the Commission initially adopted
NAESB's consensus standards limiting capacity release recalls, even
though the Commission's regulations (Sec. 284.8 (b)) would have
permitted partial day recalls. Now, however, it is clear from the
record of deliberations at NAESB, and the comments filed in this
proceeding, that the existing NAESB standards on partial day recalls no
longer command a consensus of the industry.\52\ At this point, NAESB is
stalemated, without being able to achieve a consensus in either
direction. Since consensus no longer obtains, the Commission needs to
resolve the policy dispute and has determined that allowing partial day
recalls is consistent with the Commission's regulations, will provide
incentives to release additional capacity, and will foster enhanced
competition.
---------------------------------------------------------------------------
\52\ Under NAESB's procedures, a consensus is required to
approve standards, but equally a consensus is needed to change or
remove a standard. For example, if NAESB's current partial day
recall standards (5.3.6 and 5.3.7) were resubmitted for a vote
today, the comments make clear that these standards would not
command a consensus at NAESB.
---------------------------------------------------------------------------
57. Requests for Clarification
58. A number of the comments ask for clarification of aspects of
the regulations and the way in which partial day recalls will operate.
59. Applicability of Recall Conditions
60. NiSource maintains the Commission's regulation is vague and
seems to imply that all released capacity is subject to partial day
recalls. Williams and ENA similarly seek clarification that parties
retain the flexibility to decide whether capacity is recallable on an
intra-day basis. Williams further seeks clarification that the proposed
rule is prospective only and does not affect previous capacity release
contracts.
61. The Commission has revised its proposed regulation to make
clear that pipelines need only provide releasing shippers with the
opportunity to include partial day recalls as a condition in capacity
release offers. Whether a partial day recall applies to a capacity
release will depend upon the terms of the agreement between the
releasing and replacement shipper. Because the terms of the agreement
govern, the Commission agrees with Williams that implementation of this
regulation is prospective only and will not change the terms of already
negotiated capacity release transactions.
62. Schedule for Notification of Recalls for Timely Nomination
Cycle and Reputs
63. The Industrials maintain that the Commission should not
eliminate NAESB standard 5.3.6 which establishes 8 a.m. CCT as the
deadline for notification of a recall applicable to the Timely
Nomination cycle (11:30 a.m.). The Industrials are concerned that the
elimination of this provision will force all recalls into the intra-day
cycles or will mean that recall timing will be left either to the
contract between the releasing and replacement shipper or to individual
tariff provisions. The Industrials further request that the Commission
consider a timeline for notification of reputs (in which recalled
capacity reverts to the replacement shipper after a recall ends), or
request NAESB to consider this issue.
64. The Commission recognizes that a standard timeline for recall
notification is needed and is referring this issue to NAESB for
consideration of a new standard. In the interim while NAESB is
considering a new standard, the Commission is permitting pipelines to
continue to use the notification period in current standard 5.3.6 for
the Timely Nomination cycle, and, as described earlier, has established
an interim notification schedule for the other nomination cycles. NAESB
also should consider whether a schedule or timeline for reput
notification is necessary.
65. Penalty Exposure
66. Dynegy and NGSA maintain that partial day recalls should not
result in greater penalty exposure for shippers whose capacity has been
recalled. As discussed earlier, the Commission in Order No. 587-G
required pipelines to waive non-critical penalties for bumped
interruptible shippers. Pipelines should apply the same waivers for gas
bumped through partial day recalls.
67. Effect on Alternate Points
68. NiSource seeks clarification that partial day recalls will not
permit the releasing shipper recalling capacity to change to an
alternate point and bump firm capacity that is already scheduled (by a
third party) at that point. The recall only permits the releasing
shipper to displace gas scheduled by the replacement shipper. The
Commission agrees that partial day recalls will not give the recalling
shipper any greater scheduling rights vis a vis third parties.
69. Pipelines Offering Non-Standard Nomination Opportunities
70. Dominion requests clarification that pipelines offering more
nomination opportunities than the four standard
[[Page 11914]]
times provided in the NAESB standards, need not offer partial day
recall at non-standard nomination times. Dominion maintains that it
provides additional nomination times early in the morning (7:45 a.m.
CCT) and late in the evening (8:45 p.m.), and states that its staffing,
and that of shippers, at these times does not permit processing of
recalls. In addition, Dominion contends that other pipelines are not
equipped to coordinate recalls at those hours.
71. Pipelines are certainly free to provide for recalls at non-
standard nomination periods. However, in implementing recalls during
the interim period in which NAESB is considering standards, the
Commission will require recalls to be processed only at the standard
nomination periods; pipelines need not permit recalls at any non-
standard nomination times. In considering standards for partial day
recalls, NAESB should consider whether standards should be developed to
permit recalls at certain non-standard nomination opportunities.
72. Effect on Already Accepted Partial Day Recall Programs
73. Dominion requests clarification that the final rule does not
affect Dominion's settlement in its Order No. 637 proceeding in which
it provides partial day recalls at certain nomination opportunities.
For example, Dominion states that it currently does not permit recalls
at the Intra-Day 1 cycle, although it does not object to permitting
such recalls if required by the Commission.
74. All pipelines will be required to conform to the requirements
of the Commission regulation, regardless of the terms of previous
approved tariffs. The Commission is acting under section 5 of the
Natural Gas Act in requiring pipelines to permit releasing shippers to
use partial day recalls and is seeking to establish standards to apply
to such recalls across the interstate grid. Accordingly, all pipelines
with tariffs inconsistent with the Commission's regulation must comply
with that regulation. Dominion, for instance, is required, as are the
other pipelines, to permit recalls at the Intra-Day 1 cycle (to which
it has no objection). Similarly, Dominion is required to permit recalls
under the schedule established by the Commission in this rule for the
interim period while NAESB is considering standards for partial day
recalls, and will be required to comply with subsequent timeline NAESB
develops and the Commission adopts.
75. Pipeline Capacity
76. EIP is concerned that partial day recalls are at odds with the
NAESB standards requiring that all nominations be for daily quantities.
EIP maintains that if partial day recalls are permitted for released
capacity, pipelines should be permitted to sell their capacity for less
than a full day as well.
77. EIP appears to be suggesting that a partial day recall refers
to a sale of capacity for a time period of less than one day, whereas
pipelines under the NAESB standards can only sell capacity for a full
day's quantity. The Commission is not establishing different standards
for pipeline capacity as compared to released capacity. As Gulf South
explains in its comments, a partial day recall should not be viewed as
a recall for a specific portion (number of hours) of a gas day. Rather,
the recall is for a proportionate share of the total contract quantity.
For example, if a capacity release is for a contract quantity of 2400
Dth, and the replacement shipper flowed 800 Dth during the first eight
hours prior to recall, the releasing shipper would still have a
contract quantity of 1600 Dth remaining on the contract for the
remainder of the gas day. In the same way, pipelines can sell capacity
at each of the intra-day nomination opportunities whenever capacity is
available.\53\
---------------------------------------------------------------------------
\53\ Indeed, Commission policy requires pipelines to sell
capacity at the maximum tariff rate whenever that capacity is
available, including on an intra-day basis. Tennessee Gas Pipeline
Company, 91 FERC para. 61,053, at 61,190 (2000); 18 CFR 284.7 &
284.9 (must sell services without regard to duration of the
service).
---------------------------------------------------------------------------
78. Notice of Use of Voluntary Consensus Standards
Office of Management and Budget Circular A-119 (Sec. 11) (February
10, 1998) provides that when a federal agency issues or revises a
regulation containing a standard, the agency should publish a statement
in the final rule identifying whether a voluntary consensus standard or
a government-unique standard is being adopted. In this rulemaking, the
Commission is issuing its own regulation and rescinding the
incorporation by reference of NAESB standard 5.3.6 and part of 5.3.7,
because the existing NAESB standard has not been revised to take into
account changed circumstances, there is no longer consensus supporting
this standard, and the existing standard fails to reflect Commission
policy.
79. Information Collection Statement
80. The Office of Management and Budget's (OMB) regulations in 5
CFR 1320.11 require that it approve certain reporting and recordkeeping
requirements (collections of information) imposed by an agency. Upon
approval of a collection of information, OMB will assign an OMB control
number and an expiration date. Respondents subject to the filing
requirements of this Rule will not be penalized for failing to respond
to these collections of information unless the collections of
information display a valid OMB control number.
81. The final rule will affect one existing data collection, FERC-
545 ``Gas Pipeline Rates: Rate Change (Non-Formal)'' (OMB Control No.
1902-0154). The following burden estimates are related only to this
rule and include the costs of complying with the tariff filing
requirement. Since this final rule will be implemented in two phases,
the number of responses per respondent has been increased from one, as
proposed in the NOPR, to two because each respondent will need to make
two tariff filings, one for phase one and one for phase two.
[[Page 11915]]
----------------------------------------------------------------------------------------------------------------
Number of
Data collection Number of responses per Hours per Total annual
respondents respondent response hours
----------------------------------------------------------------------------------------------------------------
FERC-545.................................... 93 2 38 7,068
----------------------------------------------------------------------------------------------------------------
FERC-545
------------------------------------------------------------------------
Annualized Capital/Startup Costs........................ $397,714
Annualized Costs (Operations & Maintenance)............. 0
---------------
Total Annualized Costs.............................. 397,714
------------------------------------------------------------------------
The cost per respondent is $4,276.00 (rounded off).
82. The Commission sought comments to comply with these
requirements. Comments were received from twenty-eight entities. No
comments addressed the reporting burden imposed by these requirements.
The substantive issues raised by the commenters are addressed within
the rule.
83. The Commission's regulations adopted in this rule are necessary
to further the process begun in Order No. 587 of creating a more
efficient and integrated pipeline grid by standardizing the business
practices and electronic communication of interstate pipelines.
Adoption of these regulations will update the Commission's regulations
relating to business practices and provide greater flexibility for
capacity holders on interstate pipelines by synchronizing the
Commission's regulation of recalled capacity with its standards for
intra-day nominations. The public also benefits by having greater
competition across the pipeline grid as a result of firm capacity
holders having increased flexibility in structuring their capacity
release transactions.
84. The Commission has assured itself, by means of its internal
review, that there is specific, objective support for the burden
estimates associated with the information requirements. The information
required in the Final Rule will help the Commission carry out its
responsibilities under the Natural Gas Act and conforms to the
Commission's plan for efficient information collection, communication,
and management within the natural gas industry.
85. Interested persons may obtain information on the reporting
requirements by contacting the following: Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426 [Attention:
Michael Miller, Office of the Chief Information Officer, CI-1, (202)
208-1415, or mike.miller@ferc.fed.gov]
or the Office of Management and
Budget, Office of Information and Regulatory Affairs, Attention: Desk
Officer for the Federal Energy Regulatory Commission, 725 17th Street,
NW., Washington, DC 20503. The Desk Officer can also be reached at
(202) 395-7318, or fax: (202) 395-7285.
86. Environmental Analysis
87. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\54\ The
Commission has categorically excluded certain actions from these
requirements as not having a significant effect on the human
environment.\55\ The regulations adopted in this rule fall within
categorical exclusions in the Commission's regulations for rules that
are clarifying, corrective, or procedural, for information gathering,
analysis, and dissemination, and for sales, exchange, and
transportation of natural gas that requires no construction of
facilities.\56\ Therefore, an environmental assessment is unnecessary
and has not been prepared.
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\54\ Order No. 486, Regulations Implementing the National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs. Preambles 1986-1990 para. 30,783 (1987).
\55\ 18 CFR 380.4.
\56\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5), 380.4(a)(27).
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88. Regulatory Flexibility Act Certification
89. The Regulatory Flexibility Act of 1980 (RFA) \57\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The regulations proposed here impose requirements only on interstate
pipelines, which are not small businesses, and, these requirements are,
in fact, designed to benefit all customers, including small businesses.
Accordingly, pursuant to Sec. 605(b) of the RFA, the Commission hereby
certifies that the regulations adopted herein will not have a
significant adverse impact on a substantial number of small entities.
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\57\ 5 U.S.C. 601-612.
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90. Document Availability
91. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through FERC's Home Page (http://www.ferc.gov) 
and in FERC's
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m.
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
92. From FERC's Home Page on the Internet, this information is
available in both the Commission Issuance Posting System (CIPS) and the
Records and Information Management System (RIMS).
--CIPS provides access to the texts of formal documents issued by the
Commission since November 14, 1994.
--CIPS can be accessed using the CIPS link or the Documents & Filing
link. The full text of this document is available on CIPS in ASCII and
WordPerfect 8.0 format for viewing, printing, and/or downloading.
--RIMS contains images of documents submitted to and issued by the
Commission after November 16, 1981. Documents from November 1995 to the
present can be viewed and printed from FERC's Home Page using the RIMS
link or the Documents & Filing link. Descriptions of documents back to
November 16, 1981, are also available from RIMS-on-the-Web; requests
for copies of these and other older documents should be submitted to
the Public Reference Room.
93. User assistance is available for RIMS, CIPS, and the Website
during normal business hours from our Help line at (202) 208-2222 (E-
Mail to WebMaster@ferc.fed.us) or the Public Reference at (202) 208-
1371 (E-Mail to public.referenceroom@ferc.fed.us).
94. During normal business hours, documents can also be viewed and/
or printed in FERC's Public Reference Room, where RIMS, CIPS, and the
FERC Website are available. User assistance is also available.
[[Page 11916]]
95. Implementation Dates
96. As discussed herein, interstate pipelines are required, by May
1, 2002, to make tariff filings, to become effective by July 1, 2002,
to comply with the requirement to implement recalls of scheduled and
unscheduled capacity for the Timely and Evening Nomination cycles and
for recalls of unscheduled capacity. Each tariff filing must include
the tariff language set forth at P. 41.
97. By October 1, 2002, NAESB should file comments with the
Commission detailing the standards NAESB has adopted relating to
partial day recalls or, if none has been adopted, those that were
considered, as well as all other material relevant to NAESB's
consideration of the standards. Other industry members also can submit
comments by October 1, 2002, and will have until October 15, 2002 to
file additional comments on the NAESB report.
98. Effective Date
99. These regulations are effective April 17, 2002. The Commission
has determined, with the concurrence of the Administrator of the Office
of Information and Regulatory Affairs of OMB, that this rule is not a
``major rule'' as defined in section 351 of the Small Business
Regulatory Enforcement Fairness Act of 1996.
List of Subjects in 18 CFR Part 284
Continental shelf, Incorporation by reference, Natural gas,
Reporting and recordkeeping requirements.
By the Commission.
Magalie R. Salas,
Secretary.
In consideration of the foregoing, the Commission amends Part 284,
Chapter I, Title 18, Code of Federal Regulations, as follows.
PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES
1. The authority citation for part 284 continues to read as
follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7532;
43 U.S.C. 1331-1356.
2. Section 284.12 is amended as follows:
a. The heading of paragraph (b) is revised by removing the word
``GISB'' and adding, in its place, the word ``NAESB.''
b. Paragraphs (b)(1) and (b)(2) are amended by removing the words
``Gas Industry Standards Board'' and adding, in their place, the words
``North American Energy Standards Board.''
b. Paragraph (b)(1)(v) is revised.
c. The heading of paragraph (c)(1)(ii) is revised, and the text of
paragraph of (c)(1)(ii) is designated as (c)(1)(ii)(A).
d. Paragraph (c)(1)(ii)(B) is added.
The revised and added text reads as follows:
Sec. 284.12 Standards for pipeline business operations and
communications.
* * * * *
(b) * * *
(1) * * *
(v) Capacity Release Related Standards (Version 1.4, August 31,
1999), with the exception of Standard 5.3.6 and the first sentence of
Standard 5.3.7.
* * * * *
(c) * * *
(1) * * *
(ii) Capacity release scheduling.
(A) * * *
(B) A pipeline must permit releasing shippers, as a condition of a
capacity release, to recall released capacity and renominate such
recalled capacity at each nomination opportunity. Each replacement
shipper must be provided with advance notice of such recall and must be
notified whether penalties will apply on the day its volumes are
reduced.
* * * * *
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix
Comments Filed
[Docket No. RM96-1-019]
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Commenter Abbreviation
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American Gas Association...... AGA.
Algonquin Gas Transmission Algonquin/Texas Eastern.
Company and Texas Eastern
Transmission Corporation.
American Public Gas APGA.
Association.
Arizona Public Service Company APS/PWEC.
and Pinnacle West Energy
Corporation.
Consolidated Edison Company of Con Edison.
New York and Orange and
Rockland Utilities, Inc.
Dominion Transmission, Inc.... Dominion.
Duke Energy Trading and DETM.
Marketing, LLC.
Dynegy Marketing and Trade.... Dynegy.
East Ohio Gas Company, The Dominion LDCs.
Peoples Natural Gas Company,
Hope Gas, Inc.
El Paso Pipeline Group........ EPPG.
Enron North America Corp...... ENA.
Enron Interstate Pipelines.... EIP.
Electric Power Supply EPSA.
Association.
Gulf South Pipeline Company... Gulf South.
Interstate Natural Gas INGAA.
Association of America.
Public Service Commission, Kentucky.
Commonwealth of Kentucky.
KeySpan Delivery Companies.... Keyspan.
American Gas Association...... AGA.
Kinder Morgan Pipelines....... Kinder Morgan.
Memphis Light, Gas and Water MLGW.
Division.
Natural Gas Supply Association NGSA.
Public Service Commission of PSCNY.
New York.
NiSource, Inc................. NiSource.
Pennsylvania Office of PA. OCA.
Consumer Advocate.
Process Gas Consumers Group, Industrials.
American Forest & Paper
Association, and Georgia
Industrial Group.
Williams Companies............ Williams.
Williston Basin Interstate Williston.
Pipeline Company.
Wisconsin Distributor Group... WDG.
[[Page 11917]]
Xcel Energy Services, Inc..... Xcel.
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[FR Doc. 02-6239 Filed 3-15-02; 8:45 am]
BILLING CODE 6717-01-P