β Scribed by Smith, William H.
No coin nor oath required. For personal study only.
ERC's Notice of Inquiry (NOI), RM98-12, F gives the industry a very mixed bag to consider. To its credit, the NO1 correctly distinguishes between long-term and short-term markets. These two types of capacity exhibit very different market dynamics and, accordingly, need different regulatory treatment. The NO1 also correctly treats existing capacity and new capacity as different segments of the market. In the same way, their different market incentives suggest separate regulatory treatment.
Unfortunately, the NO1 also suffers from a fundamental assumption that long-term contracts are preferable to short-term. The indicated reason is the benefit of long-term contracts for pipeline investment that may translate to lower rates for pipeline customers. Low price certainly is a desirable feature that customers look for, but it is not the only feature customers want to see in pipeline service, and often not the most important feature.
. --NO1 also suffers from a fundamental assumption that long-term contracts are preferable to short-term.
FERC compounds its prejudice for longterm contracts by suggesting that the typical five-year term is not really long-term. FERC pines nostalgically for long-terms of 10 or 20 years. The NO1 stops just a whisker short of asking what can be done to get the industry William H. Smith Jr. coordinates federaland legislative programs for the Iowa Utilities Board, including the Board's FERC participation.
π SIMILAR VOLUMES
apacity turnback is the unsolved prob-C lem that was created in the process of solving most of the gas industry's other problems. Recent events give little cause for optimism that the problem will decrease. Transwestern Pipeline recently agreed with Southern California Gas, its largest customer, to