Order 636: Risk management guide for LDCs

✍ Scribed by Kan, Michael E.

• Publisher: John Wiley and Sons
• Year: 2008
• Weight: 548 KB
• Volume: 9
• Category: Article
• ISSN: 0743-5665
• DOI: 10.1002/gas.3410090802

✦ Synopsis

t is no secret that FERC's Order 636 does not I contain great news for the local gas distribution companies (LDCs). In a recent survey, industry analysts were hard pressed to come up with even one aspect of Order 636 that provided opportunities for LDCs. Smaljer LDCs are so dazed by all of the new responsibilities that FERC has provided special pricing provisions that limit rate increases to any particular class due to new rate design changes. In most cases, the provision is protecting only the smallservice class. But price risk is only one of the myriad of Order 636 risk and responsibilities that LDCs must face.

There is a consensus between LDC gas supply planners and industry analysts on the greatest financial risks of Order 636. The most-often-stated concerns of Order 636 are as follows:

Transition costs-The uncertainty of the final bill and allocation of costs to LDCs is a risk. LDCs' ability to recover from their customers is a concern as well. Greater regulatory uncertahty-Will higher courts overturn Order 636? How will restructuring proceedings resolve many issues affecting the ability of LDCs to operate? How will state commissions scrutinize the decisions of LDCs