Order 636-the right of first refusal

✍ Scribed by Smead, Richard G.

• Publisher: John Wiley and Sons
• Year: 2007
• Weight: 338 KB
• Volume: 13
• Category: Article
• ISSN: 0743-5665
• DOI: 10.1002/gas.3410131007

✦ Synopsis

Order 636-The Right of First Refusal t the same time that it embarked on the A current examination of the natural gas industry of the future, in Docket PL97-1, the Commission issued Order 636C, the order on remand of Order 636. For the most part, this order was fairly noncontroversial, given how the industry has evolved since 1993. No-notice transportation is recognized as just another nondiscriminatory open-access service, available to anyone if the physical capability is there. GSR transition costs are still to be recovered, although there could be some tinkering with how they are allocated. Small-customer relief and SFV mitigation are still case-by-case situations, as necessary to make restructuring work.

However, Order 636C made one major policy choice that reflects very clearly the Commission's perception of today's world, that seriously affects the long-term dynamics of pipeline service, and that gets directly to the heart of the relationship between regulation and private contractual arrangements. This choice is the treatment of the "right of first refusal" (ROFR) mandated by Order 636. Its impact gets directly to many of the issues raised in PL97-1. Why did the Commission do what it did, and are there better alternatives?

Richard G. Smead is senior vice president of Colorado lnferstafe Gas Company, a subsidiary of The Coastal Corporation. He is past chairman of the Rate

Committee of the American Gas Association.