Pipelines: Pipeline rate reform: What's wrong with contracts?
✍ Scribed by Smead, Richard G.
- Publisher
- John Wiley and Sons
- Year
- 2008
- Weight
- 452 KB
- Volume
- 6
- Category
- Article
- ISSN
- 0743-5665
No coin nor oath required. For personal study only.
✦ Synopsis
Here we go again. Amid a number of well-thoughtat observations and valid questions in the FERC's ratedesign policy statement, we find, one more time, the notion that pipeline customers should have a unilateral right to reduce their contracts. The wording seems innocuous enough at first: In a section labeled "Capacity Adjustments," ratecase parties are directed to explore various reallocations of peak capacity in concert with changes in rate structure. This is a process that already goes on in any major rale case. But the underlying meaning is far less innocuous.
The key sentence says, "For example, pipelines and their customers must pursue contract demand reductions in conjunction with peak rate increases." Now, to whom is this order directed? There are only two kinds of customers-those who want to keep their contracts and those who don't The former do not have to "pursue" anythmg. The combination of their contracts and their certificate obligations from the pipeline cannot easily be disturbed in a rate case. The latter, those customers who want less contract demand, do not have to be told to ask for a reduction-they do so every chance they get No, the contract-reduction language is aimed solely at the pipeline. It says that any rate-design rationalization to charge more properly for peak service cames with it a requirement of contract abrogation. The commission tried this in Order 436, and it was one of the major elements rejected by the DC Circuit in AGD v. FERC. So why is the commission doing it here, and what is wrong with it?