[Federal Register: April 21, 2009 (Volume 74, Number 75)]
[Rules and Regulations]
[Page 18127-18132]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ap09-8]
[[Page 18127]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 284
[Docket No. RM08-1-003, et al.; Order No. 712-B]
Promotion of a More Efficient Capacity Release Market
Issued April 16, 2009.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule; order on rehearing and clarification and
terminating dockets.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
issuing an order addressing the requests for rehearing and
clarification of Order No. 712-A [73 FR 72692, December 1, 2008]. Order
No. 712 [73 FR 37058, June 30, 2008], as modified by Order No. 712-A,
revised the Commission's regulations governing interstate natural gas
pipelines to reflect changes in the market for short-term
transportation services on pipelines and to improve the efficiency of
the Commission's capacity release program. The orders lifted the
maximum rate ceiling on secondary capacity releases of one year or less
provided that such releases take effect within a year of the date that
a pipeline is notified of the release. The revised regulations
facilitated asset management arrangements (AMA) by relaxing the
Commission's prohibition on tying and on its bidding requirements for
certain capacity releases. The Commission further clarified in Order
No. 712 that its prohibition on tying does not apply to conditions
associated with gas inventory held in storage for releases of firm
storage capacity. Finally, the Commission waived its prohibition on
tying and bidding requirements for capacity releases made as part of
state-approved retail access programs.
This Order denies rehearing and grants clarification in part and
denies clarification in part of Order No. 712-A. This order also
terminates Docket Nos. RM06-21-000 and RM07-4-000.
DATES: Effective Date: This order denying rehearing of the final rule
will become effective May 21, 2009.
FOR FURTHER INFORMATION CONTACT:
William Murrell, Office of Energy Market Regulation, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
William.Murrell@ferc.gov, (202) 502-8703.
Robert McLean, Office of General Counsel, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426,
Robert.McLean@ferc.gov, (202) 502-8156.
David Maranville, Office of the General Counsel, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
David.Maranville@ferc.gov, (202) 502-6351.
SUPPLEMENTARY INFORMATION:
Order on Rehearing and Clarification and Terminating Dockets
1. On November 21, 2008, the Commission issued Order No. 712-A in
which it denied rehearing and granted clarification in part of Order
No. 712.\1\ Order No. 712, as modified by Order No. 712-A, revised the
Commission's regulations governing interstate natural gas pipelines to
reflect changes in the market for short-term transportation services on
pipelines and to improve the efficiency of the Commission's capacity
release program. The orders lifted the maximum rate ceiling on
secondary capacity releases of one year or less provided that such
releases take effect within a year of the date that the pipeline is
notified of the release. The revised regulations facilitated asset
management arrangements (AMA) by relaxing the Commission's prohibition
on tying and on its bidding requirements for certain capacity releases.
The Commission further clarified in Order No. 712 that its prohibition
on tying does not apply to conditions associated with gas inventory
held in storage for releases of firm storage capacity. Finally, the
Commission waived its prohibition on tying and bidding requirements for
capacity releases made as part of state-approved retail access
programs. This Order denies rehearing and grants clarification in part
and denies clarification in part of Order No. 712-A, and terminates
Docket Nos. RM06-21-000 and RM07-4-000.
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\1\ Promotion of a More Efficient Capacity Release Market, 73 FR
37058 (June 30, 2008), FERC Statutes and Regulations ] 31,271
(2008), (Order No. 712), order on reh'g, Order No. 712-A, 73 FR
72692 (December 1, 2008), FERC Stats. & Regs. ] 31,284 (2008) (Order
No. 712).
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2. Several parties seek clarification and/or rehearing of Order No.
712-A. The Marketer Petitioners seek clarification concerning an asset
manager's delivery obligation when an AMA includes released capacity on
upstream and downstream pipelines.\2\ The National Grid Gas Delivery
Companies \3\ request clarification, and National Fuel Gas Distribution
Corporation (National Fuel) requests clarification, rehearing, or a
limited waiver, concerning what releases qualify as releases to a
marketer participating in a state-regulated retail access program.
Consolidated Edison of New York Inc., (Con Ed) and Orange and Rockland
Utilities, Inc., (O&R) (filing collectively), Energy America, New York
State Electric and Gas Corporation (NYSEG) and Rochester Gas and
Electric Corporation (RG&E) (filing collectively) seek clarification of
Order No. 712-A or alternatively request waivers on the same issue
raised by National Grid and National Fuel. The New York State Energy
Marketers Coalition (NYSEMC) moved to intervene out of time and filed
comments opposing the requests for clarification and waivers sought by
National Fuel others on the retail access issue. The Commission denies
rehearing of Order No. 712-A and grants in part, and denies in part,
clarification of Order No. 712-A. The clarification granted in this
order moots the requests for waivers.
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\2\ For purposes of this request for clarification, the Marketer
Petitioners include Shell Energy NorthAmerica (US), L.P.,
ConocoPhillips Company, Chevron U.S.A. Inc., Constellation Energy
Commodities Group, Inc., Tenaska Marketing Ventures, Merrill Lynch
Commodities, Inc., Nexen Marketing U.S.A. Inc., UBS Energy LLC, and
Citigroup Energy Inc.
\3\ The National Grid Gas Delivery Companies comprise The
Brooklyn Union Gas Company d/b/a KeySpan Energy Delivery NY; KeySpan
Gas East Corporation d/b/a KeySpan Energy Delivery LI; Boston Gas
Company, Colonial Gas Company, EnergyNorth Natural Gas, Inc., and
Essex Gas Company, collectively d/b/a KeySpan Energy Delivery NE;
Niagara Mohawk Power Corporation d/b/a National Grid; and The
Narragansett Electric Company d/b/a National Grid, all subsidiaries
of National Grid USA, (collectively National Grid).
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Upstream Pipeline Delivery Obligations
Request for Clarification
3. In Order No. 712, the Commission exempted capacity releases that
were meant to implement AMAs from the Commission's prohibition against
tying and its bidding requirements. As part of the definition of AMAs
that would qualify for these exemptions, the Commission determined that
there must be a significant delivery or purchase obligation on the
replacement shipper to deliver gas to, or purchase gas from, the
releasing shipper in order to distinguish AMAs from standard capacity
releases.\4\ Accordingly, the Commission required that the release
contain a condition that the ``releasing shipper may call upon the
replacement shipper to deliver to, or purchase, from, the releasing
shipper a volume of gas up to 100 percent of the daily contract demand
of the released transportation or storage capacity.
[[Page 18128]]
* * *'' \5\ That obligation must apply for the greater of five months
or five/twelfths of the term of the release.\6\ In Order No. 712-A, the
Commission also clarified the delivery/purchase obligation portion of
the AMA definition in several respects not at issue here.\7\
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\4\ Order No. 712 at P 144-153.
\5\ 18 CFR 284.8(h)(3), as adopted by Order No. 712-A.
\6\ Id.
\7\ See Order No. 712-A at P 79-82.
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4. In addition, the Commission denied a request by the Public
Service Company of North Carolina, South Carolina Electric and Gas
Company and Scana Energy Marketing, Inc., (collectively Scana) to
clarify that in a situation where parties include released capacity on
both an upstream and downstream pipeline in an AMA, the asset manager's
delivery obligation only applies to the released capacity on the
downstream pipeline that directly connects to the releasing shipper's
delivery point.\8\ The Commission explained that if the delivery
obligation did not apply to the full amount of the upstream released
capacity, the releasing shipper could include capacity in the upstream
release that it does not need for its own legitimate business purposes
during the term of the release. The Commission concluded that while
Scana was correct that the delivery/purchase obligation is not
cumulative of the capacity in a released chain of contracts that
constitute a single capacity path, the asset manager must have a
delivery/purchase obligation up to the contract demand of each specific
contract released to it.\9\
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\8\ Id. P 86-87.
\9\ Id. P 87.
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5. The Commission also denied Scana's and BP Energy Company's (BP)
request for clarification that where released storage and
transportation capacity are combined in an AMA, the delivery/purchase
obligations associated with the release only apply to the
transportation contract. The Commission ruled again that while the
delivery/purchase obligation is not cumulative of the released
transportation and storage capacity, to qualify for the exemptions
provided for AMAs an asset manager must have the necessary purchase/
delivery obligation for each separate contract for released
capacity.\10\
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\10\ Id. P 88.
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6. The Marketer Petitioners seek clarification of both these
rulings. Marketer Petitioners argue that while the rulings reflect the
Commission's intent to confirm that the releases at issue are
associated with bona fide AMAs, they will lead to uncertainty about the
ultimate contractual delivery/purchase obligation at any specific
delivery or receipt points under an AMA contract. For example, they
state that a releasing shipper may have sequential transportation
contracts on interconnected pipelines to bring gas to a delivery point
on the downstream pipeline at the releasing shipper's city gate. For
various reasons, however, the contract demands of the contracts on the
upstream pipeline(s) may exceed the contract demand on the downstream
pipeline that directly connects to the releasing shipper's city gate.
Marketer Petitioners assert that this could occur as a result of the
need for a shipper to provide fuel and lost and unaccounted for gas
(LAUF) to each transporting pipeline in the chain.\11\ While the
Marketer Petitioners recognize that Order No. 712-A stated that the
asset manager's delivery obligation to the releasing shipper's city
gate is not cumulative of the contract demands under each contract,
they argue that Order No. 712-A could be read to suggest that the asset
manager has the obligation to deliver to the releasing shipper's city
gate a volume equal to the full amount of the contract demand on the
upstream pipeline, even though that volume exceeds the contract demand
on the downstream pipeline. They contend that such a result appears
inconsistent with Order No. 712's intent to promote efficient AMAs.\12\
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\11\ Marketer Petitioners' clarification request at 3.
\12\ Id. at 4.
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7. The Marketer Petitioners claim the same may be true where a
releasing shipper has options for both (1) long haul transportation
from the production area and (2) short haul transportation from market
area storage that form a ``network'' whereby the releasing shipper can
serve its needs at its city gate delivery point. According to the
Marketer Petitioners, this may result in optional capacity paths for an
asset manager to transport gas, or withdraw gas from storage, to meet
the releasing shipper's city gate delivery point obligations. Marketer
Petitioners assert that requiring the asset manager's delivery/purchase
obligation to apply to the full contract demand under each capacity
release in the transportation chain creates significant uncertainty as
to the delivery obligation at the delivery points on the upstream
pipelines and on the downstream pipeline at the releasing shipper's
city gate.
8. The Marketer Petitioners posit an example in their pleading
where the releasing shipper has capacity on upstream Pipelines A and B,
and on downstream Pipeline C. Pipeline C connects with the releasing
shipper's city gate. Both Pipelines A and B interconnect with Pipeline
C at Point Y, which is the releasing shipper's receipt point on
Pipeline C. (See Figure 1 below).\13\ The releasing shipper has 1,000
Dth per day of short haul capacity on Pipeline A from market area
storage to Point Y. The releasing shipper has 5,000 Dth per day of long
haul capacity on Pipeline B from the production area to Point Y. The
releasing shipper also has 5,000 Dth per day of capacity on Pipeline C
from Point Y to its city gate. Thus the releasing shipper has the
ability to transport 5,000 Dth from the production area over Pipelines
B and C to its city gate. The releasing shipper also has the option to
move 1,000 Dth per day from market area storage over Pipelines A and C
to its city gate, if it is unable to obtain the full 5,000 Dth/day to
fill pipeline B or because storage gas may be more economical on some
days.
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\13\ Id. The example in Figure 1 substantially replicates the
example filed by the Marketer Petitioners except that they included
storage withdrawal right figures that we omit here.
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[[Page 18129]]
[GRAPHIC] [TIFF OMITTED] TR21AP09.001
9. The Marketer Petitioners state it is unclear in this situation
if the asset manager's delivery obligation at the releasing shipper's
city gate is equal to (1) the releasing shipper's 5,000 Dth contract
demand on Pipeline C, or (2) the releasing shipper's 6,000 Dth total of
the releasing shipper's 1,000 Dth contract demand on Pipeline A and
5,000 Dth contract demand on Pipeline B. Marketer Petitioners also
question whether, if the delivery obligation is only 5,000 Dth at the
city gate, the asset manager nevertheless has a 6,000 Dth delivery
obligation at Point Y. Marketer Petitioners state that, without
certainty as to the Commission's view of the location and amount of the
required delivery obligation, it is unclear if all of the
transportation and storage capacity is eligible for inclusion in an
AMA.
10. Marketer Petitioners thus request clarification that the ruling
that an asset manager's delivery/purchase obligation must apply to the
full contract demand under each capacity release in a transportation
chain is not intended to alter that asset manager's obligation at a
particular point, or in other words, that it does not add additional
delivery points to an AMA. Specifically, in the example described
above, they request clarification that, while the asset manager may
have a delivery obligation associated with the releases on Pipelines A,
B, and C, of 1,000 Dth/day, 5,000 Dth/day, and 5,000 Dth per day,
respectively, that would not alter the asset manager's contractual
5,000 Dth/day delivery obligation to the releasing shipper at its city
gate. They claim that such a clarification would affirm the
Commission's holding that it does not intend the delivery/purchase
obligation under an AMA to be cumulative of the total contract demands
associated with the capacity in a released chain and make clear that
the Commission did not intend to allow AMA customers to use the
Commission's rulings to enlarge their delivery/purchase entitlements at
a particular receipt or delivery point under an AMA.
11. The Marketer Petitioners note that any concern that the
Commission may have about ``unneeded'' capacity being included in an
AMA could be addressed by the Commission clarifying that when an AMA
encompasses capacity released on more than one pipeline, the posting
should indicate that the AMA also involves capacity on other
pipeline(s) and should be posted by all the pipelines involved. They
assert that such a posting requirement would illuminate the totality of
the release capacity to be included in the AMA.
Commission Determination
12. The Commission grants clarification in part and denies
clarification in part. As we stated in Order No. 712-A, the asset
manager's delivery/purchase obligation must apply to the full contract
demand under each capacity release in the transportation chain.\14\ In
other words, each release to an asset manager is a separate capacity
release that must have its own delivery/purchase obligation in order to
qualify as an AMA. As we also noted in Order No. 712-A, in the
situation where there is a capacity chain on several pipelines, the
delivery purchase obligation need not be cumulative to the extent that
gas delivered from the upstream pipeline to the downstream pipeline can
be transported using the released capacity on the downstream pipeline.
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\14\ Order No. 712-A at P 87.
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13. The Commission grants clarification that the asset manager's
delivery obligation at the releasing shipper's city gate need only be
up to the contract demand of the released capacity on the downstream
pipeline that interconnects directly with the releasing shipper's city
gate. The fact the releasing shipper may have also released to the
asset manager capacity on an upstream pipeline or pipelines with total
contract demand exceeding the released capacity on the downstream
pipeline does not increase the asset manager's required delivery
obligation at the releasing shipper's city gate on the downstream
pipeline. Thus, in the example set forth in Figure 1, the asset
manager's delivery obligation at the releasing shipper's city gate
would be equal to the 5,000 Dth/day released capacity on Pipeline C,
despite the fact the released capacity on Pipelines A and B totals
6,000 Dth/day.
14. While a releasing shipper may release capacity to an asset
manager on an upstream pipeline(s) that exceeds the released downstream
capacity, the asset manager must have a delivery obligation
[[Page 18130]]
under each such upstream capacity release up to the contract demand of
that release. In the Figure 1 example, the asset manager's delivery
obligations on Pipelines A and B must be 1,000 Dth/day and 5,000 Dth/
day, respectively. Thus, to the extent the Marketer Petitioners seek
clarification that an asset manager's delivery obligation at delivery
points on upstream pipeline(s) cannot exceed its delivery obligation at
the city gate delivery point on the downstream pipeline, the Commission
denies that request. As the Commission held in Order No. 712-A, if the
asset manager's delivery obligation on the upstream pipeline did not
apply to the full amount of upstream released capacity, the releasing
shipper could include capacity in the upstream release that it does not
need for its own legitimate business purposes during the term of the
release.
15. In such a situation, however, if the releasing shipper requires
the asset manager to deliver volumes on the upstream pipelines that
exceed the contract demand on the downstream pipeline, the releasing
shipper would be required to take delivery of the excess volumes at
points on the upstream pipeline or pipelines, and would also be
responsible for transporting that excess gas away from those points. In
the example in Figure 1, for instance, the releasing shipper could
require the asset manager to deliver 6,000 Dth to Point Y. That
releasing shipper, however, would have to take delivery of 1,000 Dth of
that gas at Point Y and make its own additional arrangements to have
the gas transported away from Point Y, since this quantity exceeds the
asset manager's released capacity rights on the downstream pipeline.
The releasing shipper could not require the asset manager to transport
more than 5,000 Dth/day on Pipeline C from Point Y to the city gate.
The asset manager could only be held responsible for transporting to
the releasing shipper's city gate a volume up to the contract demand on
the downstream pipeline.\15\
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\15\ The same analysis applies if the releasing shipper reserves
storage withdrawal rights in excess of its contract demand on the
interconnecting pipeline. See Marketer Petitioners' request for
clarification at 5.
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16. The Commission finds that this rule is straightforward, non-
discriminatory and the most reasonable to administer for both parties
and the Commission. It is also consistent with the Commission's
clarification in Order No. 712-A that the delivery obligations for AMAs
associated with a chain of upstream and downstream pipelines and
contracts are not cumulative. Further, it minimizes the potential for
parties to include unneeded upstream capacity in an AMA.\16\
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\16\ The Commission's additional explanation of its rule should
remove any uncertainty the Marketer Petitioners have concerning the
need to reflect fuel and LAUF in the contracts on each pipeline in
the chain. An asset manager may include the extra volumes necessary
to cover fuel retention and LAUF charges at each interconnecting
point in the pipeline chain. The customer may not, however, require
that the asset manager deliver the cumulative volume to the most
downstream delivery point. (See example on page 3 of the Marketer
Petitioners' clarification request).
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Retail Access Programs
Requests for Clarification and/or Waivers
17. In Order No. 712, as affirmed in Order No. 712-A, the
Commission determined that capacity releases by local distribution
companies (LDC) to implement state-approved retail access programs
should be granted the same blanket exemptions from the prohibition
against tying and the bidding requirements as capacity releases made in
the AMA context.\17\ In order to qualify for the exemptions, the
Commission determined that the released capacity must be used by the
replacement shipper to provide the gas supply requirements of retail
consumers pursuant to a retail access program approved by the state
agency with jurisdiction over the LDC that provides delivery service to
such retail consumers.\18\ In Order No. 712-A, the Commission clarified
that a marketer participating in a state-approved retail choice program
can re-release its capacity to an asset manager that will fulfill the
marketer's obligation under the state-approved program.\19\ The
Commission declined to grant a request for clarification, however, that
a wholesale supplier who obtains capacity directly from an LDC as part
of an unbundling program but who is not a marketer under the program
nonetheless qualifies for the tying and bidding exemptions.\20\ The
Commission determined that such a clarification was not appropriate for
this generic rulemaking proceeding because BP was requesting the
Commission to approve a specific deal structure that does not meet the
criteria under which the rule generally grants exemptions. The
Commission noted that BP or any other parties are free to file
separately on a case-by-case basis for approval of individual
arrangements that it believes may merit a waiver of the Commission's
bidding and tying strictures.\21\
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\17\ Order No. 712 at P 199; Order No. 712-A at P 115.
\18\ Order No. 712 at P. 200; Order No. 712-A at P 115.
\19\ Order No. 712-A at P 118.
\20\ Id. P 121-122.
\21\ Id. P 122.
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18. Several parties seek clarification of that ruling. National
Grid seeks clarification that an LDC releasing capacity as part of a
state-approved retail access program may release directly to a
marketer's asset manager as long as the asset manager has an identical
obligation to supply gas to the marketer as the marketer's obligation
to supply gas to the releasing LDC. National Grid asserts that certain
marketers that participate in its state-approved retail access program
are requesting that they be allowed to release directly to their asset
manager so that the asset manager, not the marketer, will be the one
who has to meet the creditworthiness standards of the pipeline.
National Grid asserts that cutting out the middle man will enable
marketers to avoid having to post scarce credit assurances.
19. National Grid also requests clarification that an LDC that
releases to an asset manager can require the asset manager to release
capacity to marketers serving under the retail choice program and that
such a release will qualify for the exemptions. National Grid asserts
that the need for this clarification arises from the fact that the
number of customers participating in an LDC's retail choice program may
change from time to time and thus the LDC may release to an asset
manager only to find out that some sales customers have changed to
transportation only service. National Grid claims this change
necessitates a release by the LDC to the converting customers'
marketers. National Grid stated that the requested clarification will
allow for more efficient releases because the LDC could direct the
asset manager to effectuate those new releases.
20. National Fuel seeks clarification that the prohibition against
tying and the bidding requirements do not apply to releases by an LDC
to a marketer when the marketer is acting as an agent of a retail
access marketer pursuant to a state-mandated retail access program. It
asserts the situation described by BP in BP's request for clarification
of Order No. 712--where a wholesale entity receives releases as part of
a state-approved program, for the purpose of selling gas to another
retail marketer that makes sales directly to retail customers--is not a
unique situation and should be the subject of the general rulemaking
proceeding. National Fuel asserts that not all marketers participating
in state-approved retail unbundling programs sell directly to
[[Page 18131]]
consumers. They claim that in New York, for example, the state choice
program allows both the release of capacity to retail marketers selling
directly to consumers and for the release of capacity to marketers that
are contractually entitled to act as agents for the retail marketers
selling to consumers.\22\ National Fuel explains that the latter
arrangements may occur because retail marketers may have difficulty
acquiring all the releases necessary to meet their obligations under
the program, often due to credit issues. National Fuel states that in
the agency situation the retail marketer will enter into an agency
agreement through which a second marketer becomes the first marketer's
agent for purposes of acquiring the released capacity from the LDC. The
agent marketer agrees to acquire the necessary capacity from the LDC
and to sell gas to the retail marketer at the city gate for the
purposes of fulfilling the retail marker's obligations under the
program. According to National Fuel, this sort of arrangement does not
raise the same concerns as that described by BP because of the
``agency'' relationship. National Fuel asserts that if the Commission
does not grant clarification of the regulation, then it should amend
the regulations to include both retail marketers in state-approved
programs and their agents.
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\22\ National Fuel request for clarification at 7.
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21. Alternatively, National Fuel seeks a limited waiver for the
situation described above. It states the waiver would only apply under
the following circumstances: (1) Releases to these marketers would
occur only when there is a valid, written agency agreement between the
retail marketer and the marketer receiving releases of capacity,
requiring the marketer to act as agent for the retail marketer and
obligating the agent to meet the retail marketer's gas supply needs;
and (2) the marketer acting as agent must do so as part of a state-
approved customer choice program and under published state-approved
tariffs and/or procedures. National Fuel argues that the result would
be fully consistent with both the goal of the exemptions for state
choice programs and the non-discriminatory and efficiency goals of
Order No. 712.
22. The New York State Public Service Commission (NYPSC) filed in
support of both National Grid's and National Fuel's clarification
requests. The NYPSC asserts that Order No. 712-A should be clarified to
avoid ``hindering'' state retail access programs. It claims that the
releases at issue are made to effect service to the very same customers
for whose benefit the pipeline capacity was purchased by the releasing
LDC and that without the exemptions provided by Order No. 712 it would
be more difficult for marketers to provide service to their end use
customers. The NYPSC further argues that requiring the issue to be
resolved on a case by case basis does not foster the Commission's goals
and harms state retail access programs.
23. Other LDCs located in New York also filed in support of
National Grid's and National Fuel's requests. Con Ed and O&R assert
that a release to a ``wholesale marketer acting as agent for a retail
marketer participating in a state-approved retail choice program is
equivalent to a capacity release directly to a retail marketer.'' \23\
They assert that based on the principles of agency law the principal
and agent are equally bound by the contract made by an agent acting
within the scope of an agency relationship, and thus a wholesale
marketer that obtains capacity as a replacement shipper, when acting as
agent for the retail marketer, is obtaining capacity for the direct
benefit of the retail marketer and state retail access program. They
also support the arguments regarding the potential creditworthiness
difficulties of the retail choice marketers. Con Ed and O&R seek
company specific waivers in the event the Commission denies the
clarification requests.
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\23\ Con Ed/O&R support for clarification at 4.
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24. NYSEG and RG&E lend similar support to the clarification
requests claiming that state retail access releases involve storage as
well as transportation and that without the ability to use an agent to
obtain the capacity and serve the retail load many retail marketers may
not be able to participate in the program. They also seek a waiver in
the event the Commission denies clarification.
25. Energy America filed support for the clarification requests
stating that it has acted as agent for Direct Energy Services and other
retail marketers with respect to sourcing needs and managing
transportation and storage capacity. Energy America states that as
agent, it signs an agency agreement with the LDC making clear that it
is acting as an agent to provide service to the retail marketer under
the retail access program. The LDC then releases capacity to the agent
who transports and sells gas to the retail marketer at the city gate.
Energy America asserts that without a clarification or waiver, retail
marketers may be unable to participate in retail access programs.
26. The NYSEMC filed comments requesting that the Commission reject
National Grid's clarification. It asserts that National Grid seeks a
blanket exemption for all marketers acting as agents in retail choice
programs, not a company specific waiver as suggested in Order No. 712-
A. Further, NYSEMC takes issue with the claim that the Commission
should grant the clarification because some marketers may not be able
to meet the financial or technical requirements of interstate
pipelines. It asserts that lack of financial capability is not a reason
to expand the scope of exemptions granted by Order No. 712.
27. NYSEMC argues that granting a broad exemption as requested by
the New York utilities that also operate in Pennsylvania and elsewhere
would effectively result in a blanket waiver of the type denied in
Order No. 712-A. It also argues that granting the requested relief
would increase the risk of defaults by permitting less creditworthy
suppliers access to systems they would not otherwise be able to obtain.
It claims that it would not be in the public interest to allow
circumvention of creditworthiness standards in the current credit
climate and that relaxed credit requirements were actually one of the
causes of the current economic situation. It further argues that the
Commission would hinder the continued development of a viable and
robust competitive market by affording certain marketers preferential
credit treatment.
28. National Grid answers NYSEMC's comments, claiming that NYSEMC
mischaracterizes National Grid's clarification request by framing it as
a request for an open-ended exemption. National Grid asserts that it is
requesting an exemption only where the wholesale marketer supplier
advises the LDC that the marketer has an obligation to supply gas to
the retail marketer that is equivalent to the retail marketer's
obligation to supply gas to the releasing LDC's customers. National
Grid claims such obligation could be created by an agency relationship
or some other contractual framework. National Grid also states that
NYSEMC's concerns about creditworthiness of small customers are
misplaced because the wholesale supplier would still be required to
meet the pipeline's creditworthiness standards. National Grid also
notes that granting its clarification would provide retail customers
with a greater choice of providers.
Commission Determination
29. The Commission clarifies that the exemptions from bidding and
the prohibition against tying for releases to
[[Page 18132]]
marketers participating in state-regulated retail access programs apply
to any release where the marketer replacement shipper is obligated to
use the capacity to provide the gas supply requirement of retail
consumers in the program. Even if the marketer does not itself make
sales directly to the subject retail consumers, this condition can be
satisfied so long as the marketer has a contractual obligation to use
the full amount of the released capacity to supply gas to the retail
access marketer and the retail access marketer is, in turn, obligated
to supply that gas to the retail consumers pursuant to a state-
regulated retail access program.
30. As stated above, in Order Nos. 712 and 712-A the Commission
exempted from bidding releases ``to a marketer participating in a
state-regulated retail access program as defined in paragraph (h)(4) of
this section * * *.'' \24\ In section 284.8(h)(4) of the revised
regulations, the Commission defined releases to a ``marketer
participating in a state-regulated retail access program'' as ``any
prearranged capacity release that will be utilized by the replacement
shipper to provide the gas supply requirement of retail consumers
pursuant to a retail access program * * *.'' \25\ This definition
applies to any replacement shipper which is obligated to use the
released capacity to transport gas which will be used to provide the
gas supply requirement of the retail consumers, whether that shipper
makes the retail sales itself or sells the gas to the retail marketer
who then resells the gas to the retail consumers.\26\ The Commission's
rationale in Order No. 712 for granting the exemptions from the tying
prohibition and bidding requirements for capacity releases by LDCs to
implement state-approved retail access programs applies equally to the
situation where an LDC releases capacity directly to the retail
marketer or to another entity which is obligated to transport the gas
on behalf of the retail marketer. The essential requirement is that the
replacement shipper either (1) is itself the retail marketer or (2) has
a contractual relationship with the retail marketer and/or the LDC
requiring it to use up to the full amount of the released capacity to
satisfy the retail marketer's obligations under the state-approved
retail access program to provide the gas supply requirement of retail
consumers.
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\24\ See 18 CFR 284.8(h)(1).
\25\ 18 CFR 284.8(h)(4).
\26\ Some of the parties requesting clarification describe an
``agency'' relationship whereby the agent would obtain the released
capacity and then sell gas to its principal, the retail marketer.
See National Fuel's request at 7. This arrangement, as well as what
we understand as a traditional agency arrangement, where the
principal would continue to hold title to the capacity and the gas,
and thus there would be no need for a ``resale'' to the retail
marketer (principal), are both acceptable to the Commission as
releases eligible for the exemptions from tying and bidding provided
the ``agent'' is obligated to serve the retail marketer's needs as
described above under the retail access program.
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31. The Commission rejects the argument that granting this
clarification will allow circumvention of interstate pipeline
creditworthiness standards. If a retail marketer is unable to satisfy
these standards, the replacement shipper supplier will be required to
satisfy the pipeline's creditworthiness criteria. If no party can meet
these standards then the pipeline does not have to allow the release.
32. The Commission also grants National Grid's requested
clarification that an LDC that releases to an asset manager can require
the asset manager to release capacity to marketers serving under the
retail choice program and that such a release will qualify for the
exemptions from the tying prohibition and bidding requirements. This
condition is one that can be addressed in the agreement between the
releasing shipper and asset manager, and will allow LDCs and asset
managers to operate efficiently to effectuate the goals of retail
access programs.
33. The clarifications granted above render the various requests
for waiver moot.
Termination of Dockets
34. The Commission initiated Docket Nos. RM06-21 and RM07-4 to
address a petition filed by Pacific Gas and Electric Co. and Southwest
Gas Corporation concerning the potential removal of the maximum rate
ceiling on capacity release transactions and a petition filed by the
Marketer Petitioners seeking clarification of the operation of the
Commission's capacity release rules in the context of asset management
services. The issues raised in the petitions have been fully addressed
in the instant docket. Accordingly, the Commission hereby terminates
Docket Nos. RM06-21 and RM07-4.
The Commission orders:
(A) The requests for rehearing of Order No. 712-A are denied and
the requests for clarification of Order No. 712-A are granted in part
and denied in part as discussed above.
(B) Docket Nos. RM06-21 and RM07-4 are hereby terminated.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. E9-9111 Filed 4-20-09; 8:45 am]
BILLING CODE 6717-01-P