Urging the Federal Energy Regulatory Commission
to Promulgate Rules to Address the
Ratemaking Treatment of Pipeline Discounts
to Meet Gas-On-Gas Competition

WHEREAS, The Federal Energy Regulatory Commission’s (FERC) current ratemaking practice, as developed in the Commission’s 1989 Rate Design Policy Statement, is to compensate interstate pipelines in their general rate proceedings for revenues lost due to discounting of transportation rates;

WHEREAS, The FERC’s current ratemaking practice requires the interstate pipeline’s customers not receiving discounts to bear the revenue responsibility for the discounts;

WHEREAS, Local Distribution Companies (LDC) are generally not the recipients of discounts from interstate pipelines and also stand to bear a significant portion of the revenue responsibility associated with discounts to other customers;

WHEREAS, The FERC’s policy and practice does not distinguish between discounts designed to attract new business to a particular location, discounts to capture load from alternate fuels, and discounts to lure load away from a competing pipeline (gas-on-gas competition);

WHEREAS, In any market area where two or more pipelines compete for business through discounting rates to an existing customer, the FERC’s ratemaking practice serves to increase other customers’ rates with no net increase in throughput;

WHEREAS, The Illinois Municipal Gas Agency (IMGA) estimates that 75% of all discounts by interstate pipelines are to meet gas-on-gas competition and such discounts raise the rates of other customers by 30 to 50%;

WHEREAS, On July, 1, 1997 IMGA petitioned the FERC to institute a rulemaking proceeding to address the Commission’s policy on the ratemaking treatment for discounts associated with gas-on-gas competition, which petition is docketed as RM97-7-000;

WHEREAS, The FERC has yet to act upon the IMGA petition; The FERC has yet to act upon the IMGA petition;

THEREFORE BE IT RESOLVED, that the National Association of State Utility Consumer Advocates (NASUCA) calls upon the FERC to act upon the IMGA petition and promulgate rules to address the issue of the Commission’s ratemaking treatment for discounts for gas-on-gas competition;

BE IT FURTHER RESOLVED, that NASUCA authorizes its Executive Committee to develop specific positions and to take appropriate actions consistent with the terms of this resolution. The Executive Committee shall advise the membership of any proposed action prior to taking such action if possible. In any event, the Executive Committee shall notify the membership of any action taken pursuant to this Resolution.

Approved by NASUCA:

Submitted by:

Seattle, WA

NASUCA Gas Committee

June 10, 1998

Committee Members:

Craig Burgraff (PA), Chair
Sarah Stiendel (NJ)
Barbara Burton (DC)
Paula Carmody (MD)
Denise Goulet (PA)
Byron Harris (WV)
Werner Margard (OH)
Doug Micheel (MO)
Ron Polle (IA)
Jim Stetson (MA)
Richard Steeves (CT)
Eric Witkoski (NV)
Hana Williamson (SC)
Richard Michal (IN)
Stephen Berger (NY)
Jim Hurt (GA)