Urging the Federal Energy Regulatory Commission To Reject Any Proposed Funding Proposal For The Gas Research Institute Which Do Not Equitably Spread GRI’s Funding Costs Across All Industry Segments And/Or Which Inhibit The Competitive Market Goals In Order No. 636
WHEREAS, the Gas Research Institute (“GRI”) performs research and development for the natural gas industry and is controlled by a Board of Directors composed of interstate natural gas pipelines;

WHEREAS, GRI, in past years, has funded its research and development activities through interstate pipeline assessments approved by the Federal Energy Regulatory Commission (“FERC”) and recovered from interstate pipeline customers;

WHEREAS, the GRI has found it increasingly difficult in the competitive market for natural gas supply to obtain interstate pipeline participation in the funding of GRI’s research and development programs absent a guarantee that 100% of the pipeline’s share of GRI’s costs are recoverable from pipeline customers;

WHEREAS, GRI’s 1998/1999 funding proposal breaks research and development costs into two categories: a Pipeline and Producer Subprogram and a Local Distribution Company (“LDC”) Subprogram;

WHEREAS, GRI proposes in the 1998/1999 funding mechanism to assess the Pipeline and Producer Subprogram costs to all pipeline shippers who pay non-discounted commodity charges;

WHEREAS, the pipeline customers who pay non-discounted commodity charges are largely LDCs serving captive residential and small commercial consumers;

WHEREAS, these LDCs and their captive residential and small commercial consumer consequently will pay the bulk of the Pipeline and Producer Subprogram costs;

WHEREAS, GRI further proposes to asses the LDC Subprogram costs to all volumes of gas passing through an LDC’s city gate regardless of who owns title to the gas;

WHEREAS, GRI’s proposed 1998/1999 funding proposal for the LDC Subprogram costs similarly places the bulk of these program costs on non-competitive residential and small commercial consumers because the proposal requires direct assignment to the LDCs of the portion of the costs otherwise attributable to competitive customers served behind the LDC’s city gate;

WHEREAS, most LDCs also discount rates to competitive customers and seek to pass the discounts through to non-competitive residential and small commercial consumers;

WHEREAS, the interstate pipelines who control GRI’s Board of Directors would have no financial stake in GRI’s program costs if GRI’s 1998/1999 funding proposal is accepted by FERC and would become nothing more than collection agents for GRI;

WHEREAS, GRI’s 1998/1999 funding proposal effectively results in direct assignment by GRI of its program costs to LDCs and thus constitutes a proposal over which FERC no longer has any justifiable claim to jurisdiction;

WHEREAS, GRI’s 1998/1999 funding proposal unduly discriminates against residential and small commercial consumers by imposing the bulk of the research and development program costs on this segment of the industry while all other segments of the industry, including producers, competitive customers and the pipelines themselves, benefit from GRI’s efforts;

WHEREAS, the undue discrimination inherent in GRI’s 1998/1999 funding proposal increases rates paid by residential and small commercial customers for natural gas supply above the otherwise prevailing market rates available to competitive customers;

WHEREAS, since the implementation of Order No. 636’s unbundling requirements, GRI has submitted at least three funding proposals to FERC which impose the bulk of GRI’s program costs on the non-competitive customers served by interstate pipelines;

WHEREAS, GRI’s 1998/1999 funding proposal constitutes a vestige of monopoly-based pricing mechanisms in an era where Congress and FERC seek to allow competitive market forces to dictate the price of natural gas supply and where FERC seeks to promote more competition in the pricing of the delivery of that supply through market based rates and negotiated rates for pipeline transportation services;

WHEREAS, GRI’s monopoly-based 1998/1999 funding proposal is inconsistent with and inhibits the development of a truly competitive market for natural gas supply;

WHEREAS, the Electric Power Research Institute (“EPRI”) is the research and development entity for the electric industry and EPRI functions as a voluntary organization whose members agree to participate and fund the research and development efforts regardless of whether the state regulatory agencies with jurisdiction over the electric utilities rates sanction flowthrough of 100% of EPRI’s funding costs to electric consumers;

THEREFORE BE IT RESOLVED, that the National Association of State Utility Consumer Advocates (“NASUCA”) believes that in order to promote the use of competitive market forces as a tool to regulate rates for natural gas services, GRI should move in the same direction as EPRI for purposes of funding research and development;

BE IT FURTHER RESOLVED, that NASUCA urges FERC to reject any GRI funding proposals which would impose monopoly-based or inequitable funding mechanisms on interstate pipeline customers and/or which would unduly discriminate against residential and small commercial consumers by allowing competitive customers and pipelines to escape payment of GRI charges; and

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:

By Faxed Ballot

May 14, 1997

Submitted by:

NASUCA Gas Committee

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