The Federal Energy Regulatory Commission has offered U.S. interstate gas pipelines that lack market power more flexibility to charge transportation rates other than those based on traditional cost of service.
FERC approved a policy statement setting criteria and requirements for market based rates, negotiated/re- course rates, incentives rates, and other alternatives to cost of service arrangements.
Under the policy, pipelines can negotiate new rates with their customers and file them with the commission.
However, FERC said it will not allow pipelines carte blanche to negotiate services that would erode open access service under Order 636. It plans to seek public comment on what type of service flexibility, including negotiated terms and conditions, it should allow pipelines to offer.
Under negotiated/recourse rate programs, FERC will allow a pipeline and a shipper to negotiate mutually acceptable rates. If a shipper prefers, it can continue with service under the existing cost of service rate.
The Natural Gas Supply Association said the negotiated/recourse rate program is more flexible and will help gas customers.
"On the other hand, many producers are concerned about pipeline market power and its potential impact on wellhead prices and total consumer demand. Producers will keep close watch on the potential for this policy to increase the total cost of gas to the consumer and decrease producer netback."
The Interstate Natural Gas Association of America said it supports the new policies in general and will comment on the negotiated/recourse rate program.
FERC said negotiating rates for individual shippers could result in individually tailored seasonal rates or short term transactions to meet customers' special needs.
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