Report of the Natural Gas Regulation Committee
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REPORT OF THE NATURAL GAS REGULATION COMMITTEE This report summarizes decisions and policy developments that have occurred in the area of natural gas regulation. The timeframe covered by this report is July 1, 2007 to June 30, 2008.1 I. Rulemaking Actions ...................................................................................... 717 A. Reporting Requirements for Pipelines .............................................. 717 B. Standards of Conduct ........................................................................ 719 1. Independent Functioning Rule .................................................... 720 2. No-Conduit Rule ......................................................................... 720 3. Transparency Rule ...................................................................... 720 C. Capacity Release ............................................................................... 721 D. Transparency ...................................................................................... 723 1. Order No. 704 ............................................................................. 723 2. NOPR – Pipeline Capacity and Flow Posting Requirements ...... 724 E. Revisions to Landowner Notification and Blanket Certificate Regulations ...................................................................................... 724 1. Landowner Notification .............................................................. 725 2. Noise Surveys ............................................................................. 725 F. Fuel Cost Recovery ............................................................................ 726 II. Enforcement Actions .................................................................................... 726 A. FERC Enforcement Settlements ........................................................ 728 1. MGTC, Inc. ................................................................................. 728 2. BP Energy Co. ............................................................................ 728 3. Entergy New Orleans, Inc. (ENOI). ............................................ 729 4. Constellation New Energy - Gas Division, LLC (CNE-G.) ........ 729 B. FERC Enforcement Policy Developments ........................................ 730 1. Revised Enforcement Policy Statement (Docket No. PL08-3) ... 730 2. Obtaining Regulatory Guidance (Interpretive Order) (Docket No. PL08-2) ............................................................................... 732 3. NOPR on Ex Parte Contacts and Separation of Functions ......... 732 4. Submissions to the FERC upon Staff Intention to Seek a Show Cause Order (Order No. 711) ........................................... 732 III. Rates, Terms and Conditions of Service ..................................................... 733 A. Rates .................................................................................................. 733 1. The Natural Gas Regulation Committee wishes to acknowledge the support of the full Committee in producing this report, and in addition, to recognize specific Committee members who made particular contributions to this report. Those members are: Lawrence G. Acker, Kenneth M. Albert, Christopher J. Barr, Julie Baumgarten, Glenn S. Benson, Anne E. Bomar, Andrea Jean Chambers, Mark G. Cook, Bray Dohrwardt , Joseph H. Fagan, Russell A. Feingold, Kirstin R. Gibbs, Marvin T. Griff, Christopher Gulick, Patrick J. Hester, Christopher John, Thomas J. Knapp, Elizabeth B. Kohlhausen, Kenneth T. Maloney, Everard A. Marseglia Jr., Henry S. May Jr., Letitia W. McKoy, Paula K. Motzel, Diane S. Neal, Adina Owen, Delia Patterson, Jeffrey M. Petrash, Robert C. Platt, Mark M. Rabuano, Randall S. Rich, Richard G. Smead, Andrew K. Soto, Channing D. Strother Jr., Kevin M. Sweeney, Branko Terzic, Michael J. Thompson, Sarah E. Tomalty, Peter I. Trombley, Dena Eve Wiggins. 715 716 ENERGY LAW JOURNAL [Vol. 29:715 1. Florida Gas Transmission Company, LLC ................................. 733 2. Equitrans, L.P. ............................................................................ 734 3. NSTAR Gas Company v. Algonquin Gas Transmission, LLC .. 734 4. Discovery Gas Transmission, LLC ............................................. 736 B. Policy Statement on the Use of Master Limited Partnerships (MLPs) for Return on Equity (ROE) Determinations ...................... 736 C. Hourly Flexibility for Transportation Service ................................ 739 D. Nonconforming Service Agreements ................................................ 741 1. Northern Natural Gas Co. ........................................................... 742 2. Stingray Pipeline Company, L.L.C. ............................................ 742 3. Iroquois Gas Transmission, LP ................................................... 744 IV. Infrastructure ................................................................................................ 745 A. Pipeline Projects ................................................................................ 745 1. CIG High Plains .......................................................................... 745 a. Bundled Storage-Transportation Service .............................. 745 b. Interconnections with CIG Storage ....................................... 746 c. Incremental Rates .................................................................. 746 2. REX-East .................................................................................... 747 a. Interconnections With Other Pipelines .................................. 748 b. Roll-In ................................................................................... 749 3. Guardian Pipeline........................................................................ 750 4. Transwestern Pipeline Company, LLC ....................................... 750 5. Texas Gas Transmission ............................................................. 751 6. Gulf Crossing Pipeline Company ............................................... 752 B. Storage Projects ................................................................................. 752 1. Steckman Ridge, LP.................................................................... 752 2. Texas Gas Transmission, LLC .................................................... 754 C. LNG Projects ..................................................................................... 757 1. Projects Receiving FERC Authorization .................................... 757 a. Broadwater Energy, LLC ...................................................... 757 b. Calhoun LNG, LP ................................................................. 758 c. Southern LNG, Inc. ............................................................... 759 d. Cameron LNG, LLC ............................................................. 761 e. Trunkline LNG Company, LLC ............................................ 762 2. Projects Requesting FERC Authorization ................................... 763 a. Florida Gas Transmission Company, LLC ............................ 763 3. Projects at Pre-Filing Stage ......................................................... 764 a. UGI Energy Services, LLC ................................................... 764 b. Oregon LNG Terminal and Oregon Pipeline Project ............ 764 D. Alaska Pipeline Developments .......................................................... 764 1. Fourth Report to Congress on Progress Made in Licensing and Constructing the Alaska Natural Gas Pipeline .................... 765 2. Fifth Report to Congress on Progress Made in Licensing and Constructing the Alaska Natural Gas Pipeline ........................... 766 3. Findings of the Commissioners of Natural Resources and Revenue with Regard to the Producer Project ........................... 768 4. Pre-Filing Application of Denali – The Gas Pipeline Project ..... 770 V. Jurisdiction ................................................................................................... 771 2008] NATURAL GAS REGULATION COMMITTEE REPORT 717 A. Offshore Gathering ............................................................................ 771 1. The Jupiter Facilities ................................................................... 772 2. The Transco Facilities ................................................................. 772 B. Missouri Gas Company Reorganization ............................................ 773 VI. Kansas Ad Valorem Litigation .................................................................... 779 VII. State Ratemaking Issues for Gas Distribution Utilities ............................. 780 A. Introduction ....................................................................................... 780 B. A “Rethinking” of LDC Ratemaking Concepts................................. 781 C. The Advent of Revenue Decoupling ................................................. 782 D. Revenue Decoupling and Energy Efficiency Initiatives ................... 783 E. Other Innovative Ratemaking Approaches ........................................ 785 I. RULEMAKING ACTIONS A. Reporting Requirements for Pipelines On March 20, 2008, the Federal Energy Regulatory Commission (FERC) issued Order No. 7102 revising the financial forms, statements, and reports required from interstate natural gas companies contained in the FERC Form Nos. 2, 2-A, and 3-Q. The FERC described the enhanced forms as better reflecting the “current market and cost information” needed by the FERC in its regulatory