Power & Pipes

FERC, CFTC, and State Energy Law Developments

On February 16, 2012, FERC issued a Notice of Proposed Rulemaking proposing to amend its standards for pipeline business operations and communications[1] to incorporate By reference Version 2.0 of the business practice standards adopted By the Wholesale Gas Quadrant (WGQ) of the North American Energy Standards Board (NAESB) for natural gas pipelines.[2] FERC found that incorporating the new standards will help update and improve NAESB’s business practice standards to benefit the wholesale gas market and further the coordination between the natural gas and electric industries. Certain proposed standards addressing record retention requirements and posting information on operationally available and unsubscribed capacity will not be incorporated By reference because FERC found that they are inconsistent with existing regulations.[3]

Due to the increase in the number of requests for waivers or extensions of time to comply with standards, FERC clarified its policy on such requests. It stated that for each version of the standard FERC adopts, pipelines must seek renewal of the waivers and extensions of time as they are specific to each set of NAESB standards. If a pipeline seeks renewal of a waiver or extension of time, it must provide a current justification and a citation to the order or docket number in which the initial waiver or extension was granted. FERC also clarified that if the pipeline does not perform a business function, a request for a waiver or extension of time is unnecessary and that FERC typically will not entertain requests for waivers or extensions of time for NAESB WGQ Definitions.

FERC also clarified that waivers generally will not be granted for cases in which the pipeline believes that it should not be required to incur the costs of implementing standards that the shippers have no interest in utilizing. Instead, FERC stated that the pipeline should seek an extension of time for compliance until 60 days after the pipeline receives a request to comply with the standard. In these instances, waivers will be granted only when the pipeline demonstrates good cause to not require implementation of a standard after the shipper states its intent to utilize the standard.

As additional guidance, FERC provided an overview of its policy regarding waivers for four categories. FERC stated that it generally will deny requests for waivers or extensions of time to comply with business practice standards and internet posting standards. On the other hand, requests for waivers or extensions of time to comply with the internet business standards and Electronic Data Interchange standards are typically granted, but this determination is based on the pipeline’s individual circumstances. FERC will grant such a request to smaller pipelines that can demonstrate that compliance would be unduly burdensome. For larger pipelines, FERC will grant an extension of time to comply until a request is made to use the standard.

FERC proposed that pipelines implement the new standards beginning on the first day of the month after four full months following the issuance of the final rule. FERC stated that this implementation plan should provide natural gas pipelines with adequate time to implement the changes necessary to achieve compliance. Natural gas pipelines will also be required to file revised tariffs to reflect the new standards two months prior to the implementation date. To increase transparency and to ensure that pipelines are incorporating all of the new standards, FERC also proposed to revise the compliance filing requirements to require the pipelines to specify the tariff provision implementing each standard and to provide the status of the standard. FERC will post on the eLibrary website under Docket No. RM96-1-037 a sample tariff format that filers may reference for guidance.

Comments are due 30 days after publication in the Federal Register.

[1]. 18 C.F.R. § 284.12.

[2]. Standards for Business Practices for Interstate Natural Gas Pipelines, 138 FERC ¶ 61,124 (Feb. 16, 2012).

[3]. Section 284.12(b)(3)(v) of FERC’s regulations imposes a three-year record retention period whereas Standards 4.3.4 and 10.3.2 impose a twenty-four month record retention period. Standard 0.3.19 allows the pipeline to choose whether to post Operationally Available Capacity, Operating Capacity, and Total Scheduled Quantity at a point, segment, or zone level. This is inconsistent with Section 384.13(d) of FERC’s regulations, which does not permit a pipeline to limit its posting and requires it to post information relevant to the availability of all transportation services whenever capacity is scheduled on the mainline, at delivery points, and in storage fields. Additionally, Standard 0.3.21 requires the pipeline to update information on the Total Scheduled Quantity and Operationally Available Capacity to reflect scheduling changes and report the information at timely and evening nomination cycles. Section 384.13(d) of FERC’s regulations requires the pipeline to post this information whenever capacity is scheduled.