« ՆախորդըՇարունակել »
APPENDIXES TO MARCH 7, 1991 HEARING
(Sections 6003 and 6004 of Title VI and Title X)
43-269 - 9:1 - 7
RESPONSB TO FOLLOW-UP_QUESTIONS
SENATOR J. BENNETT JOHNSTON
SENATE ENERGY COMMITTEE HEARING
ELD MARCH 2. 1991
QUESTION 1; To the extent necessary, please supplement your testimony with a more detailed analysis of title II of s.570, the National Energy Strategy Act. Please address both the policy implications of title II and questions raised by the individual provisions of title II.
LL&E supports the goal of encouraging increased
natural gas utilization, including measures similar to title II of
that any certificate reform legislation should following fundamental requirements:
Remove current barriers to entry by permitting anyone,
not just existing interstate pipelines, to construct "at
Grant distinct legal recognition of "at-risk" pipelines, i.e., projects which rely on market forces and private negotiation not regulation to establish rates and
Establish standards of conduct and clear cut procedures which promote and preserve competition among operators
and potential shippers on "at-risk" facilities.
LL&E supports the bill's underlying objective of promoting increased availability and usage of natural gas for domestic consumption. Any new natural gas legislation should focus on providing basic ground rules which will promote the construction of new natural gas pipeline facilities on an expedited basis. However, certificate reform is not simply a matter of getting more
pipe in the ground, for the cost of inefficient, unjustified construction will be borne by all segments of the natural gas
LL&E disagrees with S.570's attempt to restructure the Federal Energy Regulatory Commission (FERC). First, it is difficult to see
how incorporation into DOE would expedite the decision-making
process. Second, the restructuring proposal would convert the Commission from an independent bipartisan regulatory agency to an
of the executive branch.
Staff input would necessarily
increase under a single administrator. The proposed restructuring
could further politicize the decision-making process, and remove
the current institutional incentive for balanced policy making. LL&E has not always been pleased with the Commission's pace, but
speed should be gained by streamlining the existing structure, not
sacrificing the Commission's independence.
Finally, LL&E opposes at this time the deregulation of both sales and transportation services as set forth in S.570.
believes that for the foreseeable future most interstate pipelines
will continue to possess both monopoly and monopsony power, and
that continued FERC oversight is appropriate and necessary.
the "at-risk" pipelines that would be built under the proposed legislation, most existing interstate pipelines were built on an exclusionary basis (i.e., a monopoly) conditioned upon utilitystyle regulation as provided under the Natural Gas Act. The quid pro quo behind this regulatory "pact" remains to this day and
should not be swept aside by deregulation. This does not mean that
a lighter handed regulation of the pipelines' services is not appropriate in some circumstances.
In the case of pipeline sales, LL&E has supported negotiated
rates where the pipeline has achieved comparability of service on
its system. Comparability, however, is a very complex issue on which the Commission only now is beginning to develop its policy and the guidelines for implementing that policy. Many pipelines do not yet offer transportation services that are comparable to sales services. other related issues, such as the pipeline's
service obligation to its customers and customer conversion rights,
situations purely negotiated rates may be appropriate for some but
not all of the pipeline's customers.
In sum, the degree of
regulation of the pipelines' sales service remains subject to many interrelated issues which are best resolved through the existing
regulatory process at this time.
As to pipeline transportation services, LL&E opposes any form of blanket deregulation at this time. On nearly all interstate pipelines, monopoly power over the transportation service still exists. Even in markets served by more than one pipeline, the market is simply allocated among or between the pipelines. Market allocation does not equate with market competition.
This is not to say that rates on existing interstate pipelines
for all services must always be cost-based.
However, there still
a need for regulatory oversight of such rates to assure that
they are "just and reasonable" and that the market power of the pipeline over its transportation services is not wielded in a
If Congress desires to do something on this subject, it should limit its action to affirming or clarifying the Commission's authority to approve negotiated rates when the Commission determines that such treatment is both consistent with the "just and reasonable" and "no undue discrimination" standards contained
in existing law.
QUESTION 2: In particular, please address Section 201 of 1.570, the so-called mandatory interconnect provision.
What are the policy issues raised in connection with this section?
Does the section achieve its stated purpose authorizing the FERC to order upstream interconnection but not downstream interconnection, i.e., bypass?