Donald F. Santa, Jr., Counsel which serve small distributor-customers are still monopolies, and these customers must be protected from the abuse inherent in monopoly service. Just as many small towns either no longer have airline service or now pay exorbitant fares for such service, and just as many small communities are losing their bankrupt banks, S.662 would lead to both increased rates and the loss of natural gas service to many small communities. II. S.570, the "National Energy Strategy Act" (NES) This bill goes far beyond either S.341, S.662, or H.R.779 (Representative Sharp's "Natural Gas Enhancement Act of 1991"), towards deregulation of the natural gas industry. While it attacks one derivative facet of Natural Gas Act (NGA) Section 7 proceedings, i.e., the opportunity for competitors to participate in such proceedings, it ignores the fundamental purpose of such NGA proceedings, i... the opportunity for natural gas distributor-customers and consumers to be heard in an objective forum regarding proposed pipeline construction and rates since they will be the ones to receive (or be denied) service from and to pay the costs of the facilities to be constructed. The NGA was enacted to protect the public interest and to ensure that natural gas facilities, for which the public would have to pay, would be necessary to serve the public and would be "used and useful." In this crucial aspect, the industry has not significantly changed since the NGA was enacted because most pipelines still have monopoly power over most customers. Customers still need the protections offered by the NGA, but S.570, unfortunately, would effectively eliminate those protections. Contrary to the contentions of the Administration, service and construction under Section 311 of the Natural Gas Policy Act (NGPA) is hardly "adrift" in uncertainties. As noted in APGA's initial comments, the breadth of the "on behalf of" standard has been thoroughly litigated at FERC and in the courts, where all factions of the industry had full and fair hearings. To change this standard now would introduce uncertainty, and lead to further litigation. As for allowing major construction under section 311, APGA also stated its opposition in its initial comments. APGA agrees with the comments of the Natural Gas Supply Association (NGSA) that such a broadening of construction authority under Section 311 is not necessary (since the NGA Section 7 regulated option already exists and assuming there will be a deregulated option of some kind included in any natural gas legislation enacted by this Congress) and inappropriate (because the pipeline will get the benefit of regulation, ie, shared Donald F. Santa, Jr., Counsel April 12, 1991 Page 4 risk of costs, while not having to submit to regulatory approval through proof that construction is necessary and in the public interest). APGA strongly opposes those portions of S.570 which would provide for optional certificate procedures and nonjurisdictional certificate procedures. The optional certificate procedures proposed in S.570 do not include the protections and procedural safeguards afforded by those proposed in S.341. Again, nonjurisdictional pipelines are out of the question given the current status of the industry. Small distributors and consumers must be protected from the monopoly power of the pipeline that is physically connected to their town. Deregulation may encourage construction of pipelines in the production area, but more pipelines will not be built to small towns where the market is less lucrative. Section 7(a) of the NGA was written because pipelines have historically been unwilling to even provide sales service to small towns, let alone competitive transportation service. APGA could support the provisions in S.570 regarding mandatory interconnection if they were properly conditioned. It should be clarified that the notice and hearing procedures of existing Section 7(a) would apply to mandatory interconnection actions. The petitioner for mandatory interconnection should be required to bear all associated costs related to the relevant interconnection. And, if Section 7(a) is to be amended, it should be broadened to include transportation service as well as sales service. Any new version of Section 7(a) must require that mandatory interconnections meet the existing statutory standards of not creating any undue burden or an impairment of existing services. Finally, APGA reemphasizes that it is strongly opposed to the abolishment of FERC, as fully stated in its initial comments. APGA thanks the Committee for this opportunity to present its views. APGA reserves the right to comment further as the need arises. If there are any questions, please do not hesitate to call me. CC: Sincerely, Robert L. Care Robert S. Cave Executive Director All Members of the Committee on Energy and Natural Resources, U.S. Senate Stanley W. Balis, Esquire re: Title X, Energy Security Act of 1991 (S. 341) and proposed amendments introduced by Senator Bingaman and the National Energy Strategy Act (S. 570) Dear Chairman Johnston: I sincerely appreciate your letter of March 7, 1991 inviting my comments on the above referenced proposed legislation. I would also like to take this opportunity to commend the efforts of both you and Senator Wallop in sponsoring (S. 341) which demonstrates your individual commitments and concerns for the energy sector so vital to the Nation's economy. Although I have not completed a detailed analysis of the proposed legislation, I would like to offer these first impressions. I would concur with the notion expressed in the testimony submitted by the Commission's staff on March 7, 1991 as amended on March 29, 1991, that the above-referenced proposed legislation, as well as H.R. 779, all seek to build upon the procompetitive gas market that began in Congress with the enactment of the NGPA of 1978 and which FERC has attempted to foster in the past six years. I concur completely with the legislative interest in streamlining the pipeline certificate process. While I believe that flexible economic options for market participants are the linchpin of a competitive natural gas market, the natural gas industry is still in the midst of a competitive transition. Until such time as truly comparable service options are in place to curb the natural and historical monopoly power of the pipelines, I am concerned that the significant elimination of regulatory oversight may pose some difficult problems. The questions raised by staff regarding, in particular, the nonjurisdictional construction option are on point. - 2 In general, the Commission staff report was an accurate representation of both our on-going efforts to resolve some of the transitional problems the industry is facing and of my concerns vis-a-vis the proposed legislation. I support the staff response. As I become more familiar with the proposed legislation I would be pleased to have the opportunity to express my views. Sincerely, Jerry J. Langdon CC: Senator Malcolm Wallop Ranking Republican Member Committee on Energy and Natural Resources United States Senate Washington, D.C. 20510-6150 |