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The Associated Gas Distributors (AGD) is a group of 41 natugas distribution companies which provide gas utility service

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to consumers in Southern California and along the East Coast. As State or locally regulated public utilities, the AGD members approach federal energy policy issues affecting natural gas with unique perspective. These companies are not free to "pick up their pipes" and move to some

profitable location. They are, instead, inextricably bound to the local areas and economies wherein they serve.

more

Unlike gas producers, marketers, brokers

and

large industrial users, the AGD members are regulated public utilities. They have obligations at the State and local level which tran

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as a legal and practical matter, the obligations of

any other segment of the gas industry. Unlike interstate pipeline companies, which are for the most part regulated by the Fed

eral Energy Regulatory Commission (FERC or Commission), the AGD members are not directly regulated by FERC, but are directly and significantly affected by the policies and rules established

there.

AGD
agrees

that there is a great deal that can be done to streamline the federal natural gas regulatory structure. Indeed,

some

revisions to that structure are essential to permit the industry to meet the demands of the marketplace for natural gas. Air quality concerns, undue reliance on imported oil, balance of

payments and efficient use of energy all point to a more expanded

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Legislative initiatives, such as S. 341, hold the promise of removing sa ne of the unnecessary and burdensome institutional barriers to natural gas reaching its full potential.

By and large, these initiatives are welcome and long overdue.

The key to public policy success on these initiatives is to maintain

a

sense of equilibriu or balance.

Fundamental systemic changes are necessary. And, it is equally necessary that the eambedded benefits of the gas utility infrastructure be retained and nurtured to an even greater poten

tial betterment of society. Thus it is that AGD urges

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uittee throughout this prepared statement to weigh carefully the implications of its actions on the gas utility segment of the industry and the millions of consumers served thereby. It would be ironic indeed if the well-intended initiatives of today

are

penaitted to 80 obscure and undenine the benefits of the present system that those benefits are lost for naught.

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ral gas transportation facilities as drafted in S 10001.

Several

key features of S 10001 are essential and should be retained and, in some respects, clarified. First, the power of the Pederal Energy Regulatory Commission to attach reasonable terms and conditions to the operating certificate, as set forth in paragraph (b)(2) will presumably provide an opportunity for affected parties to obtain Commission redress on matters which adversely im

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isting pipeline customers, oversubscription of capacity, subsidization of the new service by third-parties and bypass of local

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Second, the 10-year prohibition on allocating costs of the facilities to other services of the company, S 10001(d), properly seeks to shield third-parties from costs for which they are not responsible. This is in accordance with traditional cost responsibility concepts and should be retained. It

may be advisable

to consider a more flexible cost allo

ion procedure where

by costs could, upon a proper showing, be

allocated differently

to

account for changes in the usefulness of the service over time, though still within the 10-year period.

Third, subparagraph 10001(c)(1)(iv) provides that rates for the facility shall be 'stand-alone and incremental." This seems to imply that rates would be "cost-based“ as

well,

though subparagraph 10001(c)(1)(iii) provides that an agreement between

even

the company and a person who contracts for transportation service

"may constitute a rate schedule." There appears to be an ambiguity here which should be clarified to

that rates

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'cost-based.'

that is based upon booked cost of service data.

This is an especially important notion given that in most circumstances pipeline/facilities capacity is now, and is likely to remain in the future, a monopoly product which the competitive give and take of market participants is unlikely to mitigate.

Fourth, the provision for application of NGA S 5 to rate revisions, as stated in paragraph 10001(c)(3), is a necessary and proper safeguard against unjust, unreasonable, unduly discriminatory or preferential rates and service.

of perfecting

In terms

this

provision to make it more useful as a practical matter, AGD

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vission remedy developed pursuant to a coxplaint. The present and future dynanics of the natural gas marketplace need an equally dynamic and efficient process for resolving complaints in timely, and therefore effective, manner. A complaint process

a

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have been permitted to move gas six months earlier is simply

not

an effective remedial process.

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Finally, S 10001 appears by its terms to be limited to facilities "to provide transportation service,“ S 10001(b)(1), opposed to facilities which provide transportation or sales service. It is certainly true that pipeline transportation of gas owned by others has become the dominant portion of pipeline

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throughput in recent years. By the same token, however, substantial portion of throughput remains pipeline sales volumes, and there does not appear to be any particularly sound public policy rationale for excluding facilities for sales service from the optional procedures section. To the contrary, sales service

continues

to

play

a critical role for most LDCs as a part of a

portfolio of gas supplies necessary to serve retail markets. Accordingly, AGD suggests that S 10001 be revised to include facil

ities for the transportation or sales of gas.

Section 10002

NGPA S 311 Transportation.

NGPA S 311

was

originally intended to facilitate access by the pre-1978 "interstate" gas markets to "intrastate" gas supplies. Its

has

use

quite obviously expanded, and substantially so, beyond that orig

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tive supply arrangements have been developed

and

more

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