not,

consummated, throughput has been increased and market efficiencies have been gained. These positive developments have however, been without costs, e.q., impairment of service to existing customers and, in the case of LDC bypass, higher costs for most consumers (generally residential, commercial and industrial users not able to hook-up directly to a pipeline), stranded LDC investment and redundant pipeline facilities. A reasonable course for public policy at this juncture in terms of "finetuning" S 311 would seem to be one which optimizes the positive contributions produced by $ 311 and minimizes the "downsides."

As drafted, the revision to § 311 set forth in $ 10002 does optimize the benefits by expanding the class of § 311 users to include "any other person." Unfortunately, S 10002 is asymmetrical. It does nothing to minimize adverse consequences, and, indeed, it exacerbates those consequences because of its onesidedness in merely expanding its application to "any other per

son."

AGD supports the expansion of the "class" of § 311 users long as this revision is accompanied by reasonable safeguards to nininize adverse consequences associated with impairment of service to existing customers and LDC bypass. We submit that the public utility obligations of LDCs and, perhaps more importantly as a practical matter, retail market reliance on LDCs and their utility system infrastructure warrants these reasonable safe

guards.

More specifically, AGD suggests that the revised § 311 service be accompanied by an expedited prior notice and protest procedure limited to claims of impairment of service to existing customers and LDC bypass. If no protest is filed within a short period after public notice, say, 14 days, the $ 311 service would proceed. If a protest is filed on impairment of service grounds, the Commission would resolve it expeditiously through su ary procedures. If a protest is filed on grounds of bypass, the Commission would be empowered to grant or deny the S 311 service depending upon whether the affected LDC is ready, willing and able to provide service on terms and conditions prevailing under applicable State or local regulation.

The above-explained impairment of service safeguard is necessary to assure that existing customers already using and relying on their rights or entitlement to pipeline capacity will not have their rights diminished or degraded by the new service. Some reasonable "check" for existing users seems fair given the equitable position of those users on a "first come, first served" rationale, their reliance on their present service entitlements and, in the case of LDCs, their utility obligation and retail market reliance on their service.

reasonable

The bypass safeguard is intended to provide some measure of harmony with and deference to State law. If an LDC is doing all it is authorized to do under applicable State or local

regulation, then that LDC is competing as best as it can. And, if in spite of the LDC's best "competitive" efforts, the bypassing industrial user, for example, wants a "better deal," it has a forum where it can present its case for that relief the applicable State or local regulatory body.

The

implications of bypass can be very significant both in terms of direct and indirect costs to the remaining LDC customers. Granted that the direct costs of staying on the LDC system may be higher for the large industrial user than bypassing the LDC for direct pipeline service, this represents, however, precisely the kind of issue which is best left to the State and local regulatory bodies to assess. Only at that level of government can the full facts, circumstances and implications to all parties (the industrial user, the residential, commercial and industrial users that cannot bypass the LDC, and the LDC) be developed, analyzed, weighed and decided consistently with the economic development, environmental and energy policy desires and objectives of those most affected. AGD strongly urges the modification of s 10002 to provide the foregoing minimum impairment of service and bypass safequards.

Section 10003

NEPA Compliance. AGD endorses and supports these provisions for streamlining and expediting the environmental review process by designation of FERC as the "lead" agency for preparation of environmental documents and by requiring the Commission to permit the applicant, at its expense, to choose a

Г

rate

Section 10004

Rates and Charges. AGD supports the revisions to NGA SS 4(d) and (e) which extend the notice period for changes from 30 to 60 days and clarify that the burden of proof for rate increases or decreases remains with the pipeline applicant for a rate change. While these modifications are useful (excepting any provision for "retroactive" refunds, which AGD opposes), further amendments to NGA S 4 are necessary to assure a fairer rate setting process by reducing the inequities in present law which result in disproportionate pipeline leverage over its customers, sales and transportation alike. Thus, GD recommends

that $ 4 be amended to remove the rate-filing suspension period and replace it with a requirement that:

(1) no rate change shall be effective until approved by

(2)

FERC

FERC

shall issue a final order approving or disapproving any filed rate within 12 months of such filing: and

(3) no rate change may be filed while a prior rate change is pending before FERC.

virtually un

Under NGA S 4, interstate pipelines have the fettered right to file for rate increases at any time.

The NGA

imposes no limit on the amount of such rate

frequency.

increases or their The Commission may suspend the effectiveness of the

rate filing for five months, after which it becomes effective on motion of the pipeline subject to refund (in the case of a rate increase) unless the Commission has finally ruled on the rate filing during the five-month suspension period.

This system of rate regulation places pipeline customers at a distinct disadvantage. As a practical matter, few rate cases

the

are resolved by Commission order within the five-month period. Customers who object to a filed rate are thus put in an untenable position. On the one hand, they may engage in meaningful and time-consuming settlement negotiations or litigation and allow filed rates to go into effect, thereby subjecting their markets to higher, unjust and unreasonable rates and jeopardizing those markets. ΟΙ, on the other hand, they may be driven to a less than favorable settlement within the five-month suspension period to avoid the market disruption which would arise if the rates went into effect as filed.

The customers

Pipelines are well aware of the bargaining leverage they have over their customers in this respect, and they take full advantage of their statutory rate-filing and rate-setting prerogatives, to the clear detriment of customers. refund "remedy" is simply not an effective deterrent here because market loss cannot be remedied by refunds. Further, even though refunds may have to be made by the pipeline, the fact remains