Standards of Conduct and Reporting Requirements for Transportation and Affiliate Transactions

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 161 and 250

[Docket No. RM94-6-001; Order No. 566-A]

Standards of Conduct and Reporting Requirements for

Transportation and Affiliate Transactions

Issued October 14, 1994.

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule; Order on rehearing.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is

issuing an order on the requests for rehearing of Order No. 566, the

final rule establishing revised standards of conduct and reporting

requirements for transportation and affiliate transactions. The order

grants rehearing on Standards H and K and makes a non-substantive

revision to the definition of marketing to reflect the elimination of

cross-referenced section of the regulations.

DATES: The revised regulations will become effective November 21, 1994.

ADDRESSES: Federal Energy Regulatory Commission, 825 North Capitol

Street, N.E., Washington, D.C. 20426.

FOR FURTHER INFORMATION CONTACT: Michael Goldenberg, Federal Energy

Regulatory Commission, 825 North Capitol Street, N.E., Washington, D.C.

20426. (202) 208-2294.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of

this document in the Federal Register, the Commission also provides all

interested persons an opportunity to inspect or copy the contents of

this document during normal business hours in Room 3104, 941 North

Capitol Street N.E., Washington D.C. 20426.

The Commission Issuance Posting System (CIPS), an electronic

bulletin board service, provides access to the texts of formal

documents issued by the Commission. CIPS is available at no charge to

the user and may be accessed using a personal computer with a modem by

dialing (202) 208-1397. To access CIPS, set your communications

software to use 300, 1200 or 2400 bps, full duplex, no parity, 8 data

bits, and 1 stop bit. CIPS can also be accessed at 9600 bps by dialing

(202) 208-1781. The full text of this notice will be available on CIPS

for 30 days from the date of issuance. The complete text on diskette in

WordPerfect format may also be purchased from the Commission's copy

contractor, La Dorn Systems Corporation, also located in Room 3104, 941

North Capitol Street, N.E. , Washington D.C. 20426.

Table of Contents

I. Introduction

II. Background and Summary of Order No. 566

III. Consideration of the Affiliate Regulations taken as a Whole

IV. Standard F

V. Standard H

A. Revisions To The Standard

B. Specific Issues

1. Affiliate's Role in a Transportation Transaction

2. Posting Period

3. Posting of the Transportation Path

4. Posting of Discounts on Firm Transportation

VI. Capacity Allocation Log

VII. Requirement to Maintain Affiliate and Non-Affiliate Discount

Information

VIII. Tariff Waivers and Complaints

IX. Coordination of the Affiliate Requirements with Part 284

Requirements

X. Applicability of the Regulations

XI. Effective Date

Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A.

Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa,

Jr.

Order on Rehearing

I. Introduction

In Order No. 566,\1\ the Commission adopted a final rule amending

its regulations governing the Standards of Conduct applicable to

pipeline interactions with their marketing affiliates and the reporting

requirements for transportation and affiliate transactions. The final

rule retained the existing Standards of Conduct, with one exception.

The rule made significant changes in the reporting requirements to

reduce or consolidate maintenance and reporting burdens based on the

changes in the way pipelines are allocating capacity under Order No.

636\2\ and the requirement of Order No. 636 that pipelines develop

Electronic Bulletin Boards (EBBs) to provide customers with access to

important information. Thirteen parties, most of whom are pipelines,

have sought rehearing or clarification of the proposed rule.\3\

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\1\Standards of Conduct and Reporting Requirements for

Transportation and Affiliate Transactions, Order No. 566, 59 FR

32885 (June 27, 1994), III FERC Stats. & Regs. Preambles 30,997

(June 17, 1994).

\2\Pipeline Service Obligations and Revisions to Regulations

Governing Self-Implementing Transportation; and Regulation of

Natural Gas Pipelines After Partial Wellhead Decontrol, 57 FR 13267

(Apr. 16, 1992), III FERC Stats. & Regs. Preambles 30,939 (Apr. 8,

1992), order on reh'g, Order No. 636-A, 57 FR 36128 (Aug. 12, 1992),

III FERC Stats. & Regs. Preambles 30,950 (Aug. 3, 1992), order on

reh'g, Order No. 636-B, 57 FR 57911 (Dec. 8, 1992), 61 FERC 61,272

(1992), appeal re-docketed sub nom., Atlanta Gas Light Company and

Chattanooga Gas Company, et al. v. FERC, No. 94-1171 (D.C. Cir. May

27, 1994).

\3\The parties seeking rehearing and clarification are listed on

Appendix A.

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One of the principal issues raised in the rehearing petitions is

the timing of the requirement for posting affiliate discount

information on the pipelines' EBBs. Current Standard H requires posting

when a discount offer is made. After considering all the interests

involved, the Commission is revising Standard H to require posting

within 24 hours of the time at which gas flows under the discount. The

Commission is leaving undisturbed the requirement of Standard H that a

pipeline making a discount offer to an affiliate must make a comparable

offer contemporaneously available to similarly situated non-

affiliates.\4\

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\4\The Commission also is changing the posting period from 90 to

30 days and is making other minor changes to make the posting more

informative and easier to use.

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The other substantive change the Commission is making is to revise

Standard K to ensure that shippers have reasonable access to tariff

waivers. The revised Standard will require pipelines to provide their

log of tariff waivers within 24 hours of a request.

In addition, the Commission is making some non-substantive

revisions. The definition of marketing in Sec. 161.2(c) has been

revised, because the definition cross-referenced a section of the

Commission's producer regulations that recently was removed by the

Commission in an order that eliminated all of the producer regulations

at Part 270.\5\ The Commission is revising other regulations to clarify

that they apply only to marketing affiliates and not other affiliates

of pipelines.

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\5\Removal of Outdated Regulations Pertaining To The Sales of

Natural Gas Production, 59 FR 40240 (Aug. 8, 1994), III FERC Stats.

& Regs. Preambles 30,909 (July 28, 1994).

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II. Background and Summary of Order No. 566

The Commission, in Order No. 497,\6\ issued a rule intended to

prevent pipelines from providing preferential treatment to their

marketing or brokering affiliates. The rule adopted Standards of

Conduct (codified at Part 161 of the Commission's regulations)\7\ and

tariff and reporting requirements (codified in Sec. 250.16).\8\ The

Standards of Conduct established the principles applicable to

relationships between pipelines and their affiliates. In general, the

Standards sought to prevent pipelines from favoring affiliates with

information or transportation discounts not available to non-

affiliates. The tariff provisions required pipelines to include a

variety of information in their tariffs, such as a list of operating

personnel shared with affiliates, the information required in

transportation service requests, and the procedures used for complaint

resolution and for informing shippers about the availability and

pricing of transportation services. The reporting requirements required

pipelines to file information relating to transportation transactions

with affiliates and to maintain the same information for non-affiliated

shippers.

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\6\Inquiry Into Alleged Anticompetitive Practices Related to

Marketing Affiliates of Interstate Pipelines, Order No. 497, 53 FR

22139 (June 14, 1988), FERC Stats. & Regs. [Regulations Preambles

1986-1990] 30,820 (1988), order on rehearing, Order No. 497-A, 54

FR 52781 (Dec. 22, 1989), FERC Stats. & Regs. [Regulations Preambles

1986-1990] 30,868 (1989), order extending sunset date, Order No.

497-B, 55 FR 53291 (Dec. 28, 1990), FERC Stats. & Regs. [Regulations

Preambles 1986-1990] 30,908 (1990), order extending sunset date and

amending final rule, Order No. 497-C, 57 FR 9 (Jan. 2, 1992), III

FERC Stats. & Regs 30,934 (1991), reh'g denied, 57 FR 5815, 58 FERC

61,139 (1992), aff'd in part and remanded in part, Tenneco Gas v.

Federal Energy Regulatory Commission, 969 F.2d 1187 (D.C. Cir.

1992), order on remand, Order No. 497-D, 57 FR 58978 (Dec. 14,

1992), III FERC Stats. & Regs. 30,958 (1992), order on reh'g and

extending sunset date, Order No. 497-E, 59 FR 243 (Jan. 4, 1994),

III FERC Stats. & Regs. 30,987 (Dec. 23, 1994), order on reh'g,

Order No. 497-F, 59 FR 15336 (Apr. 1, 1994), 66 FERC 61,347 (1994),

order extending sunset date, Order No. 497-G, 59 FR 32884 (June 27,

1994), III FERC Stats. & Regs. Preambles 30,996 (June 17, 1994).

\7\18 CFR Part 161.

\8\18 CFR 250.16.

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In Order No. 636, the Commission created a new operating

environment for interstate pipelines and shippers by requiring

pipelines to unbundle their sale of gas from their transportation

service and by implementing changes in the terms and conditions for

providing transportation service. For example, the Commission required

that pipelines establish EBBs to provide information about available

firm and interruptible capacity on the pipeline, including the firm

capacity available through the newly established capacity release

mechanism.\9\

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\9\Sections 284.8(b)(4); 284.9(b)(4). The Commission also has

issued Order No. 563 promulgating standards governing the methods by

which pipelines will provide information about available capacity

through their EBBs. Standards For Electronic Bulletin Boards

Required Under Part 284 of the Commission's Regulations, Order No.

563, 59 FR 516 (Jan. 5, 1994), III FERC Stats. & Regs. Preambles

30,988 (Dec. 23, 1993), order on reh'g, Order No. 563-A, 59 FR

23624 (May 6, 1994), III FERC Stats. & Regs. Preambles 30,994 (May

2, 1994), reh'g denied, 68 FERC 61,002 (1994).

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In light of the changes effected by Order No. 636 and by the

Commission's review of its existing Order No. 497 requirements, the

Commission in Order No. 566 made significant changes in the Standards

of Conduct and the tariff and reporting requirements. The Commission

eliminated the Standard of Conduct dealing with gas subject to take-or-

pay relief, because the Commission had established procedures in Order

No. 636 for dealing with gas supply realignment costs. The Commission

revised its Standard of Conduct H (prior Standard of Conduct I) to

coordinate its posting requirements relating to affiliate discounts and

thereby eliminate duplicative EBB postings. Former Standard I required

pipelines offering discounts to affiliates to make comparable discounts

contemporaneously available to similarly situated shippers. The

Commission retained this requirement, but modified the regulation to

codify its policy that pipelines use their EBBs to provide non-

affiliates with the contemporaneous notice required by the Standard.

This modification further enabled the Commission to eliminate a

duplicative reporting requirement, in Sec. 250.16, under which

pipelines had to post similar discount information on their EBBs. The

Commission eliminated a number of the tariff requirements, retaining

only the requirements that tariffs must include a list of operating

personnel and facilities shared by the pipeline and its marketing

affiliates and a provision establishing the procedures used to address

complaints.

The major change to the reporting requirements was to reduce the

pipelines' reporting burden by eliminating maintenance and posting

requirements relating to requests for transportation service and

replacing them with more limited requirements that better comport with

pipeline operations under Order No. 636. The revised regulations were

designed to better capture the information used by pipelines to

allocate capacity among shippers when available capacity is not

sufficient for the pipelines to honor all requests for service. For

those pipelines whose tariffs rely upon contract information or other

data to allocate capacity, the pipelines will be required to maintain a

log (for both affiliates and non-affiliates) of contract dates or other

relevant information used to allocate capacity. The affiliate log must

be posted on the pipelines' EBBs, while the full log (for both

affiliates and non-affiliates) must be provided to the Commission,

within a reasonable time, upon request. However, pipelines that

allocate capacity on a pro rata basis will not have to maintain the

log.

Because Standard H was modified to codify Commission policy

requiring EBB posting of discount offers, the Commission eliminated the

provision, under Sec. 250.16, requiring pipelines to post information

relating to affiliate discounts on their EBBs. Under the revised

regulations, pipelines must only maintain the relevant discount

information for both affiliates and non-affiliates and provide that

information to the Commission upon request.

Several of the rehearing requests challenge the Commission's

decision not to rescind the Standards of Conduct and reporting

requirements in their entirety. They then focus on the Commission's

decisions on individual requirements. The Commission will first address

the considerations relating to the affiliate requirements as a whole

and will then address the contentions made with respect to specific

items.

III. Consideration of the Affiliate Regulations Taken as a Whole

In the Notice of Proposed Rulemaking (NOPR),10 the Commission

stated that, as part of its continuing assessment of the Order No. 497

regulations, it would consider comments on the need to retain these

requirements as a whole. Many pipeline commenters contended that all

the Order No. 497 requirements should be removed, because they were

duplicative of existing prohibitions on undue discrimination and

because the changes created by Order No. 636 made these requirements

unnecessary. In Order No. 566, the Commission determined that the

changes effected by Order No. 636 had not reduced the pipelines'

incentive or ability to favor affiliates significantly enough to

warrant complete rescission of the regulations at this point. The

Commission, however, committed to reviewing these requirements as the

industry obtains more experience operating in the restructured

environment brought about by Order No. 636.

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\1\0Standards of Conduct and Reporting Requirements for

Transportation and Affiliate Transactions, Notice of Proposed

Rulemaking, 59 FR 268 (Jan. 4, 1994), IV FERC Stats. & Regs.

Proposed Regulations 32,504 (Dec. 23, 1993).

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Several pipelines contend the Commission erred in not rescinding

all of the Order No. 497 regulations.11 They make five arguments.

First, they contend that the requirements cannot be substantiated

because during the six years they have been in effect, the evidence

does not show that pipelines have acted to favor affiliates.

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\1\1Enron, INGAA, MGS/Natural, Panhandle Pipelines.

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Second, they argue that Order No. 636 has introduced added

competition to the marketplace by unbundling the sale of gas from the

transportation of gas and by permitting firm shippers to release their

capacity. They assert this added competition has eviscerated the

pipelines' monopoly over transportation and hence their ability to

discriminate unfairly in favor of their marketing affiliates.

Third, they maintain that the conduct sought to be prevented by the

affiliate regulations is already covered by the regulations under Part

284 that prohibit pipelines from engaging in undue discrimination.

Fourth, they maintain that whatever benefits may be derived from

the regulations do not warrant the reduction in competition the

regulations create. For example, INGAA maintains that pipeline

affiliates are placed at a competitive disadvantage because affiliate

discounts are posted, while non-affiliates can conduct their business

without such disclosure.

Fifth, they maintain that given the limited benefits from the

requirements, the burdens and costs on the pipelines of complying with

the posting and record maintenance requirements are not justified. The

Panhandle Pipelines, for instance, maintain that few in the industry

are interested in the information posted on EBBs, stating that shippers

have accessed the affiliate EBBs on their four pipelines only a limited

number of times.

If the regulations are maintained, many pipelines12 contend

the Commission should include a sunset date on which the regulations

will expire. They point out a sunset date had been a feature of the

prior Order No. 497 reporting requirements and the Commission

acknowledged in Order No. 566 that developments in the industry may

well make continued enforcement of the rules unnecessary. They point

out that the Commission has committed to reviewing these requirements

and argue that a sunset date will make that commitment tangible.13

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\1\2Enron, INGAA K N Energy, MGS/Natural, Panhandle Pipelines,

Tenneco.

\1\3If the Commission does not have sufficient evidence within

the sunset period to make its determination, they assert the

Commission can extend the requirements as it has in the past.

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In contrast, Hadson contends that the rules have not had a

significant adverse effect on the ability of marketing affiliates to

compete given the phenomenal success that affiliate marketers have

enjoyed. Hadson maintains that the success of the regulations is shown

by the reduced number of complaints from state governments, producers,

and competing marketers, and it argues that this success is sufficient

grounds to make the Order No. 497 rules a part of the permanent

regulatory framework.

The Commission denies the requests for rehearing. Even with the

changes created by Order No. 636, the pipelines still retain an

economic incentive to favor their affiliates, since such preferences

may increase the overall profitability of the parent corporation.

Although the unbundling of pipeline gas sales from transportation

service has created a more competitive gas market, this competition has

not eliminated the pipelines' incentives to favor their affiliates.

Pipelines can still provide their affiliates with competitive

advantages by giving them preferential access to transportation

information or to discounts or other transportation benefits.

Similarly, while the capacity release mechanism has created competition

between released capacity and the pipelines' firm and interruptible

capacity, the industry has not even had a year's experience with

capacity release, so evidence of how it will affect the pipeline's

control over transportation service is still unknown.

The pipelines assert that the regulations are unnecessary because

the Commission's Part 284 regulations already prohibit undue

discrimination and that the Standards of Conduct and reporting

requirements are therefore duplicative. Although the Part 284

regulations do prohibit undue discrimination, these regulations do not

establish the mechanisms, included in the affiliate regulations, to

help ensure that non-affiliates are treated equally with affiliates and

to provide for public and Commission monitoring of affiliate

transactions. Given the special relationship between pipelines and

their marketing affiliates and the pipelines' incentive to favor

affiliates, the additional protection provided by the affiliate

regulations is necessary.

In addition, the pipelines claim that the regulations should be

removed since there has been little evidence of favoritism to

affiliates so the regulations place unnecessary burdens on the ability

of affiliates to compete and create needless reporting burdens. Even

with the current regulations, the Commission has received complaints of

affiliates abuses. Using the number of complaints is an uncertain

indicator of whether the regulations need to be continued, since the

presence of the Standards of Conduct and the public scrutiny created by

the reporting requirements may have had the desired prophylactic effect

and decreased the extent of potential problems which otherwise might

have occurred.

In the final rule, the Commission significantly reduced the burdens

created by the tariff and reporting requirements. The regulations that

remain do not create such undue burdens on the pipelines or their

affiliates that rescission is warranted, given the pipelines'

continuing incentives to favor affiliates. These regulations strike a

reasonable balance between prevention of pipeline favoritism towards

affiliates and the competitive and reporting burdens claimed by the

pipelines and affiliates. For example, the Standards of Conduct do

nothing more than require the pipelines to provide to non-affiliates

the same information and discounts the pipelines provide to affiliates

by posting such information on EBBs. Such disclosure does not prevent

the affiliates from competing; it merely ensures that all relevant

transportation information is provided in a public forum so competition

between affiliates and non-affiliates can take place on an even basis.

Moreover, since pipelines are required to operate EBBs by Sec. 284.8

(b)(4) and (5), the additional burden of posting affiliate information

is not great.

The Commission will not impose a sunset date for the reporting

requirements. The Commission's review of the Order No. 497 requirements

in this rule resulted in a significant reduction in the reporting

requirements: pipelines now are required to post and maintain a simple

log of contract data used to allocate capacity only if they use such

data, and to maintain a limited amount of information concerning

transportation discounts provided to affiliates and non-affiliates.

Given this reduction in burden, the Commission does not find that the

administrative burdens created by establishment of a sunset date are

now appropriate, especially since the Commission is unable to determine

when it will have sufficient information to reevaluate its reporting

requirements. The Commission, however, is committed to undertaking such

a reevaluation when the industry has obtained sufficient experience

operating in the restructured environment.

IV. Standard F

Standard F requires the pipelines to disclose contemporaneously to

all shippers transportation information provided to affiliates. The

Panhandle Pipelines argue that this Standard is no longer needed,

because, due to the capacity release and flexible receipt and delivery

point authority created by Order No. 636, customers control access to

capacity, not the pipelines. The Commission, however, fails to discern

how the ability of customers to exercise greater control over the use

of their capacity would lessen the effect of a pipeline providing

important transportation information to an affiliate, but withholding

the information from the rest of the market. As an example, a

pipeline's advance notice of curtailment plans could permit an

affiliate to make alternate transportation arrangements so that it can

continue to provide uninterrupted service, while shippers without

advance notice may be at a disadvantage in attempting to make such

alternate plans.14

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\1\4The affiliate, for instance, could lock-up alternate receipt

or delivery points before other shippers are aware of the need to

change points.

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V. Standard H

The predecessor to Standard H required pipelines offering a

transportation discount to an affiliate to make a comparable discount

contemporaneously available to all similarly situated non-affiliates.

In Order No. 566, the Commission retained this requirement. It modified

the Standard, however, to codify the interpretation developed through

case-by-case decision-making that pipelines were required to post

certain information about affiliate discounts on the pipelines'

EBBs.15 Under Standard H, pipelines are required to post, for a 90

day period, notice of each offer to an affiliate, providing the date of

the offer, the discount rate, the quantity of gas scheduled to be moved

at the discount rate, the delivery points in the offer, any conditions

applicable to the offer, and the procedures by which a non-affiliated

shipper can request a comparable offer. The Commission found that this

modification of the Standard did not add a new posting requirement,

because the Commission eliminated the comparable requirement under

Sec. 250.16 that pipelines post affiliate discount information on their

EBBs.

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\1\5See Colorado Interstate Gas Company, 64 FERC  61,277 at

62,960 (1993) (citing Sunrise Energy v. FERC, 62 FERC  61,087 at

61,622-23 (1993)), reh'g denied, 65 FERC  61,264 at 62,224-25

(1993).

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A. Revisions to the Standard

Pipelines16 challenge the Commission's modification of the

Standard first by contending that the Commission failed to abide by the

Administrative Procedure Act (APA), because the proposal to require

posting of affiliate offers on EBBs was not included in the NOPR in

this proceeding.17 They assert that the addition of the posting

requirement to Standard H, without proper notice, violated the APA,

because it was not in character with the prior regulations or the

original scheme proposed in the NOPR and was not a logical outgrowth of

the NOPR. In particular, they assert that the modification to Standard

H was not in character with the previous regulations, because, under

prior Sec. 250.16, pipelines were required to post affiliate discount

information after the discount was provided, while the revision to

Standard H requires such posting when the discount offer is made.

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\1\6ANR/CIG, Enron, INGAA, MGS/Natural, Panhandle Pipelines.

\1\75 U.S.C. 553(a).

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The pipelines also make a number of substantive challenges to the

Standard. They contend Standard H in its entirety is unnecessary

because no evidence demonstrates that pipelines engage in abusive

discounting practices.18 They further maintain that any potential

problems are adequately covered by Commission regulations under Part

284 which prevent undue discrimination and require, under

Sec. 284.7(d)(5)(iv), that the pipelines provide notice of

discounts.19

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\1\8Enron, MGS/Natural.

\1\9Enron, INGAA.

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The pipelines further contend that the required posting of discount

information when offers are made will disclose confidential competitive

information and will permit non-affiliates to steal deals being

negotiated by affiliates.20 Enron argues that contemporaneous

posting of the discounted rate, volume, and delivery points will enable

competitors to discern the identity of the affiliate's customer and

determine the type of offer that will enable the non-affiliate to

undercut the affiliate's deal.21 Enron requests that if the

Commission retains the posting requirement, it eliminate the disclosure

of competitively sensitive information, requiring only the posting of a

notice of a discount. MGS/Natural contend that the revision to the

regulation is based on the incorrect premise that non-affiliated

shippers will request discounts only if they are made aware of the

discount offered to the affiliate. They maintain that all shippers know

how to request and bargain for discounts so that after-the-fact posting

of discounts is all that is necessary to ensure that discrimination has

not occurred.

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\2\0ANR/CIG, Enron, MGS/Natural, Panhandle Pipelines.

\2\1TGPL requests deletion of the requirement to post the volume

of gas scheduled since the pipeline will not know this information

when offering the discount.

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Along the same lines, K N Energy and Panhandle Pipelines request

clarification of when pipelines are obligated to post offers under the

regulation. They argue that pipelines should not be required to post

affiliate discount information during negotiations, but should post

only the final offer on the day it is offered to the affiliate. K N

Energy states that affiliates will be unduly disadvantaged by posting

of offers during the negotiation process and cites to the Commission's

decision in Sunrise Energy Company v. Transwestern Pipeline

Company,22 in support of this interpretation. In contrast,

Indicated Companies contend that the Commission should require the

posting of all offers made during negotiations in addition to posting

the final offer, citing to the Commission's decision in Colorado

Interstate Gas Company.23

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\2\262 FERC  61,087 at 61,623 (1993), aff'd, 66 FERC  61,170

(1994).

\2\365 FERC  61,264 at 62,224-25 (1993).

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The Commission rejects the pipelines' contention that Standard H in

its entirety is unnecessary due to an absence of complaints about

abusive discounting practices and the existing requirements of Part

284. As discussed earlier, the Commission has received complaints of

affiliate abuses, and the need to prevent preferential discounting is a

fundamental premise of the regulations. Given the pipelines' incentive

to favor marketing affiliates, a separate requirement that pipelines

contemporaneously make the same discounts available to non-affiliates

as to affiliates is necessary and not unduly burdensome. Public

disclosure of affiliate discount information also is still necessary to

inform non-affiliates of available discounts and to permit the market

to monitor affiliate transactions. As discussed below, the Commission

rejects the pipelines' contention that the current Part 284 discount

reports are sufficient to replace the posting requirements under

Standard H.

The Commission, however, is persuaded by the rehearing petitions

that its posting requirements under Standard H did not strike the

proper balance between the interests at issue here. The Commission,

therefore, will grant rehearing and revise the posting requirement so

that the information about affiliate discount transactions will not

have to be posted until 24 hours after gas flows under the discount

transaction.24 The change to the posting requirement will not

affect the pipelines' obligation contemporaneously to provide non-

affiliates with the same discounts provided to affiliates. Any pipeline

offering a discount to an affiliate will be required to make a

comparable discount contemporaneously available to all similarly

situated non-affiliated shippers.

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\2\4The Commission also is making some minor changes to make the

posting easier for shippers to use. The Commission is requiring

posting of the time period for which the discount applies and the

maximum rate applicable to the transaction. These two data elements

previously had been included in the posting requirement under former

Sec. 250.16.

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As the parties point out, the Commission's prior orders were not

clear as to when posting should be required. In Sunrise Energy, the

Commission interpreted the prior regulations as not requiring pipelines

to provide notice of discount negotiations with affiliates. On the

other hand, in Colorado Interstate, the Commission held that to comply

with the prior regulations, pipelines had to post offers made during

negotiations on their EBBs in addition to posting the final offer. In

Order No. 566, the Commission followed Colorado Interstate and required

posting of discount information when an offer to an affiliate was made.

The Commission has decided that this requirement does not strike

the appropriate balance between the need to provide information about

affiliate discounts and the need to ensure that affiliates can compete

on a relatively equal basis with non-affiliates. Pipeline marketing

affiliates should be able to compete in the market on the same terms as

non-affiliates to the maximum extent possible. The Commission is

concerned that if information about affiliate discounts is provided

during the negotiating process, such information could provide non-

affiliates with a competitive advantage over affiliates. As the

pipelines contend, non-affiliates could use the posted affiliate

information to try to interfere with an affiliate's negotiations with a

customer. Non-affiliates are not subject to a similar risk, because

they are not required to disclose information about the deals they

negotiate.

On the other hand, the Commission is not persuaded by the

pipelines' contention that posting is adequate if it is delayed until

the month after the affiliate has transported gas under the discount

transaction, as is the case under the current Part 284 reporting

requirements.25 Posting the month after the transaction is too

late to permit the market to monitor current affiliate transactions or

to enable non-affiliates to obtain discounts during the same time

period as affiliates.

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\2\5Section 284.7(d)(5)(iv) (filing required 15 days after close

of the next billing period). In addition to finding that the Part

284 reports are not filed timely enough, the Commission finds other

reasons for concluding that these reports cannot substitute for the

Standard H EBB postings. The Part 284 reports do not provide some of

the data required by Standard H, such as delivery points and terms

and conditions of the discount, information which is needed for non-

affiliated shippers to determine whether potential discrimination

has occurred. And, the Part 284 reports are not posted on pipeline

EBBs so shippers cannot obtain easy access to this information.

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The time that gas flows appears to establish an appropriate posting

trigger. It ensures that affiliates will not be competitively

disadvantaged during the period when deals are being negotiated. At the

same time, it permits the market to actively monitor current affiliate

transactions to quickly ensure that undue discrimination has not

occurred. And, the posting is early enough so a similarly situated non-

affiliate still has the time to request and obtain a discount for its

transportation during essentially the same time period as the

affiliate. While alternative posting times also might achieve these

goals, the point at which gas flows is a reasonable choice because it

is a concrete event that can be easily verified.

The Commission recognizes that posting when gas flows means that

non-affiliates will be negotiating deals with potential customers

without knowledge of discount offers to affiliates for which the non-

affiliates may be eligible. But the Commission finds that this result

is necessary to strike the proper balance between providing for

disclosure of affiliate discount information and the preservation of

competition between affiliates and non-affiliates. The primary purpose

for requiring posting of affiliate information is not to provide non-

affiliates with information that may be competitively useful, but to

protect against undue discrimination against non-affiliates. Posting at

the time gas flows achieves that purpose without the potential for

providing non-affiliates with competitive advantages over affiliates.

Moreover, non-affiliates will not be without protection in the

period prior to the posting. Pipelines still will be under an

obligation to make discounts offered to affiliates contemporaneously

available to similarly situated non-affiliates. The non-affiliates also

will know the level of discounts provided to affiliates during the

prior month, and they can use this information, along with other market

information, to negotiate discounts with the pipelines. If a pipeline

fails to provide a non-affiliate with a discount, the posting

requirement will enable the non-affiliate to examine almost immediately

whether a denial of a discount amounts to discrimination.

The grant of rehearing makes resolution of the pipelines' arguments

concerning the APA's notice and comment provisions unnecessary. Posting

will be required only after the discount transaction is consummated,

which is the posting time the pipelines contend was the requirement

under the previous regulations and the NOPR.

B. Specific Issues

1. Affiliate's Role in a Transportation Transaction

In the final rule, the Commission required pipelines to post

discount offers when affiliates are involved in a transaction, even if

they are not the shipper. The Commission reasoned that if a pipeline

knows of an affiliate's involvement in a deal, it may offer a discount

to the actual shipper to benefit the affiliate. The offer of a discount

in this situation would be no different than providing the discount

directly to the affiliate.

MGS/Natural and Tenneco contend this provision is anticompetitive

because shippers will be loathe to deal with affiliates if the details

of their deals are disclosed. They contend that maintenance of the

discount information under Sec. 250.16 is all that should be required.

TGPL requests clarification that posting is required only if the

pipeline knows of the affiliate's involvement when granting the

discount; it asserts subsequently acquired knowledge of involvement

should not trigger a posting requirement or an obligation to make the

discount available to other shippers. Panhandle Pipelines request

clarification that knowledge of the discount refers only to knowledge

by those granting the discount and does not apply to general corporate

knowledge held by others in the company, but not communicated to those

negotiating discounts.

The Commission will retain the obligation to post discounts when an

affiliate is involved in the transaction, but is not the shipper. Such

disclosure should have no different effect than disclosure of the same

deal when the affiliate is acting as the shipper, and MGS/Natural and

Tenneco do not explain why the effect should be any different. The

Commission, however, will clarify that in posting such offers, the

pipelines need not disclose the name of the actual shipper. They must

only report that a discount has been offered in an affiliate

transaction.

The Commission grants TGPL's request that discounts need to be

posted only when the pipeline knows of the affiliate's involvement at

the time the discount is made. Only if the pipeline has current

knowledge of the affiliate's involvement could the role of the

affiliate be a basis for offering the discount. With respect to

Panhandle Pipelines' request, the Commission agrees in principle that

discounts need to be disclosed only when the officials involved in

granting the discount are aware of the affiliate involvement.

Pipelines, however, are responsible for establishing organizational

procedures in order to dispel questions about whether the responsible

officials have learned of information about affiliate involvement that

may be held by others in the organization.

2. Posting Period

The final rule required affiliate discounts to be posted for a 90

day period. Several pipelines contend that the 90 day period is longer

than necessary to effectuate the purposes of the rule, because

discounts are often available only for a short time and become stale.

They further contend that posting for 90 days will clutter EBBs with

unnecessary information. The range of alternatives they propose extends

from 7 to 30 days.

The Commission will modify the posting requirement to require that

the discount information be posted for 30 days from the date of first

posting. 30 days of posting is sufficient time for shippers to monitor

affiliate discounts. Since many discounts last for only a month, a 30

day posting requirement will help ensure that the posted information is

current.

3. Posting of the Transportation Path

The National Registry requests clarification that if discount

offers are dependent on the use of more than one receipt point, all

such points must be disclosed. Indicated Companies contend that

Standard H should be amended to require disclosure of the full

transportation path of the affiliate discount.

The Commission will clarify that Standard H requires the posting of

all conditions of an affiliate discount. Thus, if the discount is based

on the use of a particular transportation path or one or more receipt

points, that information must be posted.

The Commission is not sure whether Indicated Companies is

requesting that the pipeline post the full transportation path even

when the path is not a condition of the discount. If that is the

request, it is denied. Pipelines must post the delivery points for

every affiliate transaction. Requiring the posting of receipt points

could be voluminous and is unnecessary unless the use of certain

receipt points is a condition of the discount, in which case the

information would need to be posted.

4. Posting of Discounts on Firm Transportation

Indicated Companies request clarification that the posting

requirement applies to firm, as well as interruptible discounts. The

regulation refers to transportation discounts, which includes both firm

and interruptible discounts.

VI. Capacity Allocation Log

In Order No. 566, the Commission eliminated a number of

requirements for pipelines to post information about requests for

transportation service. The Commission replaced these requirements with

a more limited requirement that was better tailored to the methods used

by pipelines to allocate capacity under Order No. 636 during periods

when demand exceeds supply. Those pipelines relying on contract data or

other data for allocating capacity must maintain a log showing for each

shipper, the applicable contract dates or other data used to allocate

capacity. The log for pipeline affiliates must be posted on the

pipelines' EBBs, while the log for both affiliates and non-affiliates

must be maintained by the pipelines and provided to the Commission upon

request.

MGS/Natural contend that the capacity allocation log should be

removed because the industry has no need for or interest in the data.

ANR/CIG maintain that if the primary basis for capacity allocation is

rate paid, the capacity allocation log is not needed. They maintain

undue discrimination cannot take place when contract data is only the

secondary basis for allocation and that the burden of maintaining the

log, therefore, is not warranted. Columbia/Columbia Gulf request a

waiver of the allocation log requirement, contending that on their

system, the only information other than the rate used to allocate

capacity is the date nominations for interruptible transportation are

received.

The Commission finds that the capacity allocation log is necessary.

When demand for interruptible service exceeds available supply,

Commission policy and pipeline tariffs require that the interruptible

capacity first be allocated on the basis of the rate bid. However, if

the rate bid is not sufficient, some pipelines assign priority based on

contract data, such as contract execution date, the date service is

requested, or the date gas is first shipped under a contract. Even

though contract data are the secondary basis for allocating capacity,

such information can be very important during a constraint situation

when many shippers are willing to bid the highest rate necessary to

retain capacity. The capacity allocation log provides a reasonable

means for non-affiliated shippers and the Commission to ensure that

pipelines do not unfairly favor their affiliates during periods when

capacity is at a premium. The allocation log provides this important

information with only minimal burdens on the pipelines. It consists of

only five data elements and will not have to be updated frequently,

because the contract data used for allocating capacity generally remain

the same.

Implicit in Columbia/Columbia Gulf's waiver request is an

assumption that the rule requires posting of the dates on which

nominations are received. The rule generally was designed to reduce the

burden on pipelines and, therefore, the Commission did not intend for

pipelines to have to maintain and post data that varies every day, such

as nomination dates and times. The capacity log is designed to capture

information that remains stable over time, such as the date a contract

is executed or the service request date, or other similar data relating

to service under a contract.

This rehearing order is not the appropriate forum for acting on

Columbia/Columbia Gulf's waiver request. Columbia/Columbia Gulf should

file a separate waiver request setting forth the burden imposed by the

rule and suggesting means for reducing the compliance burden.

VII. Requirement To Maintain Affiliate and Non-Affiliate Discount

Information

In Order No. 566, the Commission amended Sec. 250.16 to require

pipelines to maintain certain information about both affiliate and non-

affiliate discounts.26 The regulations required pipelines to

provide this information to the Commission upon request and also

provided that it would be made available through the Commission's

discovery procedures.27 Indicated Companies contend that the

information also should be made available to the public upon request.

The Commission denies the request for rehearing.

---------------------------------------------------------------------------

\2\6This information includes the name of the shipper being

provided the discount, the affiliate relationship between the

pipeline and the shipper, the affiliate's role in the transportation

transaction (i.e., shipper, marketer, supplier, seller), the

duration of the discount, the maximum rate or fee, the rate or fee

actually charged during the billing period, and the quantity of gas

scheduled at the discounted rate during the billing period for each

delivery point.

\2\718 CFR Part 385, Subpart D.

---------------------------------------------------------------------------

Prior to Order No. 566, the Commission required pipelines to post

affiliate discount information on their EBBs and to maintain the same

information for non-affiliate transactions. The non-affiliate

information was available only to the Commission and to others pursuant

to the Commission's discovery provisions. The non-affiliate information

was not made generally available to the public because it might be

competitively sensitive and non-affiliate information was not needed to

detect discrimination in favor of affiliates.28

---------------------------------------------------------------------------

\2\8Order No. 497, FERC Stats. & Regs. [Regulations Preambles

1986-1990] at 31,148.

---------------------------------------------------------------------------

In Order No. 566, the Commission eliminated the previous

requirement, under Sec. 250.16, to post affiliate discount information

because the relevant discount information was posted under Standard H.

The Commission concluded that the discount information posted under

Standard H is sufficient for non-affiliated shippers to monitor

affiliate discounts to determine whether discrimination has occurred

and thus found that a duplicative posting requirement under Sec. 250.16

was not needed.

The Commission, however, maintained the requirement that disclosure

of the affiliated and non-affiliated data would be limited to the

Commission and to parties demonstrating a need for such information in

discovery. Indicated Companies has not provided any justification for

now requiring general public disclosure of the detailed non-affiliate

information. Moreover, Indicated Companies already has access to less

detailed information about both affiliate and non-affiliate discounts

through the Part 284 requirement that pipelines file discount reports

with the Commission showing the name of the shipper receiving a

discount, the maximum rate or fee, the rate or fee charged, and any

affiliation between the pipeline and the shipper.29

---------------------------------------------------------------------------

\2\918 CFR 284.7(d)(5)(iv).

---------------------------------------------------------------------------

VIII. Tariff Waivers and Complaints

In Order No. 566, the Commission eliminated the requirements that

pipelines post tariff waivers and complaints related to affiliate

transactions on the pipelines' EBBs. The Commission concluded that if

shippers had questions about tariff waivers, they could obtain such

information under Standard K, which requires pipelines to maintain and

make available for copying a log of tariff waivers. The Commission

found that complaints are matters between the complainant and the

pipeline and that the complainant, if it is dissatisfied with the

pipeline's response, can bring the matter to the Commission's attention

either through the Commission's Enforcement Task Force hotline or the

Commission's formal complaint procedure.

Indicated Companies and Hadson contend that posting of tariff

waivers should be continued. They argue that tariff waivers can provide

competitive benefits to affiliates as significant as discounts and that

viewing such waivers at the pipelines' offices is unduly burdensome.

Hadson contends that requiring shippers to travel to pipeline offices

to view waivers is an anachronism in an age when computer technology

can provide such data instantaneously. Hadson contends that complaints

should continue to be posted because they may help shippers detect

patterns of abuse.

The Commission will not reinstate the requirements to post tariff

waivers and complaints on EBBs. Complaints are individual concerns

between the pipeline and their customers and complaints that are

resolved amicably would not generally provide indications of abuse.

Complaints which are not resolved can be referred to the Commission,

and the Commission will be able to discern any patterns of abuse.

With respect to tariff waivers, the potential benefits from EBB

postings may be outweighed by the programming and other computer and

administrative costs of placing such waivers on pipeline EBBs. The

Commission, however, agrees that shippers should have reasonable access

to such waiver information without having to travel to pipeline offices

to copy the waivers. The Commission, therefore, will amend Standard K

to require pipelines to provide a copy of the log of tariff waivers to

anyone requesting it within 24 hours of the request. The pipelines can

then choose the most expedient method of complying, whether that may be

posting the tariff waivers on their EBBs or providing them using

facsimile machines.

IX. Coordination of the Affiliate Requirements With Part 284

Requirements

Pipelines have requested that the Commission coordinate its

affiliate regulations with some of its Part 284 regulations to

eliminate duplicative requirements and make these requirements

consistent. ANR/CIG contends that the Commission should eliminate the

requirement to include in the initial reports required by

Sec. 284.106(a)(3) the points between which natural gas is to be

transported and the state of the source of gas, because the Commission,

in Order No. 566, removed similar maintenance requirements relating to

source and destination of gas. Columbia/Columbia Gulf and Tenneco

contend that the requirements for pipelines to file discount

information under Sec. 284.7(d)(5)(iv) is unnecessary since pipelines

must maintain even more extensive discount information under

Sec. 250.16(d). Tenneco further argues that the semi-annual storage

reports required by Secs. 284.106(g) and 284.126(g) require information

also required by the affiliate regulations and only one requirement

should be retained.

The Commission will not make piecemeal changes in its Part 284

requirements in this proceeding. For example, the Part 284 discount

reporting requirements are not identical with the requirements of

Sec. 250.16(d): the Part 284 reports are publicly available while the

more extensive Sec. 250.16 information is not. Similarly, in the EBB

proceedings in Docket No. RM93-4-000, the Commission has been

considering industry proposals to replace the initial reports with an

electronic Index of Purchasers.30 The Commission already is

examining its regulations in light of the changes caused by Order No.

636 and revisions to these requirements will be made at the appropriate

time when all the regulations can be considered as a whole.

---------------------------------------------------------------------------

\3\0Order No. 563-A, III FERC Stats. & Regs. Preambles, at

31,047-49.

---------------------------------------------------------------------------

X. Applicability of the Regulations

The Commission is revising the definition of marketing in

Sec. 161.2(c) as a result of the Commission's recent order31

eliminating all of its producer regulations at Part 270 due to the

passage of the Natural Gas Wellhead Decontrol Act (Decontrol

Act).32 Section 161.2(c) currently defines marketing, in relevant

part, as ``a first sale of natural gas as that term is defined in

Sec. 270.203 of this chapter, or a sale of natural gas in interstate

commerce for resale* * *.'' Since Sec. 270.203 has been removed, the

Commission is revising the definition so as to maintain the same

coverage as the previous definition.

---------------------------------------------------------------------------

\3\1Removal of Outdated Regulations Pertaining To The Sales of

Natural Gas Production, 59 FR 40240 (Aug. 8, 1994), III FERC Stats.

& Regs. Preambles 30,909 (July 28, 1994).

\32\Pub. L. No. 101-60; 103 Stat. 157.

---------------------------------------------------------------------------

Section 270.203(c) used the Commission's authority under the

Natural Gas Policy Act (NGPA) to define any sale by an affiliate of an

interstate pipeline as that affiliate's first sale of natural

gas.33 Under the NGPA, first sales include sales to interstate and

intrastate pipelines, sales to local distribution companies, sales to

any person for use by that person, as well as any sale preceding the

enumerated sales.34 If first sale status for marketing affiliates

were removed (without the revision made here) a substantive change in

coverage would occur, because the definition would not apply to certain

direct sales by pipeline marketing affiliates that were previously

covered by the definition of marketing. Accordingly, the definition of

marketing will be revised to ensure that no substantive change occurs.

The revised regulation will read as follows:

\3\3Under the NGPA, sales by pipeline marketing affiliates

generally would not be first sales. The Commission used its

authority to define pipeline affiliates as making first sales to

prevent possible circumvention by pipeline affiliates of the maximum

lawful price provisions of the NGPA. 15 U.S.C. 3301(21)(A)(v).

\3\415 U.S.C. 3301(21)(A)(i)-(iv). Thus, the prior definition of

marketing in Sec. 161.2 applied both to sales for resale and direct

sales made by pipeline marketing affiliates.

---------------------------------------------------------------------------

Marketing or brokering as used in this part and Sec. 250.16 of

this chapter means a sale of natural gas to any person or entity by

a seller that is not an interstate pipeline, except when:

(1) the seller is selling gas solely from its own production;

(2) the seller is selling gas solely from its own gathering or

processing facilities; or

(3) the seller is an intrastate natural gas pipeline or a local

distribution company making an on-system sale.

This definition effects no change in substantive coverage under the

regulations. The regulations continue to apply only to pipeline

affiliates that are engaging in gas sales activities that would compete

with independent marketers. The definition does not apply to producers,

gatherers, and processors, acting in their traditional roles of selling

gas from their own production, gathering, or processing facilities, or

to intrastate pipelines and local distribution companies acting in

their traditional roles of making on-system sales of gas.35 These

entities will be included as marketers only to the extent that their

activities go beyond their traditional roles and they make sales for

which an independent marketer could compete. Because the revision has

no substantive effect on the rights of any party, the Commission

determines that good cause exists under the APA for finding that notice

and public comment on these revisions is unnecessary and contrary to

the public interest.36

---------------------------------------------------------------------------

\3\5Order No. 497-A, 54 FR 52781 (Dec. 22, 1989), FERC Stats. &

Regs. [Regulations Preambles 1986-1990] 30,868, at 31,592 (1989).

\3\65 U.S.C. 553(b). See National Helium Corporation v. Federal

Energy Administration, 569 F.2d 1137, 1145-46 (Emer. Ct. App. 1978).

---------------------------------------------------------------------------

Columbia/Columbia Gulf, INGAA, and Enron point out that the

applicability sections of Sec. 161.1 and Sec. 250.16 and Standards E

and H refer to affiliates rather than marketing affiliates. They assert

that the regulations have only applied to marketing affiliates in the

past and request the Commission to revise these regulations to make

this clear. The Commission will revise the regulations to make clear

that they apply only to marketing affiliates.

XI. Effective Date

The amendments to the Commission's regulations adopted in this

order will become effective November 21, 1994.

List of Subjects

18 CFR Part 161

Natural gas, Reporting and recordkeeping requirements.

18 CFR Part 250

Natural gas, Reporting and recordkeeping requirements.

By the Commission. Commissioner Hoecker concurred in part and

dissented in part with a separate statement attached.

Lois D. Cashell,

Secretary.

In consideration of the foregoing, the Commission amends Parts 161

and 250, Chapter I, Title 18, Code of Federal Regulations, as set forth

below.

PART 161--STANDARDS OF CONDUCT FOR INTERSTATE PIPELINES WITH

MARKETING AFFILIATES

1. The authority citation for Part 161 continues to read as

follows:

Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.

2. Section 161.1 is revised to read as follows:

Sec. 161.1 Applicability.

This part applies to any interstate natural gas pipeline that

transports gas for others pursuant to subpart A of part 157, and

subparts B or G of part 284 and is affiliated in any way with a natural

gas marketing or brokering entity and conducts transportation

transactions with its marketing or brokering affiliate. The

requirements of this part also apply to pipeline sales operating units

to the extent provided in Sec. 284.286 of this chapter.

3. In Sec. 161.2, paragraph (c) is revised to read as follows:

Sec. 161.2 Definitions.

* * * * *

(c) Marketing or brokering as used in this part and Sec. 250.16 of

this chapter means a sale of natural gas to any person or entity by a

seller that is not an interstate pipeline, except when:

(1) The seller is selling gas solely from its own production;

(2) The seller is selling gas solely from its own gathering or

processing facilities; or

(3) The seller is an intrastate natural gas pipeline or a local

distribution company making an on-system sale.

* * * * *

4. In Sec. 161.3, paragraphs (e), (h), and (k) are revised to read

as follows:

Sec. 161.3 Standards of conduct.

* * * * *

(e) It may not disclose to its marketing affiliate any information

the pipeline receives from a nonaffiliated shipper or potential

nonaffiliated shipper.

* * * * *

(h)(1) If a pipeline offers a transportation discount to an

affiliated marketer, or offers a transportation discount for a

transaction in which an affiliated marketer is involved, the pipeline

must make a comparable discount contemporaneously available to all

similarly situated non-affiliated shippers.

(2) Within 24 hours of the time at which gas first flows under a

transportation transaction in which an affiliated marketer receives a

discounted rate or a transportation transaction at a discounted rate in

which an affiliated marketer is involved, the pipeline must post a

notice on its Electronic Bulletin Board, operated pursuant to

Sec. 284.8(b)(4) of this chapter, providing the name of the affiliate

involved in the discounted transportation transaction, the rate

charged, the maximum rate, the time period for which the discount

applies, the quantity of gas scheduled to be moved, the delivery points

under the transaction, any conditions or requirements applicable to the

discount, and the procedures by which a non-affiliated shipper can

request a comparable offer. The posting must remain on the EBB for 30

days from the date of posting. The posting must conform with the

requirements of Sec. 284.8(b)(4) of this chapter and the pipeline's

tariff requirements relating to Electronic Bulletin Boards. Access to

the information must be provided using the same protocols and

procedures used for the pipeline's Electronic Bulletin Board.

* * * * *

(k) A pipeline must maintain a written log of waivers that the

pipeline grants with respect to tariff provisions that provide for such

discretionary waivers and provide the log to any person requesting it

within 24 hours of the request.

PART 250--FORMS

1. The authority citation for Part 250 continues to read as

follows:

Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.

2. In Sec. 250.16, paragraph (a) is revised to read as follows:

Sec. 250.16 Format of compliance plan for transportation services and

affiliate transactions.

(a) Who must comply. An interstate natural gas pipeline that

transports natural gas for others pursuant to Subparts B or G of Part

284 of this chapter and is affiliated, as that term is defined in

Sec. 161.2 of this chapter, in any way with a natural gas marketing or

brokering entity and conducts transportation transactions with its

marketing or brokering affiliate must comply with the requirements of

this section. The requirements of this section also apply to pipeline

sales operating units to the extent provided in Sec. 284.286 of this

chapter.

* * * * *

Note.--The following appendix will not appear in the Code of

Federal Regulations.

Appendix A.--Parties Filing Rehearing Requests

[Docket No. RM94-6-001]

----------------------------------------------------------------------------------------------------------------

Commenter Abbreviation

----------------------------------------------------------------------------------------------------------------

ANR Pipeline Company and Colorado Interstate Gas Company........... ANR/CIG.

Columbia Gas Transmission Corporation and Columbia Gulf Columbia/Columbia Gulf.

Transmission Company.

Northern Natural Gas Company, Transwestern Pipeline Company, Enron.

Florida Gas Transmission Company, Black Marlin Pipeline Company,

and Enron Gas Services, Inc.

Hadson Gas Systems, Inc............................................ Hadson.

Indicated Companies37.............................................. Indicated Companies.

Interstate Natural Gas Association of America...................... INGAA.

K N Energy, Inc.................................................... K N Energy.

MidCon Gas Services, Corporation and Natural Gas Pipeline Company MGS/Natural.

of America.

National Registry of Capacity Rights............................... National Registry.

NorAm Gas Transmission Company and Mississippi River Transmission NGT/MRT.

Corporation.

Algonquin Gas Transmission Company, Panhandle Eastern Pipe Line Panhandle Pipelines.

Company, Texas Eastern Transmission Corporation, and Trunkline Gas

Company.

Tenneco Gas........................................................ Tenneco.

Transcontinental Gas Pipe Line Corporation......................... TGPL.

----------------------------------------------------------------------------------------------------------------

\37\Conoco, Inc., Amoco Production Company, Anadarko Petroleum Corporation, GPM Gas Corporation, Marathon Oil

Company, Meridian Oil, Inc., Mobil Natural Gas, Inc., Natural Gas Clearinghouse, Pennzoil Exploration and

Production Company, Pennzoil Petroleum Company, Pennzoil Gas Marketing Company, Phillips Petroleum Company,

Shell Gas Trading Company, Union Pacific Fuels, Inc., Vastar Resources, Inc., and Vastar Gas Marketing, Inc.

Standards of Conduct and Reporting Requirements for Transportation

and Affiliate Transactions

[Docket No. RM94-6-001]

Issued October 14, 1994.

Hoecker, Commissioner, concurring in part and dissenting in part:

I concur with the additional modifications and clarifications to

the Commission's rules that are made in this order. However, for the

reasons stated in my prior dissent in this proceeding, I believe

retention of the reporting and records maintenance requirements for

affiliated natural gas marketers is excessive and unnecessary,

especially given the detailed standards of conduct to which they are

subject.\1\

---------------------------------------------------------------------------

\1\III FERC Stats. and Regs. 30,997 (1994) at pp. 31,082-83.

---------------------------------------------------------------------------

In particular, I previously expressed the concern I now see

reflected in a number of the rehearing requests that elimination of

a date to ``sunset'' these requirements ensures that they will

continue in effect by sheer regulatory inertia. The original sunset

date was a codification of a prior Commission's skepticism about the

need for extensive regulation in this area. Elimination of that

provision evinces a degree of comfort about the need to police

affiliated gas marketers that I do not share.\2\

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\2\The range of regulatory burdens retained in this docket

appears doubly peculiar when compared to the less onerous reporting

requirements the Commission has employed for the power marketing

affiliates despite the absence of the kind of organizational

separation or mandatory information-sharing requirements that we

impose on gas pipeline marketing affiliates. See, e.g., Enron Power

Marketing, Inc., 65 FERC 61,305 (1993), order on clarification and

reh'g, 66 FERC 61,244 (1994), Heartland Energy Services, Inc., et

al., 68 FERC 61,223 (1994) and Intercoast Power Marketing Company,

68 FERC 61,248 (1994). In addition, whereas power marketers are

still in an early stage in their development where the potential for

affiliate abuse is not generally understood, there have been few

demonstrable problems with affiliated gas marketers over a

significant period of time.

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I, therefore, continue to dissent in part.

James J. Hoecker,

Commissioner.

[FR Doc. 94-25994 Filed 10-19-94; 8:45 am]

BILLING CODE 6717-01-P