FERC requests comments on re-imposing price cap on releases

This afternoon the Commission has issued an Order Requesting Comments in the
SDG&E and LA Dept. of Water & Power petition proceedings on the short term
capacity release price cap (RP01-180, RP01-222).

The order requests comments on "whether...[to] reimpose the maximum rate
ceiling on short-term capacity release transactions into California and the
effects of such action on the California gas market." Order and attachment
are attached at the bottom of this email. Print to read all footnotes
(original came in WordPerfect).

Note that in footnote 2, the order explains the current comprehensive
Commission approach to the gas market in California, and that they're
reaching out for the gray market: "On May 18, 2001, in Docket No.
RM01-9-000, the Commission issued an order proposing to impose certain
reporting requirements on natural gas sellers and transporters serving the
California market. The proposed reporting requirements are intended to
provide the Commission with the necessary information to determine what
action, if any, it should take within its jurisdiction. Our order today
coupled with our May 18 order continues to focus on issues related to natural
gas prices in California and actions we may take to address capacity release
transactions and bundled sales (i.e., the "gray market")."

To note in this order, the discussion includes an explanation that FERC
Staff's analysis of capacity release data between Nov. 2000 and April 2001
shows that only .09 to 1.2 percent of the volume of capacity releases into CA
were above the maximum tariff rate. In light of this information, the order
requests comment on whether the price cap into California would be reimposed
on short term releases prior to Sept. 30, 2002.

Comments are due in 20 days. Questions asked in the order are: (1) Would
reimposition of the maximum rate ceiling on short-term capacity release
transactions into California have any significant effect on the price of gas
at the California border; (2) Should the reimposition of the maximum rate
ceiling on short-term capacity release transactions be limited to California
or extended to pipelines delivering into the Western Systems Coordinating
Council (WSCC) region; (3) What effect do capacity release transactions have
on wholesale electric prices; (4) What would be the effect of reimposing the
maximum rate ceiling on short-term capacity release transactions into
California given firm shippers' ability to make bundled sales at the
California border; and (5) How will reimposing the maximum rate ceiling for
short-term capacity release transactions into California impact shippers'
ability to obtain short-term firm capacity.

An excel attachment to the order details the Staff findings on Transportation
Release Transactions above the max. rate Nov. 2000 - April 2001