When rate design crosses the border

Journal Article · Fri Mar 01 04:00:00 EST 1991 · AGA Monthly; (USA)

OSTI ID:5714664

Kelley, T

Pipeline rates break down into two components: commodity charges and demand charges, with the former comprising costs that vary with the total amount of gas sold or transported, and the latter, costs a pipeline charges just for providing service to a customer. Canada employs a full fixed-variable (FFV) system, in which all fixed costs - including return on equity - are passed along to customers as part of the demand charge. The modified fixed-variable (MFV) rate design preferred for the past decade by the U.S. Federal Energy Regulatory Commission (FERC), on the other hand, assigns most fixed costs to the demand component but puts other fixed costs, including return on equity, in the commodity component of pipeline rates. The author discusses how this distinction was brought into the spotlight as the planned $583 million, 370-mile Iroquois Gas Transmission System pipeline from Canada to New York's Long Island, which FERC approved. When completed, the new pipeline will bring 575.9 cubic feet of natural gas per day from Canada to 16 utilities and four cogeneration customers in the U.S., Northeast. The Independent Petroleum Association of America (IPAA), representing U.S. independent gas producers, opposed the Iroquois project. It said Iroquois benefited from a tilt caused by the different rate design systems - which IPAA believes is relevant because the natural gas in question would be moved from western Canada on Canadian pipelines before it reached Iroquois at the New York border. That tilt, said IPAA, favored Canadian gas and could penalize U.S. producers, either depressing prices or forcing them to shut in gas.

• OSTI ID: 5714664
• Journal Information: AGA Monthly; (USA), Journal Name: AGA Monthly; (USA) Vol. 73:3; ISSN AGMOD; ISSN 0002-8584
• Country of Publication: United States
• Language: English

Related Subjects

03 NATURAL GAS
030600* -- Natural Gas-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
COMPETITION
ENERGY SYSTEMS
INDUSTRY
NATURAL GAS DISTRIBUTION SYSTEMS
NATURAL GAS INDUSTRY
PIPELINES
PRICING REGULATIONS
RATE STRUCTURE
REGULATIONS