FERC Filings
MOTION TO INTERVENE OUT OF TIME AND REQUEST FOR REHEARING OF THE ELECTRIC POWER SUPPLY ASSOCIATION re: TENNESSEE GAS PIPELINE COMPANY
REQUEST FOR REHEARING
EPSA has two significant concerns with the Commission’s September 13 Order. First, the Commission did not provide NAESB with the necessary policy guidance in order to develop a generic standard on creditworthiness. Second, the Commission should expedite the development of a generic standard on creditworthiness.
A. Commission Needs to Provide Adequate Policy Guidance to NAESB
EPSA agrees with the Commission that the issue of credit standards must be addressed at the industry level for natural gas. EPSA believes that there are numerous and far-reaching policy issues that must be addressed in establishing creditworthiness guidelines. It is not sound policy for pipelines to impose excessive credit requirements at a time when the U.S. economy faces the challenge of much-needed energy infrastructure investment. Billions of dollars in potential investment capital for the energy sector could be needlessly tied up in unnecessary credit assurances such as letters of credit, surety bonds and prepayments. Since the issue of creditworthiness standards is contingent upon sound policymaking, the Commission must provide NAESB with the necessary guidance from which a generic standard can be built. NAESB was not established as a policymaking entity. NAESB’s certificate of incorporation states that the purpose of the organization is to “promote more competitive and efficient natural gas and electric service, as such standards apply to electronic data interchange (“EDI”) record formats and communications protocols and related business practices that streamline the transactional processes” (emphasis added). NAESB was not formed for the purpose of policymaking with which the Commission has now tasked it. While NAESB often must balance policy considerations in developing industry standards, it does this best when the Commission gives specific policy guidance and parameters for NAESB to follow.
Given the need to address credit issues in a timely manner and the limited scope of NAESB’s purpose, the Commission should expand the role of the technical conference established in this proceeding to address the development of generic guidelines on creditworthiness and credit requirements. Industry participants should be asked to comment on the following fundamental issues surrounding a generic credit standard:
- How should creditworthiness be measured?
- Who should be required to provide additional assurance?
- What forms should that assurance take?
- Should these forms of assurance vary, and if so, based on what criteria?
- What is the cost of the various forms of assurance?
- Should customers and transmission providers be allowed to negotiate credit provisions?
- Should different credit requirements exist for contracting for expansions as compared to contracting for existing capacity? Why or why not?
- Does the pipeline’s risk change after service begins? If so, how?
- Do pipelines have a duty to mitigate credit risk, and if so, how?
- Should there be sunset dates in place for collateral and prepays?
- What is the impact on other shippers if a customer defaults?
- Are the rating agencies the proper measure for determining the creditworthiness of transmission customers?
- Are there adequate safeguards against potential discriminatory behavior?
- What is the pipeline’s risk and how should it be measured?
- Are there other issues that the Commission should consider?
B. Credit Issues Need to be Resolved on an Expedited Basis
EPSA notes that the market has indeed changed and it is unfair to shippers and pipelines alike not to have clarity and consistency on credit issues, especially since several pipelines have already filed for controversial modifications to their credit requirements. The Commission should act in a timely manner with proper deliberation so that all energy market participants concerns can be addressed. Tennessee will have the opportunity to place its suspended tariff provisions by February 16, 2003. As the September 13 Order now stands, Tennessee’s suspension period will have long expired by the time the Commission receives any feedback from NAESB, and it will be too late to prevent the harm Tennessee’s tariff provisions will cause customers. Given the impact of Tennessee’s filing, along with others, to industry participants, EPSA requests the Commission modify the September 13 Order and utilize the Tennessee technical conference as a vehicle to develop standard guidelines regarding credit evaluation and credit requirements, with a goal of reaching conclusion on or prior to February 16, 2003.