FERC Filings
Comments of EPSA re: Amendments to Blanket Sales Certificates
The Commission Should Not Bifurcate Gas Markets
EPSA, as an association representing competitive electric generators and power marketers, is neutral as to the fuel used to generate electricity. Currently, however, 132 gigawatts (GW) of the 157 GWs, or 84 percent of the competitive generating capacity added to the U.S. grid from 1997-2002, uses natural gas as its primary fuel. As a result, EPSA members constitute a large, rapidly growing interstate pipeline customer segment that has an interest in the efficient operation of the national market for natural gas that Congress and the Commission have created.
As noted above, competitive generators, as significant gas customers, support the Commission’s broader efforts to restore confidence in the country’s power and natural gas markets. As part of that effort, the NOPR proposes to require that pipelines and all sellers for resale adhere to a code of conduct with respect to gas sales. However, the Commission also seeks specific comments on whether application of the code of conduct to only part of the natural gas market will have a negative effect on the market as a whole. EPSA is concerned that a rule that only applies to a portion of the market creates an uneven playing field and would negatively impact the market.
Splitting the market into those who must comply with the proposed rules and those who do not will inevitably bifurcate the natural gas marketplace. While the goals of the NOPR, which are to ensure appropriate conduct, should be applicable to all market participants, the reality is that having two sets of rules for market participants will result in an uneven marketplace. Those companies that are not encumbered by the proposed rules will be competitively advantaged. Further, numerous costs may shift to the ‘regulated’ sellers or, more likely, increase across the board for all sales due to the competitive disadvantage created in the marketplace.
The Commission, of course, is constrained by its jurisdiction over only a portion of this market. Hence, the Commission’s fundamental goal – restoring confidence in energy markets – will not be achieved under this bifurcated approach. The segment of market participants that have to follow the guidelines will face a competitive disadvantage through increased implementation costs and a natural reluctance to offer innovative products that the market might need for fear of violating the proposed rules. This will damage the operation of the competitive gas market by decreasing liquidity, increasing risk premiums, decreasing price transparency and, in the end, possibly causing a loss of necessary competitors in the natural gas market. Loss of market competitors will make for a weaker, less liquid marketplace that has more potential, rather than less, for market power abuse. These resulting impacts on the natural gas market will erode rather than restore confidence in that market by market participants, financial institutions, policymakers and the public. Quite simply, the imposition of rules on only a portion of the market will cause more damage than it may intend to prevent.