Pennsylvania PUC Withdraws Rulemaking On Capacity Assignment, Other Retail Gas Market Changes -- EnergyChoiceMatters.com

Pennsylvania PUC Withdraws Rulemaking On Capacity Assignment, Other Retail Gas Market Changes

October 19, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Pennsylvania PUC has withdrawn a proposed rulemaking regarding the release, assignment, and transfer of capacity among Natural Gas Distribution Companies (NGDCs) and Natural Gas Suppliers (NGSs).

The PUC said that the proposed changes had resulted from the Commission’s Natural Gas Retail Markets Investigation (RMI) and were intended to improve the competitive market by revising how capacity is assigned and addressing the related issues of penalties and imbalance trading.

However, "Based on the comments received, the Commission finds that due to the diversity of the NGDCs’ systems and operations the viability and benefits of implementing the proposed changes is questionable at this time," the PUC said, as the Commission withdrew the proposal and closed Docket L-2017-2619223

Most notable among the now-withdrawn proposed rules was the prior proposal to apply the Peoples Natural Gas capacity payment mechanism, under which capacity is released to retail suppliers but all customers pay the average system cost of capacity regardless of their participation within the retail market, on a statewide basis

The PUC had previously proposed to add language to its rules providing that, "Capacity or Pennsylvania supply costs shall be charged to all customers as a non-bypassable charge based on the average contract rate for those services."

Of this proposal, the PUC now says, "We agree with the commenters that state that a one-size-fits-all approach to capacity assignments is not appropriate for all NGDC systems and operations due to the capacity assets available and the varying costs of those capacity assets for each NGDC. We also agree with the commenters who raise concerns about the cost shift associated with the proposal and the cost-effectiveness of implementing the proposal in several of the service territories. While the proposal may reduce the upfront costs to enter the market in some NGDC service territories, it has not been shown in these comments that such cost reductions would in fact be conveyed to customers."

The PUC had also previously proposed that, "When release must be restricted due to reliability or other constraints, an NGDC shall develop a mechanism that provides proxy or virtual access to the assets."

Regarding this proposal, the PUC now says, "Again, we agree with the commenters that the one-size-fits-all approach for proxy or virtual access to assets can create greater operational risks for some NGDCs and may not be feasible for some NGDCs. In addition, the proposal would require some NGDCs to implement new systems and modify numerous existing systems just to attempt a “virtual access” approach with no identified benefits to justify these significant costs. The benefits of the proposal may be suspect in that virtual storage does not provide the same optionality as actual storage, even when considering the costs to the supplier of meeting the requirements of the storage operator for filling and withdrawing from that storage. Commenters noted that the proposal would result in additional, unnecessary burdens for suppliers without commensurate benefits. Commenters also stated that more information about how virtual pooling would work under the proposal needs to be fleshed out prior to implementation. Commenters also noted that virtual or proxy capacity access has not been a major issue in recent Purchased Gas Cost proceedings, where the benefits of such a program can be determined on a case-by-case basis."

The PUC had also proposed to implement a proposal for daily imbalance trading

Of this proposal, the PUC now says, "Commenters agree that significant and costly upgrades to NGDC systems are needed to accommodate daily imbalance trading. Commenters have also noted that no party has requested this change and no clear reason as to the basis for such a change has been shared with some commenters noting that the Daily Imbalance Trading Proposal is designed to address a problem that does not exist and may be inferior to trading opportunities on the interstate pipeline system. No commenter has demonstrated that the benefits of daily imbalance trading on every NGDC system would provide benefits in excess of the significant costs to upgrade NGDC systems needed to facilitate such a program."

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