FERC executive points to 'gray market' in gas price surge


By Ann de Rouffignac
OGJ Online

HOUSTON, Mar. 21, 2001—Alice Fernandez, director of tariffs and rates at the Federal Energy Regulatory Commission, Wednesday conceded the so-called "gray market" helped drive gas prices sky high in southern California late last year.

Industry sources described the gray market for pipeline capacity and natural gas as the sale of "packages" of capacity and gas by marketers or even by gas distribution companies that have access to gas and capacity, that might be reselling the products.

With these packages, it is impossible to properly attribute what portion of the final price belongs to the gas commodity and what portion belongs to the transportation capacity, hence the term "gray market."

Fernandez agreed the activities of the gray market might be a factor to be considered in analyzing the California market. She also said the secondary pipeline capacity market was blamed unnecessarily by analysts for the higher prices. Fernandez spoke at Houston Energy Expo sponsored by the National Energy Services Association.

She said El Paso Corp.'s pipeline to California released little capacity in that market above the cap. Interstate pipelines have a maximum (called the cap) and minimum tariff that can be charged.

In October 2000 about 11% of all capacity releases were above the tariff cap. But for other months of 2000, the amount of releases above the cap varied 3%-8%. That means only a small percentage of the total capacity released to shippers was priced above FERC's maximum tariff. Fernandez cited figures for August 2000-February 2001.

Nevertheless, in a recent FERC conference on marketing affiliates, Fernandez said natural gas producers expressed concerned about the gray market "packages." They wanted FERC to change the rule governing affiliate transactions and to look into redefining affiliate.

Others were concerned about market monitoring, she said.

Many market participants said they didn't have the time or the resources to be monitor the market themselves. They wanted FERC to take a more active role.

Concerning the supply of gas and electricity in California and the overall tight market expected nationwide this summer, FERC is taking what steps it can to help, she said. FERC is seeking comments by March 30 on granting blanket certificates to pipelines for portable compression that would keep the capacity of pipelines constant during summer maintenance.

FERC is also seeking comment on rate incentives for adding electric transmission upgrades and pipeline capacity. The faster the work can be completed the higher the incentives, she said.

The agency has also shortened the permitting time for new pipelines without significant environmental issues to 210 days in 2000 from 299 days in 1999, said Fernandez.

On the electric side, the commission granted waivers for certain permits to small generators called "qualifying facilities" so they can sell power to the grid more easily and to parties with distributed generation who also want to sell back to the grid.

Sponsored by FLSmidth
Recommend this article Recommend this article () You recommended this article You recommended this article ()
Follow Power Engineering on Twitter

Products Showcase

Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Latest News

Shutterstock coal production trucks

Weekly Coal Production

The Weekly Coal Production shows how much coal is being produced across the U.S.

Federal Reserve Bank of Dallas Weekly Economic Indicators financial business

The Federal Reserve Bank of Dallas' Economic Indicators

The Federal Reserve Bank of Dallas offers a glimpse into how the markets are doing domestical...

Kvaerner awarded contract for gas-fired power plant in Delaware

Kvaerner North American Construction Inc. and its joint venture partner, Parsons Brinckerhoff...

Canadian Solar purchases two solar projects

Canadian Solar Inc. has acquired a majority interest in two utility-scale solar power project...

Operators Restart Unit 2 at PPL Susquehanna

Unit 2 at the PPL Susquehanna nuclear power plant near Berwick, Pa. resumed generating electr...

Settlement agreement limits cost recovery at Edwardsport

The Indiana Utility Regulatory Commission (IURC) on Dec. 27 modified and approved a settlemen...

Toshiba in talks to sell portion of Westinghouse nuclear unit

Toshiba Corp is in talks  to sell up to 16% of its stake in the Westinghouse Electric Co...

Utah nixes nuclear waste storage facility

Plans to park radioactive waste at a storage facility in Utah have been officially called off.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013

Current Magazine Issue

08/01/2013
Volume 117, Issue 8
1308PE_C1_digital

Buyers Guide Company Listings

Southern California Edison

Specializes in analysis of ion-exhange resin, chemical cleaning solvents, cooling water, wastewater, ultrapure water, bulk chemicals, boiler tube deposits, and more.

Power Industry Wire News

Freedom Energy Holdings Inc. Presents ELAS Prototype Demonstration for Engineering Execs; Michigan Government Officials

Freedom Energy Holdings Inc. Presents ELAS Prototype Demonstration for Engineering Exec...

FuelQuest Announces GRAIL 2014 Conference Speakers

FuelQuest Announces GRAIL 2014 Conference Speakers

Vista Partners Updates Coverage on Power Solutions International, Inc. (NASDAQ: PSIX); Price Target Raised to $110.00

Vista Partners Updates Coverage on Power Solutions International, Inc. (NASDAQ: PSIX); ...

Ultra Electronics USSI and Liquid Robotics Announce the Development of Long Duration, Maritime Security Solution

Ultra Electronics USSI and Liquid Robotics Announce the Development of Long Duration, M...

Ceres Police Department Selects Zero Motorcycles as Their Electric Motorcycle of Choice

Ceres Police Department Selects Zero Motorcycles as Their Electric Motorcycle of Choice

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>