Washington

By CHARLES J. ABBOTT

The common carrier saga

IN ROMAN mythology there is Venus, who rose full-grown from the sea. Storybooks are filled with tales of magic lanterns and genies who, impelled by a few words, could create immediately the world of the speaker's dreams. It takes a bit longer with government, to put it mildly, and the so-called Illinois plan on natural gas is an example.

It arrived in Washington nearly three years ago, heralded as a way to lower the price of natural gas, perhaps saving customers $5 billion to $10 billion a year, according to then-U.S. Rep. Tom Corcoran (R-14, Ottawa). The idea was to turn pipeline companies from merchandisers into "common carriers," like trucking companies, who would pump natural gas, no matter who owned it, to its destination. The hope was that users could shop around for the lowest priced gas and then have it shipped home, saving a bundle over the existing method of bargaining with whatever pipeline served the area. Often pipelines own the gas they sell and have their own deals with suppliers to obtain gas at a particular price.

The idea was suited for the conditions; natural gas supplies were becoming more abundant and customers were asking why they had to pay for expensive gas when other suppliers would sell it at a lower price. Imported gas and take-or-pay contracts were a lightning rod for some complaints. The situation was quite a change from the 1970s when price was secondary to assuring fuel would be available.

Members of the Illinois Commerce Commission developed and touted the common carrier plan, and it was promoted in Washington by Illinois congressmen. In addition, a member of the Illinois commission, Charles Stalon, became a member of the Federal Energy Regulatory Commission (FERC), which oversees rates for transporting and selling natural gas, among other duties. Some FERC staff workers also supported the idea of more market influence in sales.

Last October 9 FERC proposed in administrative order 436 what looks like a version of the Illinois plan. It opens competition in natural gas sales in the same way that the Illinois plan proposed, but compliance was left voluntary. "Pipelines now have to decide what service they will offer," FERC chairman Raymond O'Connor said in a speech two weeks later. "They can choose to remain merchant pipelines and only sell gas to customers or they can choose to become transporter pipelines and both sell gas and transport gas owned by others. If they choose the second option, the commission's new rules provide a comprehensive, streamlined transportation program to assist pipelines in seeking new markets to serve." One snap analysis suggested that most pipeline operators would enlist because there are few captive markets — meaning there is always the concern that a competitor will win away business with a better price or customers would find lower priced gas on their own.

It hasn't worked out that way, at least not immediately. FERC initially set a December 15, 1985, deadline for pipelines to decide if they would participate in order 436 but then extended the sign-up deadline until February 15, 1986. A FERC spokeswoman in mid-January said that six pipeline companies "are on board for the permanent open access program" and that one other pipeline had said it would join the program this June. There was "not an awful lot" of the total U.S. capacity enrolled, she said. Some senators noticed that, too. Both Illinois senators and six of their colleagues this winter filed a resolution urging pipelines to carry natural gas under the open access rules. "Unfortunately, most pipelines are choosing to serve no one. And in the last month alone at least 45 industrial customers in Illinois and many more nationwide have been cut off from their supplies of cheap gas and face price increases that will total in the millions of dollars," said Sen. Alan Dixon (D-Belleville) when the resolution was filed. At the other end of the pipeline, Sen. David Boren (D-Okla.) said that some independent suppliers were shut out of sales because pipelines did not want to carry gas owned by someone else. He said that he might turn to legislation if the problem was not resolved.

Other people also were thinking about legislation on natural gas in this year's session of Congress. There was speculation in January of how the administration might try again to decontrol natural gas. Spokesmen for a trade group, the Interstate Natural Gas Association of America, said that they had filed for a rehearing before the FERC on the access rules and also were seeing if there was industry consensus on legislation that would take care of problems that pipeline operators fear they could face under the rules. One concern, they said, is that pipelines could be stuck with expensive gas supply deals while customers refuse to take the gas.

In addition, FERC chairman O'Connor resigned in January, and FERC director of regulatory analysis, Charles Teclaw, who played a leading role in developing order 436, resigned to take a job as executive director of the Illinois Commerce Commission, "Right now, most of the focus at FERC is who's going to be the next chairman," said one observer, and another said that it was not clear what direction the FERC will take.

Obviously there is no storybook ending to this tale. It's more on the order of an epic with 1,000 chapters and still more to be written.

42/March 1986/Illinois Issues