Pennsylvania Code › Title 52 - PUBLIC UTILITIES › Part I - Public Utility Commission › Subpart C - Fixed Service Utilities › Chapter 69 - GENERAL ORDERS, POLICY STATEMENTS AND GUIDELINES ON FIXED UTILITIES › RECOVERY OF FERC ORDER 636 TRANSITION COSTS-STATEMENT OF POLICY › Section 69.342 - Gas procurement following restructuring of interstate pipeline services

Current through Register Vol. 54, No. 28, July 13, 2024
(a) The
					 implementation of Federal Energy Regulatory Commission's (FERC) Order No. 636
					 changes the environment in which the natural gas industry operates. While
					 interstate pipeline sales gas has played an increasingly diminishing role
					 within Pennsylvania local distribution company (LDC) supply portfolios in the
					 years following FERC Order No. 436, Order No. 636 has now totally "unbundled"
					 the services provided by interstate pipelines and they no longer provide a
					 city-gate sales service to their customers. LDCs now secure gas supplies and
					 arrange for the transportation and storage of the gas on one or more pipeline
					 systems, as well as provide contingencies for back up supplies and services.
					 This new environment increases the responsibility for supply, transportation
					 and storage that LDCs manage, and each LDC's supply portfolio shalladdress the
					 reliability and flexibility required in replacing pipeline sales service. As a
					 result, LDC fuel procurement strategies shall adapt to reflect this
					 change.
(b) The Commission's
					 procurement review process will factor in this change. Each LDC should have as
					 an objective the achievement of optimum burner tip rates favorable to retail
					 customers consistent with customer demand requirements. In this regard,
					 attention shall be given to gas supply costs associated with retail
					 service.
(c) The Commission
					 encourages LDCs to build effective and diverse supply portfolios in order to
					 continue providing consumers with reliable service at reasonable prices under
					 the Commission's least cost fuel procurement criteria. These portfolios should
					 include an optimum mix of suppliers, production areas, transporting pipelines,
					 storage options and contract terms that may include varying pricing mechanisms,
					 contract lengths and flexibility in quantities of gas taken. The Commission
					 recognizes fixed prices, storage carrying costs, hedging costs and other
					 pricing mechanisms not directly tied to the spot market,in addition to spot
					 market pricing, as acceptable tools in developing a portfolio and a cost of
					 gas, under the Commission's least cost fuel procurement criteria. The
					 Commission also recognizes a comparison of gas supplies priced, as delivered,
					 to the LDC's city gate as a useful tool in evaluating purchase options when an
					 LDC considers renewing a contract for capacity on interstate gas pipeline or
					 when it considers purchasing additional capacity. A comparison is consistent
					 with a least cost fuel procurement as mandated by
					 66 Pa.C.S. §
												§
												1307(f),
					 1317 and
					 1318 (relating to sliding
					 scale of rates; adjustments; regulation of natural gas costs; and determination
					 of just and reasonable natural gas rates). Furthermore, the Commission
					 recognizes that each LDC's service area and customer base is unique and,
					 therefore, LDC supply portfolios will differ.