PENNSYLVANIA PUBLIC UTILITY COMMISSION [52 PA. CODE CH. 69] [27 Pa.B. 4109] [M-960839]
Fitness of Natural Gas Marketers The Pennsylvania Public Utility Commission (Commission) on May 22, 1997, adopted a final policy statement to provide guidance to local distribution companies (LDCs) providing natural gas service in this Commonwealth with regard to uniform standards for brokers and marketers. The contact person is Joseph K. Witmer, Assistant Counsel, Law Bureau (717) 783-3663.
Commissioners present: John M. Quain, Chairperson; Robert K. Bloom, Vice-Chairperson; John Hanger, Statement follows; David W. Rolka; Nora Mead Brownell
Public Meeting held
May 22, 1997Final Order By the Commission:
On October 3, 1996, the Commission adopted a proposed policy statement to provide guidance to LDCs providing natural gas service in this Commonwealth simultaneously with a companion statement on policies for affiliated interests of LDCs at M-960838. A corrected proposed policy statement was published in the Pennsylvania Bulletin on November 23, 1996. Comments were due within 30 days after publication, with reply comments 60 days after publication.1 A public forum was held on March 7, 1997.
The commentators raised a number of issues, including jurisdiction, enforcement, 66 Pa.C.S. § 1307(f), Gas Reserve requirements, LDC discretion and the role of the Federal Energy Regulatory Commission's (FERC) rules. With respect to jurisdiction, a number of commentators initially disagreed on the extent of the Commission's authority to impose fitness standards on a marketer or broker. In addition, where some degree of jurisdiction was conceded, they differed widely in their views of the scope and relevance of fitness standards and how those standards should be imposed.
A. Jurisdiction
The Office of Consumer Advocate (OCA) and the Pennsylvania Gas Association (PGA) concluded that the Commission had jurisdiction over a marketer or broker. The OCA claimed that 66 Pa.C.S. §§ 501(b) and 508 provided the Commission with the authority to impose requirements directly on a marketer or broker in order to ensure system reliability. The PGA also claimed that the Commission's authority to approve gas transportation tariffs allowed the Commission to impose requirements in order to avoid those higher costs that might result whenever an LDC was forced to perform its supplier-of-last-resort role when a marketer or broker failed to perform.
Other commentators questioned the Commission's authority to impose any requirements on a marketer or broker. Specifically, it was argued that the Commission lacked authority over a marketer or roker because these entities, with the exception of the LDC affiliate, were not public utilities as defined under 66 Pa.C.S. § 102 of the Public Utility Code (code).
It was also argued that the Commission should avoid extending regulatory concepts to businesses which are not monopolies and which offered services subject to the rigors of the competitive marketplace. Specifically, Enron noted that any attempt to exercise jurisdiction over unregulated third-party suppliers of natural gas through licensing, certification or otherwise would be unwarranted and unlawful--especially in light of the Commission's nonexercise of this authority over nonutility gas suppliers in the many years of LDC transportation for end users.
In addition, some commentators claimed that the Commission's fitness guidelines represented an attempt to regulate marketer or broker practices, contractual relationships and the like. Specifically, Natural Gas Clearinghouse (Clearinghouse) claimed that marketers or brokers are not regulated entities subject to Commission jurisdiction, given that they do not avail themselves of the rights (for example, franchise territories, cost of service/rate of return regulation) of public utility status. Clearinghouse claimed that attempts to exercise this authority would push qualified marketers or brokers out of this Commonwealth.
With respect to the arguments that marketers and brokers are public utilities within the meaning of section 102 of the Public Utility Code, 66 Pa.C.S.§ 102, this Commission would not agree with this interpretation of the statute. As such, we do not have direct authority over the marketers or brokers except to the extent that they are affiliates or divisions of the LDC and are, therefore, certificated by this Commission to provide service within their designated service territories.
With respect to section 501(b) of the code, 66 Pa. C.S.§ 501(b), which provides:
(b) Administrative authority and regulations.--The commission shall have general administrative power and authority to supervise and regulate all public utilities doing business within this Commonwealth. The commission may make such regulations, not inconsistent with law, as may be necessary or proper in the exercise of its powers or for the performance of its duties.
the Commission would point out that, under this provision, its authority extends to the regulation of public utilities. An attempt to impose any regulation on nonutility marketers or brokers would be inconsistent with the exercise of its powers. As for section 508 of the code which addresses the power of this Commission to vary, reform and revise contracts, the Commission would note again that this authority extends to contracts in which the utility is a contracting party. Section 508 provides, in pertinent part:
The commission shall have the power and authority to vary, reform, or revise, upon a fair, reasonable, and equitable basis, any obligation, terms or conditions of any contract heretofore or hereafter entered into between any public utility and any person, corporation, or municipal corporation, which embrace or concern a public right, benefit, privilege, duty, or franchise, or the grant thereof, or are otherwise affected or concerned with the public interest and the general well-being of this Commonwealth.
66 Pa.C.S. § 508.
Since contracts for nonutility gas supply are between the marketer or broker and the end user, the Commission's authority is limited in this area.
However, while this Commission recognizes that there are limitations to our authority with respect to nonutility marketers and brokers, we would disagree with those commentators who maintain that the Commission is precluded from taking any substantive action to address issues involving marketers or brokers. In particular, this Commission would point to its authority under section 1501 of the code concerning the character of service and facilities which provides, in part:
Every public utility shall furnish and maintain adequate, efficient, safe, and reasonable service and facilities, and shall make all such repairs, changes, alterations, substitutions, extensions, and improvements in or to such service and facilities as shall be necessary or proper for the accommodation, convenience, and safety of its patrons, employees, and the public. Such service also shall be reasonably continuous and without unreasonable interruptions or delay. Such service shall be in conformity with the regulations and orders of the commission. Subject to the provisions of this part and the regulations or orders of the commission, every public utility may have reasonable rules and regulations governing the conditions under which it shall be required to render service.
66 Pa.C.S.§ 1501.
In addition to the above, the Commission's authority to address matters raised in the subject policy statement arises out of the general powers provisions of section 501 of the code.
Accordingly, we conclude that the Commission has the authority to regulate the operations of participants in the market to the extent that this Commission is authorized to insure that gas service is safe, adequate and without unreasonable interruption or delay. While this authority is derived from the Commission's jurisdiction over public utilities and its authority to issue orders and regulations concerning these matters, the net effect of the exercise of this authority is the resolution of issues which will affect all participants in this Commonwealth's jurisdictional gas supply market.
That is especially the case when the actions of a marketer or broker, such as nonperformance or delivery in excess of one's nomination, causes harm to the system's reliability and operations. Otherwise, a marketer or broker would be free to cause harm to Commonwealth ratepayers without regulatory consequences. That, we believe, was not the intent of the General Assembly in establishing the Commission's authority in the code.
The Commission's challenge is to reconcile reliability and competition. Consequently, the action we take today is premised on our jurisdiction over public utilities, public utility tariffs and public utility contracts to the extent they implicate the public interest in system reliability. The exercise of jurisdiction is necessary to meet our public interest obligation to ensure that an LDC's system operations are adequate.
B. Enforcement
A number of commentators raised the issue of who would be responsible for the enforcement of the provisions of the Policy Statement. The PGA submits that the LDCs should be allowed to make the initial cost-benefit assessment in tariffs given their expertise and reliability obligations. Enron Capital and Trade Resources (Enron), however, would leave enforcement largely to the market although Enron agrees with the PGA that nonperformance could be addressed with penalties set forth in a transportation tariff. The Independent Oil and Gas Association of Pennsylvania (IOGA) believes that tariffs are the appropriate vehicle for ensuring system reliability but believes that a marketer or broker serving only sophisticated industrial customers not be subjected to these provisions in an LDC's gas transportation tariff. One concern identified by T. W. Phillips (Phillips) is the matter of the ability of the smaller LDCs to implement this policy.
We are concerned about the perception of the commentators that the LDC will be the sole determiner of the financial and technical fitness of various gas suppliers. It has never been this Commission's intention to delegate its responsibilities to the LDC. It is anticipated that the LDC will develop specific criteria or standards as part of their transportation service which will provide a litmus test of the supplier's financial and technical abilities. These standards are subject to Commission review and approval.
We would expect, however, that the LDCs will develop such tariff provisions in conjunction with their customers and the marketers and brokers. We expect the development of generic tariff provisions on an LDC-by-LDC basis in light of each LDC's configuration and the desire of a marketer or broker to access customers behind an LDC's gate. In those discussions, we further expect the participants to address the scope and applicability of Chapter 56 regulations as part of any tariff filed in response to this Policy Statement.
With regard to IOGA's position that these requirements should apply only to small residential customers, we cannot agree. System reliability is dependent upon all participants meeting their obligations. The failure of a large industrial customer's supplier to meet its obligations can have serious effects on the operations of the gas system, including a substantial impact upon the LDC's obligation as supplier of last resort. Customers, large or small, who obtain gas from unreliable and financially unfit suppliers place the entire system at risk. It is incumbent upon this Commission, under sections 1501 and 501 of the code, to take the requisite actions to address this possibility.
For the above reasons, we will amend § 69.195(a) of our proposed Policy Statement to add a provision expecting the parties to address, and the LDC to propose, tariff provisions regarding the enforcement of any tariff filed in adherence to the Policy Statement. Again, we would emphasize that we expect such provisions to be generic in nature and to be developed in consultation with the customers and the interested marketer or broker communities.
C. 66 Pa.C.S.§ 1307(f)
In our proposed Policy Statement at § 69.195(a) and (b), we proposed that firms delivering gas must demonstrate the financial and technical fitness necessary to meet their contractual obligations. (Emphasis added). This has been a hotly contested matter. That is because the matter goes to the extent to which contractual information of a competitor must be given to an LDC with the attendant risk it could be transmitted to an LDC's affiliated merchant. Some commentators were concerned that this directly subjects a marketer or broker to 66 Pa.C.S. § 1307(f).
The PGA claims that a marketer or broker must be subjected to the full panoply of section 1307(f) of the code because an examination of, and information about, their supply contracts is critical to ensuring system reliability and gauging an LDC's supplier-of-last-resort obligations. The PGA also claims that, because a combination of market forces and contract rights are insufficient to guarantee delivery of tangible gas supplies in periods of tight demand, the Commission may need to examine the supply contracts of a marketer or broker just like an LDC.
In the alternative, the PGA wants the Commission to reevaluate its approach to LDC supply contracts under section 1307(f) of the code if the Commission determines that a marketer or broker is not subject to section 1307(f).
The IOGA, Enron and Clearinghouse oppose any Commission examination of a nonutility marketer or broker's supply contracts under section 1307(f). IOGA claims that section 1307(f) of the code was only intended to monitor a monopolist's purchase of gas supplies and that using section 1307(f) of the code to conduct an in-depth examination of marketer or broker supply contracts is misguided. In addition, IOGA urges the Commission to limit its fitness policy statement to residential (and possibly small commercial) customers through the ongoing regulation of an LDC's distribution operations.
Enron claims that the only vehicle for addressing fitness and reliability are LDC transportation tariffs, that any penalties for nonperformance must be clearly spelled out in LDC tariffs, and that the Commission cannot subject gas supply contracts to LDC disclosure or Commission review under section 1307(f) of the code. Clearinghouse claimed that system reliability and operational fitness cannot be guaranteed through a supply contract's examination because every contract would need to be examined and that the examination would not preclude an inability to perform due to causes outside the contract. Eastern Energy Marketing (Eastern) objects to using section 1307(f) to the extent it requires the disclosure of commercially sensitive information. They urge the Commission to establish guidelines in order to reduce LDC-marketer battles in individual LDC proceedings.
As noted in our previous discussion, marketer and brokers, unless they are part of the LDC, are not public utilities within the definition of section 102 of the code, 66 Pa.C.S.§ 102. As such, they do not fall within the purview of section 1307(f) of the code and this Commission does not have the authority to review those gas supply contracts. Our authority does, however, extend to the assurance that customers will receive continuous and safe service. 66 Pa.C.S.§ 1501.
While they dispute what that entails and whether those requirements can be leveraged to favor an LDC's affiliate, most commentators recognize the necessity of some minimum reliability standards for competitors.
We find that financial or technical fitness standards may be an efficient vehicle for dealing with a marketer or broker whose inability or unwillingness to meet their performance obligations directly threatens system reliability. Nevertheless, we recognize the marketers and brokers concern about an LDC's ability to leverage those standards into market impediments or bias in favor of its affiliate because of untempered discretion. We believe, however, that this concern is addressed by the fact that the Commission must approve any tariff proposal, those tariffs remain subject to challenge by disgruntled parties, and the fact that all actions taken under a tariff remain subject to the Commission's regulatory authority. We also believe that the participation of the customers and the marketers and brokers in the development of these tariff standards will help to alleviate some of their concerns.
We would also note that we believe that a marketer or broker need not be subjected to an in-depth examination and disclosure of every contract related to gas reserves to accomplish that end. Such a level of review is not necessary to provide an LDC with the information it needs to meet the system reliability and supplier-of-last resort obligations.
We expect marketers, brokers and the LDCs to develop, in consultation with each other, the generic information requirements needed for system reliability and supplier-of-last-resort obligations.
We will amend our Proposed Policy Statement at § 69.195(b)(1) and (2) to expect an LDC's transportation tariff, developed in consultation with other brokers and marketers, to secure sufficient generic information about a marketer or broker's gas operations, supplies, emergency contingencies, the ability to meet peak demand, and other information necessary for the safe and continuous operation of the gas supply and distribution system.
We believe this approach strikes a balance between an LDC's legitimate information needs, pertaining to those system operator and supplier of last resort obligations which a gas marketer or broker is not required to perform, and a marketer or broker's need to retain some confidential commercial information in order to effectively compete against an LDC's merchant operations.
D. Gas Reserves
The Commission has traditionally required LDCs to provide sufficient gas reserves, as part of their gas service, aimed at meeting peak demands. In our proposed Policy Statement at § 69.195(b)(2), we proposed extending that requirement to a marketer or broker by requiring a marketer or broker to demonstrate operational fitness with ''gas reserves and the ability of the firm to meet the peak demand of contracted customers.''
PGA's comments, that fitness standards should apply to all sectors covered by an LDC's supplier-of-last-resort obligation and that LDC's should be free to establish the requirements of a gas marketer or broker (including an LDC's affiliate) in order to maintain system reliability, suggest that a gas reserves requirement should be but one of many ways to maintain reliability in a competitive market. Open Flow Gas Supply Corporation (Open Flow) and Phillips challenge a gas reserve requirement, to the extent it would shift responsibility for determining fitness to the local utilities, because they consider it an additional burden that adds to the cost of service, requires expertise some LDCs lack, and opens the door to competitive abuses.
The IOGA, Enron, Clearinghouse, Eastern and the OCA also question the gas reserves requirement. The IOGA would impose requirements only on an interim basis, limit them to a marketer or broker serving residential and small commercial customers, and avoid mandates since mandates cannot account for the dynamics of a competitive market. Enron believes that fitness should be limited to financial tests and that mandatory requirements such as gas reserves only limit the flexibility of a marketer or broker. Both Eastern and Clearinghouse oppose this requirement to the extent it requires a marketer or broker to demonstrate their upstream supply sources and transportation arrangements, as opposed to holding a marketer or broker financially responsible for any harm stemming from nonperformance, and result in disclosure of sensitive commercial information.
The OCA also opposes the gas reserves requirements. The OCA believes that the better approach is to require a showing that the alternative supplier has sufficient supply and capacity to meet maximum daily delivery obligations with sufficient emergency back-up supplies and that such provisions be enforced by penalties.
Upon consideration, we conclude that LDCs will need supply-related information in order to ensure reliability and provide transportation services for competitors consistent with our discussion above. While the need for assurances of financial soundness is essential, it must be recognized that an inability or failure to provide the gas supply required by the customer is the most immediate concern.
The OCA's suggestion is useful. It presents another way to ensure system reliability with due regard for the different market positions and legal obligations of gas marketers or brokers and LDCs in this Commonwealth. That difference includes, but is not limited to, the LDC's supplier of last resort obligation imposed by Pennsylvania law and practice.
This approach lets the parties make the initial determination on gas reserve requirements or the appropriateness of the OCA's alternative. It gives the parties the maximum flexibility they need to design an approach melding competition with system reliability.
This flexible approach is premised on an expectation that the marketers, brokers and an LDC, as opposed to the Commission, can best make the initial determination on what measures will guarantee that peak demand will be met with due regard for emergency situations and an LDC's system reliability and supplier-of-last-resort obligations. As always, the Commission's processes remain open to parties otherwise unable or unwilling to resolve these concerns through negotiations.
We will amend our Policy Statement and refrain from imposing any explicit gas reserves requirement. We leave that matter to resolution by the LDCs as part of the tariffs proposals an LDC submits after consultation with customers, marketers or brokers.
We further amend our Policy Statement to provide that any supply and reserve information requirements will be as generic as possible and not result in the disclosure of sensitive commercial information by a marketer or broker to an LDC. We agree with the OCA that a marketer or broker could meet this gas reserve requirement, contingent upon a determination by the participants, by a generic showing that it has sufficient supply and capacity to meet the maximum daily delivery obligations with sufficient emergency back-up supplies as agreed to by the LDC and the marketer or broker.
E. FERC Requirements for Marketers
The PGA and the LDC's claim that FERC's rules in regard to system reliability are insufficient because they are limited to the wholesale market whereas the Commission must address delivery at the retail level in this Commonwealth. The PGA asserts that IOGA's position that fitness standards should not apply to industrial customers is based on a premise that fitness standards would increase costs to industrial customers without any outstanding benefits. The PGA counters that industrial customers still have regulatory rights with respect to obtaining service from the supplier of last resort. However, the PGA points out that some customers might want to forego reliance on an LDC's supplier-of-last-resort obligation in order to maximize energy savings. In that case, a supplier serving a customer that releases an LDC from its supplier-of-last-resort obligation may not be expected to demonstrate any modicum of fitness as regards that particular customer.
Eastern, Enron and Clearinghouse collectively claim that FERC's rules, which require compliance with basic and commonly used creditworthiness standards and rely on the use of penalties and incentives to manage nonperformance, constitute the regulatory maximum necessary for ensuring system reliability.
The OCA recognizes that industrial users have extensive experience in dealing with a gas marketer or broker, however, it opines that, as with any creditor of the LDC, the financial and technical soundness of marketers and brokers needs to be assessed. The IOGA uses experience as an argument for a hands off policy on part of the Commission with respect to the larger customers and argues for standards limited to suppliers wishing to market to residential customers.
In our Proposed Policy Statement, we had suggested that fitness should be addressed consistent with the requirements for marketers or brokers at FERC. The issue has now become whether we should expect parties to show anything more than the minimum requirements addressed by FERC.
We agree with PGA that the Federal model may not be sufficient. The minimum FERC requirements are imposed on a wholesale market with large and sophisticated agents. We are not setting regulatory standards for such a market. We are charged with setting some advisory policy guidelines for managing the discrete and insular purchases of gas supplies by a myriad of, potentially, less sophisticated residential and smaller customers, as well as some large and sophisticated agents, for delivery at the retail level. As such, we remain convinced that this policy statement must set forth some minimum requirements of fitness for retail service by suppliers
We also believe that they should not be limited to small residential and commercial customers because all customers, including large industrial and commercial customers, benefit from those standards to the extent they enhance system reliability and provide a supply of last resort. As the PGA notes, an LDC would be required to make up for delivery shortfalls to all customer classes, including the experienced and sophisticated, as the supplier of last resort.
With respect to the PGA's statement that a complete waiver and release from underlying system reliability and supplier-of-last-resort obligations would be a necessary prerequisite to foregoing the imposition of any financial or technical fitness standards on a marketer or broker serving a customer, we have serious reservations about the enforceability of such a waiver. The obligation of the LDC to serve is statutorily mandated. Since this Commission does not have the authority to waive a statute, there is sufficient doubt as to the enforceability of such an agreement between the LDC and the customer to eliminate its consideration as a viable option at this time.
For purposes of this Policy Statement, this Commission will retain the provision pertaining to the requirement that any standards adopted by the LDC be consistent with FERC requirements. However, we would note that this is a policy statement which is applied on a case by case basis. Where a participant believes that a more substantial demonstration of fitness is necessary, the LDC, and any other party has the opportunity to present its arguments at the time the subject tariffs are submitted for review. In that situation, where there is a clear showing that the proposed standard is not sufficient or applicable, the Commission will consider other alternatives. We would note, however, that it is our expectation that the customers, marketers, brokers and LDC will be able to come to a resolution of these issues without resort to formal Commission proceedings.
Conclusion
Based upon the foregoing discussion, we have made some modifications in our language. In § 69.195(a), we have modified the phrase ''marketer or broker'' to include an LDC's affiliate for all purposes under this Policy Statement. We have also modified § 69.195(a) to require an LDC to develop enforcement provisions in any tariff proposed in light of this Policy Statement. We are also modifying § 69.195(a) to have the parties address the applicability of Chapter 56.
In addition, we are further modifying § 69.195(c). We deleted the phrase ''subject to Commission approval'' under subsection (c). That phrase was superfluous given the Commission's role in approving tariff proposals as well as the Commission's regulatory authority.
We also inserted the word ''transportation'' before tariff in the first sentence of § 69.195(c) to reflect the fact that transportation tariffs are an effective vehicle for tariffs proposals guided by this Policy Statement. We have also added language clarifying the intended scope and use of the information sought in tariffs proposed as a result of this Policy Statement.
Accordingly, under our authority under sections 501, 508, 1301, 1302, 1303, 1304, 1317, 1318 and 1501, 66 Pa.C.S. §§ 501, 508, 1301, 1302, 1303, 1304, 1317, 1318, 1501 and the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. § 1201 et seq.), the Commission has authority to promulgate this final policy statement addressing the fitness of a marketer or broker (including an LDC's affiliate) to read as set forth in Annex A.
Therefore, It Is Ordered that:
1. The Final Policy Statement regarding the Fitness of Natural Gas Marketers, 52 Pa. Code, is amended by adding § 65.195 to read as set forth in Annex A.
2. The Secretary shall submit this order and Annex A to the Governor's Budget Office for review of fiscal impact.
3. The Secretary shall duly certify this order and Annex A and deposit them with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
4. This policy statement shall become effective upon publication.
5. A copy of this Order and Annex A are to be served upon all jurisdictional gas utilities, the Office of Consumer Advocate, the Office of Small Business Advocate and on any parties who filed comments in this proceeding.
JAMES J. MCNULTY,
Acting SecretaryFiscal Note: Fiscal Note 57-181 remains valid for the final adoption of the subject regulations.
Statement of Commissioner Hanger This Policy Statement provides the Commission with the ability to effectively regulate gas marketer and brokers in order to ensure system reliability. Specifically, the Policy Statement requires the local distribution company (LDC) to consult with marketers and brokers in their service territory to develop transportation tariff provisions regarding technical and financial fitness standards that will be used to govern the entry of a marketer and broker into the LDC's service territory.
Some marketers and brokers were concerned that this Policy Statement would effectively give an LDC veto power with regard to new supplier entry into an LDC service territory. This is untrue. The Policy Statement explicitly requires the technical and financial standards to be developed in consultation with the brokers and marketers serving the LDC's territory. The standards ultimately have to be approved by the Commission. Any standard that is anti-competitive or that does not allow for input from marketers will not be approved by me.
One area that needs to be addressed is the role of brokers and marketers in satisfying the needs of human needs customers. Any provider of gas supply to human needs customers who have contracted for firm gas must insure that they have adequate gas supply and pipeline capacity to meet the needs of these customers on peak usage days. I will be very critical of broker/marketer price arbitrage on those cold winter days if firm customers in the Commonwealth are at risk for nondelivery because certain suppliers have decided to divert gas supply for those firm customers to other areas of the country because of higher prices in those markets. This behavior, if it endangers reliable service to human needs customers, should be grounds for revocation of the suppliers right to do business in the Commonwealth. I expect the technical and financial fitness standards developed by the LDC and broker/marketer community to incorporate these concerns.
Annex A 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 UNIFORM STANDARDS FOR BROKERS AND MARKETERS § 69.195. Fitness of natural gas marketer or broker (including an LDC's affiliate).
(a) Fitness of brokers and marketers.
(1) Unless otherwise stated, the phrase marketers or brokers, or both, includes all local distribution company (LDC) affiliates, subsidiaries, parents, divisions, and the like providing gas supply to the respective LDC's customers.
(2) To retain reliable service when the gas industry unbundles, the Commission seeks to insure that brokers and marketers operating in this Commonwealth possess the financial or technical, or both, fitness necessary to meet their obligations consistent with the public interest in system reliability and gas supplies. As assurance of the continuation of reliable service and secure supplies is a prerequisite for opening Pennsylvania's gas markets to full retail competition, both new and incumbent providers of gas should be fully capable of providing reliable service and supplies.
(3) The LDCs should address the issue of financial and technical fitness in their tariffs, in consultation with marketers or brokers, to assure the reliability of supplies to the end user and the public interest in system reliability. The LDCs should also address the matter of enforcement in any tariff, developed in consultation with customers, marketers or brokers, submitted in adherence to this section.
(b) Demonstration of fitness to deliver gas. Gas suppliers that wish to deliver gas to retail customers should demonstrate that they have the requisite financial and technical fitness to meet their obligations to customers consistent with the public interest in system reliability and LDC's underlying supplier-of-last-resort obligation. The financial and technical fitness is expected for any marketer or broker that wants to serve any or all retail commercial, industrial or retail classes. Financial and technical fitness is aimed at ensuring that a marketer or broker has the requisite ability to offer service to the public.
(c) Nondiscriminatory transportation tariff rules. The LDCs may offer nondiscriminatory transportation tariff rules, developed in consultation with marketers or brokers, governing the qualifications of marketers and brokers. The rules should be consistent with any registration requirements for marketers and brokers of the Federal Energy Regulatory Commission. The tariff rules should address the following:
(i) Financial fitness, including the ability to comply with any penalties stemming from nonperformance or in response to changed circumstances.
(ii) Operational fitness, including the ability of the firm to meet peak demand of contracted customers which could be met by a showing of sufficient gas reserves or sufficient supply and capacity to meet the maximum daily delivery obligations with sufficient emergency back up supplies.
(2) The information expected by this section should be as generic as possible and be limited to the information needed for system reliability and performance of an LDC's supplier-of-last-resort obligations. The information expected by this section should avoid information wanted solely or largely for an LDC's merchant function. The information expected by this section should avoid mandating the disclosure of specific and commercially sensitive information such as price, origin, destination, and the like. Information provided to an LDC as part of its system reliability and supplier-of-last-resort obligations may not be provided to an LDC's affiliate as part an LDC's merchant operations.
[Pa.B. Doc. No. 97-1303. Filed for public inspection August 15, 1997, 9:00 a.m.] _______
1The Commission received comments from the Office of Consumer Advocate (OCA); the Independent Oil and Gas Association of Pennsylvania (IOGA); the Pennsylvania Gas Association (PGA); and the Industrial Energy Consumers of Pennsylvania (IECPA); Eastern Energy Marketing (Eastern); Enron Capital and Trade Resources (Enron); KCS, LG&E, MidCon and Natural Gas Clearing House (Clearinghouse); Open Flow Gas Supply Corporation (Open Flow); T. W. Phillips (Phillips) and UGI. Comments at the March 7, 1997, Open Forum were provided by IOGA, Enron, T. W. Phillips and PGA. Enron and PGA filed reply comments.
