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Frequently Asked Questions
Order No. 712 – Capacity Release
Q. What changes will occur as a result FERC Order No. 712?
R. There are four major modifications to FERC’s policies and regulations. 1
First, the ruling permanently lifts the maximum rate ceiling on capacity releases of one year or less.
However, FERC declined to eliminate the maximum rate ceiling for long-term capacity releases of more
than one year or to lift the price ceiling on primary sales of capacity by interstate pipelines.
Second, to promote the use of asset management arrangements (AMA) under which a capacity holder
releases some or all of its capacity to an asset manager who agrees to either purchase from, or supply
the gas needs of, the capacity holder. 2 The ruling exempts capacity releases made as part of such
arrangements from the prohibition on tying capacity releases to any extraneous conditions, and from
the bidding requirements for capacity releases. Additionally, FERC requires AMAs to obligate the
replacement shipper to stand ready to deliver gas to, or purchase gas from, the releasing shipper for at
least 5 months out of each 12 month period of the release. Similarly, FERC’s definition allows for supply
side AMAs. Finally, FERC clarified that short-term AMAs may be rolled over without bidding and that the
price ceiling does not apply to any consideration provided by an asset manager to the releasing shipper
as part of an AMA.
Third, the final rule revises the FERC’s prohibition against tying to allow a releasing shipper to include
conditions in a release of storage capacity regarding the sale and/or repurchase of gas in storage
inventory for any capacity release. Specifically, this exemption from tying is meant to allow a shipper
that releases storage capacity to require a replacement shipper to take title to any gas in the released
capacity at the time the release takes effect and/or to return the storage capacity to the releasing
shipper at the end of the release with a specified amount of gas in storage.
Fourth, to facilitate state retail open access programs, the ruling modifies the FERC’s regulations by
exempting capacity releases made under state-approved retail programs from the capacity release
bidding requirements and prohibition against tying.
Implementation:
Q. What changes has Northern made to its capacity release system to comply with the Order?
R. Northern has revised its capacity release system to include an indicator for the releasing shipper to
check a box if the release is for an AMA or state-approved retail program. If the release is related to an
AMA, the releasing shipper is required to input the conditions of the release that qualify the release as
an AMA transaction.
See attached screen shot of the new modifications in Northern’s capacity release system.
Q. Will Northern be reviewing the conditions of the AMA transactions?
1
2
Rules are subject to further changes. Several requests for rehearing or clarification have been filed and are pending.
Refer to paragraph nos. 144 -147 of the Order for the definition of an AMA.
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R. No. Releasing shippers are responsible for ensuring that the conditions input in the condition box
qualify the release as an AMA transaction. Per the Order, “It is incumbent upon the releasing shipper to
include the details discussed above to qualify the release as an AMA. The Commission further clarifies
that the pipeline has no obligation to act on any information other than is provided to it by its
customers.” 3
Q. When will the rule take effect?
R. The Final Rule takes effect on July 30, 2008. Northern’s system changes to implement the Final Rule
will be in place on July 24, 2008 for capacity releases effective July 30 or later.
See attached summary of capacity release changes.
3
Refer to paragraph nos. 172 - 177 of the Order for more information on posting and reporting requirements.
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Order 712
Capacity Release Term Requirements
The following includes references to the Final Rule (Docket No. RM08-1-000)
Release for 31 days or less
¾ No maximum tariff rate limitation (¶30 & ¶134 of Final Rule , & revised §284.8(b))
¾ Can include prearranged non-biddable capacity releases (revised §284.8(h)(1))
¾ Can rollover AMA capacity releases without competitive bidding (¶ 27, ¶109, ¶134, ¶135)
¾ Can rollover state-approved retail choice capacity releases without competitive bidding (¶199)
¾ Requests for clarification have been filed with FERC regarding rollover/no rollover requirements
in revised §284.8(h)(2) as the regulatory text of the Final Rule and the revised regulations
seem to conflict.
Releases for 32 days to and including 1 year
¾
No maximum tariff rate limitation (¶30, ¶134, revised §284.8(b))
¾
Non-biddable for AMA capacity releases (¶109, ¶134, revised §284.8(h)(1))
¾
Non-biddable for retail choice capacity releases (¶199, revised §284.8(h)(1))
¾
Biddable for all other capacity releases (¶73, ¶195)
¾
Can rollover AMA capacity releases without competitive bidding (¶ 27, ¶109, ¶134, ¶135)
¾
Can rollover retail choice capacity releases without competitive bidding (¶199)
¾
Can not rollover other biddable capacity releases (¶80, ¶134) except a rollover or extension into
a long term release (>12 months) at max rates would not require bidding
Releases more than 1 year
¾
Can not exceed the maximum tariff rate (¶78, ¶134, revised §284.8(b))
¾
Can include prearrange non-biddable capacity releases at maximum rate (revised §284.8(h)(1))
¾
Non-biddable for AMA capacity releases at any rate (not to exceed maximum) (¶134, revised
§284.8(h)(1))
¾
Non-biddable for retail choice capacity releases at any rate (not to exceed maximum) (¶199,
revised §284.8(h)(1))
¾
Biddable if less than maximum rate for other capacity releases
¾
Can rollover AMA capacity releases at any rate (not to exceed maximum) (¶134, ¶135)
¾
Can rollover retail choice capacity releases at any rate (not to exceed maximum) (¶199)
¾
Can rollover other capacity releases if at maximum rate and the rollover period is greater than 1
year
¾
Can not rollover other biddable capacity releases if less than maximum rate
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The Asset Manager and Retail Choice Marketer buttons are located on the Prearranged Shipper screen:
If the pre-arranged shipper has been designated as an Asset Manager Terms/Notes are required.
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