FERC Affiliate Standards

Policy August 09, 2007

Background

Regulators are concerned about affiliated entities gaining an advantage over their unregulated competitors through relationships among pipelines, utilities and their subsidiaries. They also seek to ensure that ratepayers do not subsidize a company s competitive activities. More than 25 states and the Federal Energy Regulatory Commission (FERC) have adopted laws or regulations that in some way govern these relationships to prevent potential competitive advantages. Some states have adopted guidelines, often termed standards of conduct or codes of conduct, for interactions between parents and affiliates, such as arms-length transactions; separate staff and facilities; and the offering of the same terms, information and services to all marketers. In January 2007, FERC proposed revisions to its standards of conduct applicable to gas and electric transmission providers. With respect to natural gas pipelines, FERC proposed to apply the standards to cover pipelines relationships with their marketing affiliates, but proposed to define marketing affiliates to include entities that managed or controlled transmission capacity as an asset manager for a third party.

AGA Viewpoint

AGA believes that legislation and regulations established to govern the market must preserve the natural gas industry s excellent record of service and reliability, and allow local natural gas utilities to compete on the same basis as other providers of energy. AGA supports maintenance of the traditional exception from standards of conduct regulations for local natural gas utility companies affiliated with interstate pipelines and with electric companies, and is working to ensure that exception is implemented in a reasonable and workable manner. AGA filed comments in response to FERC s proposed rules advocating that FERC clarify that pipeline-affiliated LDCs could make off-system sales using non-affiliated pipelines without being considered a marketing affiliate of its affiliated pipeline. AGA also advocated that FERC clarify that LDCs affiliated with electric transmission providers would not be considered market affiliates of the electric utility if they do not conduct transmission transactions with the affiliated electric utility. AGA asked FERC to define the term asset manager and clarify that LDCs that are otherwise exempt under the definition of marketing affiliate do not lose such exemption by virtue of managing or controlling transmission capacity, such as when they participate in state-approved choice programs.

AGA Contact: Michaela Burroughs, 202-824-7311, mburroughs@aga.org