Gas-on-Gas Discounting: Still a Zero-Sum Game

Captive shippers still face rate hikes without reward under the FERC's new rule on short-term pipeline capacity.

In its final rule issued on short-term gas pipeline capacity, announced Feb. 9 in Order No. 637,[Fn.1] the Federal Energy Regulatory Commission squanders a precious opportunity to end a discrimination inherent in its pipeline rate discounting policy.

In practice, that policy permits interstate pipelines to raise rates for captive customers to offset discounts they give to other customers that enjoy access to competing interstate pipelines. The theory behind this privilege is simple. The pipelines justify their discounts on the claim that all customers, including non-favored customers that get no discounts or lesser discounts, will benefit. How? The benefit, it is said, comes from an increase in units of service provided - a result of the discounting.