Benchmarks

An interesting time for pipeline capacity markets looms as the first winter under Federal Energy Regulatory Commission Order 637 begins. FERC's new rule was implemented to encourage that capacity flow to its most valued use in peak-demand periods. To achieve this goal, FERC released the price cap on short-term capacity release transactions. Market participants now can increase capacity price bids until holders of capacity are willing to curtail their demand or take their chances in the interruptible markets. Other market changes arising from Rule 637 include mechanisms for seasonal or term-differentiated rates, such as hourly structures for power producers; standardization of segmenting rules-the breaking up of capacity parcels; and changes in the priority rights for replacement shippers.