Auctioning gas imbalances offers advantages over bidding on available pipeline capacity.
In a Notice of Proposed Rulemaking issued last summer, the Federal Energy Regulatory Commission proposed a series of auctions for all unutilized short-term rights in pipeline capacity, with the most frequent auction being for transmission rights for the next day. All transporters and the pipeline would be required to release available short-term capacity rights to be auctioned. (See FERC Docket RM98-10-000, Regulation of Short-term Nat. Gas Transp. Servs., July 29, 1998.)
Confusion abounded, however, when the FERC attempted to show how auctions would work in bidding for various segments in a multi-nodal pipeline network. At the FERC's Workshop on Pipeline Capacity Auctions, held Oct. 20, the Commission staff presented several examples. For ease of presentation, the model results were first presented for a three-node linear pipeline, then a four-node, network pipeline. Much of the confusion concerning this model could be eliminated by changing the nature of the auction.
Instead of auctioning available capacity as proposed by the staff's model, the better auction is of gas imbalances (i.e., the difference between the nomination and the actual delivery of gas). Such an auction of gas imbalances would acquire a number of desirable characteristics:
Universal Application. Every transportation customer has a minor gas imbalance daily that is generally ignored because the imbalance is within tolerance. By making even those small gas imbalances subject to auction, all transportation customers would become participants in the auction.