United States: FERC Issues Final Rule Incorporating NAESB Wholesale Gas Quadrant Business Practice Standards Version 3.0

On October 15, 2015, FERC issued a final rule (Order No. 587-W) amending its regulations at 18 C.F.R. § 284.12 to incorporate by reference, with certain enumerated exceptions, the latest version (Version 3.0) of business practice standards applicable to interstate natural gas pipelines (and to the contents of intrastate pipeline Form No. 549D filings) adopted by the North American Energy Standards Boards's ("NAESB") Wholesale Gas Quadrant ("WGQ").  Interstate pipelines must file tariff records to reflect the changed standards by February 1, 2016, with such records to take effect on April 1, 2016, and must comply with the revised standards beginning on April 1, 2016.  The final rule adopts policies on waiver requests set out in the related Notice of Public Rulemaking ("NOPR").  Intrastate pipelines filing Form No. 549D should use, instead of common codes, their own location codes and names in their list of jurisdictional receipt and delivery points.  Upon incorporation by reference, the new Version 3.0 Standards will replace the standards incorporated by reference in 2012 in Order No. 587-V.

The final rule largely adopts the proposals in the notice of proposed rulemaking (Version 3.0 NOPR) issued by FERC on July 16, 2015.  The updated business standards fall into several general categories.

First, the updated business standards contain and supplement the revisions to the NAESB scheduling standards accepted by FERC in Order 809 as part of its efforts to harmonize gas-electric scheduling coordination, which revisions are to be implemented on April 1, 2016.

Second, the updated business standards revise the codes used by pipelines to identify receipt and delivery locations.  Pipelines are to cease using common codes and the location common code system, as the NAESB membership concluded that the common code system provided little commercial benefit to the industry at large.  Instead, each transportation service provider assigns the proprietary codes that it will use to identify points of receipt and delivery.  The new standards require pipelines to post sufficient information on their websites to permit shippers and FERC to identify the interconnection points between pipelines that were previously identified through the common codes, and FERC is promulgating a new subsection 284.13(f) setting forth related pipeline posting requirements (and moving contents of existing 284.13(c)(2)-(6) to it).  The proprietary codes will be used by FERC in its Index of Customers to identify the points on shippers' contracts.  FERC is also requiring pipelines to maintain and post a complete listing of all inactive points, and, for ease of making comparisons, FERC will post the old common code file used in past Customer Indices on its website prior to April 1, 2016.  FERC is providing a Revised Instruction Manual for filing Form No. 549B – Index of Customers on its website that reflects the final rule's changes.  The final rule directs that when pipelines make their Index of Customers filings for the second quarter of 2016 and thereafter, they should do so using the new location names and codes for all active points.

Related to this change to the Index of Customers, FERC is making conforming changes to its regulations at 18 C.F.R. §§ 157.14 and 157.18 (dealing with exhibits), 260.8 (system flow diagrams) and 284.13 (reporting requirements for interstate pipelines) to require that receipt and delivery point information in various interstate natural gas pipeline filings and postings use the same proprietary location names as provided for in the NAESB WGQ Version 3.0 Standards.  FERC is also making conforming changes to 18 C.F.R. § 284.126.  Also, intrastate pipelines filing Form No. 549D should use, instead of common codes, their own location codes and names in their list of jurisdictional receipt and delivery points.

The new standards contain other reporting requirement changes, including reporting "Design Capacity" for each location.  The Version 3.0 Standards contain revisions to the capacity release standards regarding posting requirements for offers to purchase released capacity that were the subject of FERC's order to show cause in Docket No. RP14-442-000.  Other revisions are: (1) revisions to standards defining "Operating Capacity" and "Design Capacity"; (2) elimination of WGQ interpretations of standards, which interpretations FERC has long declined to incorporate by reference; (3) modifications to standards to reflect this elimination of the WGQ interpretations; (4) modifications for certain maintenance purposes, including changes to eliminate the appearance of the electronic data interchange in the imbalance trading process; (5) modifications to reflect new data elements; and (6) edits for clarity, increased user-friendliness and 29 minor corrections.  A complete list of all the revisions made in the Version 3.0 Standards to the prior standards can be found in the Appendix to the Version 3.0 NOPR, 80 FR 43987, FERC Stats. & Regs. ¶ 32,708 at 34,767.

As also explained in the NOPR and the final rule, FERC is adopting the Version 3.0 Standards with the following exceptions.  FERC is not incorporating the NAESB standards specifying the terms of optional model contracts, and is not adopting NAESB eTariff-related standards.

Because the NAESB WGQ Version 3.0 Standards incorporate and go beyond the WGQ Version 2.1 Standards proposed by NAESB, but notyet  adopted by FERC in Docket No. RM14-2-003, the final rule terminates the proceedings in that docket as moot.

With respect to the interstate pipeline tariff records to be filed by February 1, 2016, the final rule adopts compliance filing requirements to increase the transparency of pipelines' incorporation by reference of the NAESB WGQ Standards, so that shippers and FERC will know which tariff provision(s) implements each standard as well as the status of each standard.  These compliance filing requirements are described in paragraph 42 of the final rule.

A copy of the final rule is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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