PROPOSED RULEMAKING
PENNSYLVANIA PUBLIC UTILITY COMMISSION
[52 PA. CODE CH. 69]
[M-00001351]
Maintaining Safety and Reliability for Natural Gas Supply and Distribution Service
[30 Pa.B. 2911] The Pennsylvania Public Utility Commission (Commission) on April 27, 2000, adopted a proposed policy statement order setting forth procedures the Commission intends to follow in executing its responsibilities under the Natural Gas Choice and Competition Act related to safety and reliability for natural gas supply and distribution service. the contact persons are William Hall, Bureau of Conservation, Economics and Energy Planning, (717) 783-1547 and David Screven, Law Bureau, (717) 787-2126.
Commissioners Present: John M. Quain, Chairperson; Robert K. Bloom, Vice Chairperson; Nora Mead Brownell; Aaron Wilson, Jr.; Terrance J. Fitzpatrick
Public Meeting held
April 27, 2000
Proposed Policy Statement By the Commission:
On June 22, 1999, Governor Tom Ridge signed into law the Natural Gas Choice and Competition Act, 66 Pa.C.S. §§ 2201--2212 (act). The act revised the Public Utility Code, 66 Pa.C.S. §§ 101--3316 (code) adding Chapter 22, relating to restructuring of the natural gas utility industry. The Commission is the agency charged with implementing the act.
This policy statement sets forth the procedures the Commission intends to follow in executing its responsibilities under section 2203(1) of the act (relating to standards for restructuring of natural gas utility industry).
(1) The Commission shall enforce standards as necessary to ensure continuation of the safety and reliability of the natural gas supply and distribution service to all retail customers. In adopting the standards, the Commission shall consider the absence of any applicable industry standards and practices or adopt standards in conformity with industry standards and practices meeting the standards of this chapter. The application of such standards shall be in such a manner that incorporates the operational requirements of the different natural gas distribution companies.Also in section 2203(12) of the act:
(12) The Commission shall make its determinations pursuant to this chapter and shall adopt such orders or regulations as necessary and appropriate to ensure that natural gas suppliers meet their supply and reliability obligations, including but not limited to, establishing penalties for failure to deliver natural gas and revoking licenses. Any affected entity may at any time petition the Commission to amend or rescind any such order or regulation issued or promulgated under this chapter.Commission staff established a Collaborative Working Group as the appropriate vehicle to proceed with the implementation of section 2203(1) and (12) of the act. On July 7, 1999, Commission staff convened the first meeting of the Gas Safety and Reliability Working Group to address safety and reliability issues presented by the implementation of the act.
At the initial meeting of the working group, Commission staff identified statutory directives that applied to the working group, framed a tentative list of issues that should be addressed by the working group, and established a date for the submission of informal comments. A second meeting of the working group was held on August 11, 1999, and a schedule for the further work of the group was established.
The group agreed that section 2203(1) of the act, recognizes the different operational characteristics of Natural Gas Distribution Companies and that this allows certain issues to be addressed in tariffs. Regulations or policies containing detailed uniform rules for all companies may be inappropriate and unworkable. Commission staff urged the parties to identify those common issues, which could be addressed in a policy statement.
The Office of the Consumer Advocate, the Office of Trial Staff, the Pennsylvania Gas Association, Texas Eastern Transmission Corporation, CNG Retail Services Corporation and TXU Energy Services (filed jointly with Statoil Energy) submitted informal comments on August 18, 1999.
The Working Group designated selected members to draft a suggested policy statement and this draft was delivered to the full group and considered at the meeting on September 21, 1999. The working group agreed that the policy should be presented to the Commission for consideration as Interim Safety and Reliability Guidelines.
The Commission approved the Interim Guidelines at its public meeting on October 15, 1999, at Docket No. L-00990144. The Commission stated:
After a review of the suggested policy statement, we agree that the policy statement appropriately addresses those issues that can be determined to be generic guidelines applicable to all NGDC systems in Pennsylvania and is consistent with the reliability provisions of the Act. We believe that the proposed guidelines are appropriate to ensure that safety and reliability are maintained, while recognizing that the details of these requirements need to be further developed in each NGDC's restructuring proceeding. We also believe that these requirements fairly balance the obligations of NGDCs, NGSs and end-users in the process of ensuring system reliability.The Commission ordered that these guidelines be incorporated into the Commission's regulations in Chapter 69 (relating to policy statements).
The guidelines address a number of matters that are critical to reliability, including (1) delivery standards for natural gas suppliers; (2) the definition, use, and verification of ''comparable capacity'' for supplying firm service; (3) the distinctions between firm and interruptible service; (4) the roles of the supplier of last resort and the NGDC's role as system operator; (5) requirements to ensure that sufficient firm capacity remains committed to NGDC firm service customers; (6) appropriate guidelines for the establishment of penalties; (7) critical day procedures necessary to maintain system safety and reliability; (8) the establishment of communication protocols on all matters which may affect system reliability; and (9) the establishment of Operational and Capacity Councils to meet the requirements of section 2204(f) of the act (relating to implementation). On all of these issues, the guidelines provide a strong framework for addressing these issues in more detail in the context of each utility's tariff and operational procedures.
We propose to continue to monitor issues that are crucial to maintaining reliability and safety. We also propose to impose penalties or revoke the license of a Natural Gas Supplier if an investigation shows that a supplier is in noncompliance with Tariff rules or Commission requirements and no corrective action has been taken.
To ensure the continued safety and reliability of natural gas service in this Commonwealth, the Commission proposes to amend Chapter 69 by adding §§ 69.11--69.19, to read as set forth in Annex A, which establishes guidelines for natural gas safety and reliability. Accordingly, under section 501 of the code and the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202), and regulations promulgated thereunder at 1 Pa. Code §§ 7.1--7.4, the Commission amends the regulations in Chapter 69 as noted and to read as set forth in Annex A; Therefore, It Is Ordered That:
1. The proposed amendments to Chapter 69, as set forth in Annex A, are issued for comment.
2. The Secretary shall submit this order and Annex A to the Governor's Budget Office for review of fiscal impact.
3. The Secretary shall certify this order and Annex A and deposit them with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
4. Interested persons may submit an original and 15 copies of written comments to the Office of the Secretary, Pennsylvania Public Utility Commission, P. O. Box 3265, Harrisburg PA, 17105-3265, within 60 days from the date this order is published in the Pennsylvania Bulletin. A copy of written comments shall also be served upon the Commission's Bureau of Conservation, Economics and Energy Planning.
5. A copy of this order and Annex A shall be served upon the Office of Consumer Advocate, the Office of Small Business Advocate, the Office of Trial Staff, all jurisdictional Natural Gas Distribution Companies and all Licensed Natural Gas Suppliers.
JAMES J. MCNULTY,
SecretaryFiscal Note: 57-216. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 52. PUBLIC UTILITIES
PART I. PENNSYLVANIA PUBLIC UTILITY COMMISSION
Subpart C. FIXED SERVICE UTILITIES
CHAPTER 69. GENERAL ORDERS, POLICY STATEMENTS AND GUIDELINES ON FIXED UTILITIES
SAFETY AND RELIABILITY GUIDELINES § 69.11. Definitions.
The following words and terms, when used in this section and §§ 69.12--69.19, have the following meanings, unless the context clearly indicates otherwise:
Act--66 Pa.C.S. §§ 2201--2212 (relating to natural gas competition).
Design day conditions--The extreme weather conditions that an NGDC uses to project customer requirements.
Essential human needs retail gas customer--Customers consuming gas service in buildings where persons normally dwell including apartment houses, dormitories, hotels, hospitals and nursing homes, as well as the use of natural gas by sewage plants. (See § 69.22 (relating to definitions).)
Firm capacity--Assigned capacity or comparable capacity that can be called upon to serve customer requirements on a reliable basis even under design day conditions
Gas supply assets--Includes all sources and components associated with the acquisition and delivery of natural gas.
Interruptible gas service--Indicates that natural gas service may be interrupted consistent with the terms and conditions of the NGDC tariff.
Interstate capacity--Services provided by a Federal Energy Regulatory Commission-regulated entity, including pipeline transportation, storage, peaking, balancing and no-notice services.
NGDC--Natural gas distribution company.
NGS--Natural gas supplier.
Operational flow order--An order issued by an NGDC to protect the safe and reliable operation of its gas system, either by restricting service or requiring affirmative action by shippers.
Reliability plan--A plan provided for in 66 Pa.C.S. § 1317(c) (relating to regulation of natural gas costs).
Residential retail gas customer--As defined in the tariff of each NGDC.
SOLR--Supplier of last resort.
§ 69.12. Delivery standards for NGSs.
(a) NGSs should deliver natural gas supplies under the terms of service specified in NGDC tariffs. Failure to deliver natural gas supplies in accordance with the tariffs may subject NGSs to penalties under procedures specified in the tariffs or revocation of licenses, or both. (See section 2203(12) of the act (relating to standards for restructuring of natural gas utility industry).) The NGSs may serve customers with different quality of service requirements, as permitted under the act and applicable NGDC tariffs.
(b) NGSs should utilize firm capacity sufficient to meet the requirements of their firm service customers except to the extent otherwise provided in each NGDC's reliability plan. Service to any essential human needs retail gas customer lacking installed and operable alternative fuel capability and any residential retail gas customer should be firm service.
(c) NGSs should warrant to the NGDC that they have sufficient firm capacity to meet the requirements of the essential human needs retail gas customers, as defined in § 69.11 (relating to definitions), and should describe the characteristics of any firm capacity to the NGDC. The NGDC should take commercially reasonable steps to attempt to verify that the firm capacity contract rights exist. The failure or inability of an NGDC to verify the existence of the contract rights using commercially reasonable steps does not relieve an NGS from any liability for failing to deliver gas, or subject the NGDC to any liability resulting from the NGS's failure to deliver.
(d) Natural gas service to interruptible gas service customers should be interrupted, pursuant to the terms and conditions of the NGDC's tariff, if the safety and reliability of firm service would be impeded by the interruptible customer's continued use of natural gas.
§ 69.13. Service obligations of the supplier of last resort.
(a) The SOLR is the NGDC or an NGS, which has been designated by the Commission under section 2207 of the act (relating to obligations to serve) to provide SOLR service. Each of the following services will be provided by an SOLR:
(1) Natural gas supply services to those customers who have not chosen an alternative NGS or who choose to be serviced by their SOLR.
(2) Natural gas supply services to those customers who are refused supply service from an NGS.
(3) Natural gas supply services to those customers whose NGS has failed to deliver its requirements.
(b) A customer should not have more than one SOLR designated for any of the services in subsection (a).
(c) An SOLR under subsection (a)(3) should provide sufficient supplies as to quantity, quality, pressure and location to meet the operational reliability requirements of the NGDC's system including a failure of one or more NGSs to do one of the following:
(1) Supply natural gas to their retail gas customers in conformance with their contractual obligations to the customers.
(2) Satisfy applicable reliability standards and obligations.
§ 69.14. Obligations of the system operator.
An NGDC should, in addition to performing any other roles such as selling natural gas, function as the system operator in ensuring that its distribution system is designed, constructed, managed and operated to safely and reliably receive and deliver natural gas throughout its facilities to customers connected to them. An NGDC, in performing its responsibilities as a system operator, may retain or acquire gas supply assets as required to perform its system operator functions in a manner which permits it to operate its system in a safe and reliable manner. The identity of the gas supply assets utilized by the NGDC to perform its system operator function should be reviewed by the Commission annually in the NGDC's Section 1307(f) proceeding as part of the NGDC's reliability plan.
§ 69.15. Ensuring sufficient firm capacity availability.
(a) NGSs using firm gas supply contracts with Pennsylvania producers or storage or transportation capacity contracts acquired through assignment or release by NGDCs or acquired as the result of the nonrenewal of a storage or transportation capacity contract previously held by the NGDC should offer the SOLR, or the successor NGS, a right of first refusal to utilize the contracts at the NGS's contract cost as long as needed to serve retail gas customers being relinquished by the NGS.
(b) NGSs using storage or transportation capacity contracts acquired in a manner other than through assignment, release or nonrenewal by the NGDC should provide the SOLR a right of first refusal to use the capacity at contract cost if the NGS failed to give the SOLR and the NGDC sufficient notice or if there is insufficient alternative capacity available to serve the market being relinquished by the NGS.
(1) The SOLR may retain the right to use the capacity at cost until the SOLR, through reasonable and diligent efforts, is able to acquire replacement capacity sufficient to serve the customers being relinquished by the NGS.
(2) The NGDC or the SOLR should acquire the replacement capacity in a manner consistent with the Commission's least cost fuel procurement policy.
§ 69.16. Penalties.
Nonperformance penalties should be established at levels sufficiently high to deter NGSs from failing to comply with their delivery obligations.
(1) The penalties should be independent of and in addition to the costs incurred by the NGDC, or, in the alternative, the supplier of last resort, for replacement gas supplies, including pipeline penalties.
(2) NGDCs may take into consideration the operational costs and other liabilities NGDCs may be exposed to by virtue of an NGS's failure to deliver in establishing penalties.
(3) Failure of an NGS to honor delivery obligations may lead to disqualification from NGDC programs, suspension or revocation of the NGSs license.
(4) The disqualification, suspension or revocation should not relieve the NGS of its obligations to pay all penalties and costs incurred by the NGDC as a result of the NGS's failure to deliver.
§ 69.17. Critical period procedures.
(a) A critical period exists when the NGDC declares an Operational Flow Order (OFO). A critical period implies the need for heightened awareness and attention by all parties.
(1) OFOs are issued to alleviate stress, or potential stress, to the NGDC system that threatens safety or reliability, or both.
(2) OFOs are an action of last resort, are never issued lightly, and are only issued for safety or reliability reasons.
(3) OFOs are distinct from, and do not preclude, other types of flow orders which an NGDC may issue to satisfy other obligations of the NGDC or the SOLR under the code or this title, such as the obligation to fulfill the least cost fuel procurement requirements of section 1318 of the act (relating to determination of just and reasonable gas cost rates).
(b) The NGDC should describe in detail, in its tariff, the actions it will take in advance of, and during a critical period. At a minimum, those actions should include the following:
(1) Exercises wherein critical period communications between, and the required responses of, the parties can be tested.
(2) A protocol for issuing and communicating system alerts that announce actual or pending events that, if unchecked, may result in a critical period, and call for voluntary actions or responses from NGSs and customers.
(3) A protocol for issuing and communicating OFOs. The protocol should address how and when the OFOs will be announced, and provide for disseminating periodic status reports during the period an OFO is in effect. OFOs should state the actions required and the reasons for the actions, be as localized as possible and be applied in a nondiscriminatory manner.
§ 69.18. Communications protocols.
Communications protocols are tools by which NGDCs, NGSs and other parties, define and describe the type, form and frequency of communications necessary to successfully fulfill customer requirements in an operating environment of increased retail choice. Effective and consistent communications are critical to reduce errors, and provide all entities with the information necessary to properly fulfill their respective responsibilities, both in normal and emergency circumstances. A communications protocol should include at minimum, in addition to the specific requirements in § 69.17(b)(2) and (3) (relating to critical period procedures) the following:
(1) A detailing of contact data for both NGDC and NGS personnel responsible for the various aspects of customer contact, gas deliveries and distribution, including mechanisms for ensuring that the data is kept current for all parties.
(2) The specification that regular meetings will be held, with joint agenda development responsibilities, including the potential scheduling of operational conference calls.
(3) Communications, to the extent not otherwise set forth in the NGDC's tariff, associated with the NGDC's procedures for customer enrollment, billing arrangements, daily or monthly delivery quantity determination, nominations (monthly, daily, intra-day, and weekend), balancing options, reconciliation or true-ups, cash-outs and electronic data exchange requirements.
(d) Procedures utilized by NGDCs to inform NGSs of changes to NGS delivered supplies or customer demand, or both, required to assure system reliability, both daily and seasonal, and to avoid pipeline penalties.
§ 69.19. Operational and capacity councils.
(a) Each NGDC should create an operational and capacity council for parties referred to in section 2204(f) of the act (relating to implementation) to discuss and attempt to resolve operational and capacity issues related to customer choice, including the reliability effects of those operational and capacity issues related to customer choice and the ongoing implementation of this section and §§ 69.11--69.18 (relating to safety and reliability guidelines). The intent of these councils is to explore the possibility of building consensus among council participants relating to operational, capacity and operational and capacity-related safety and reliability issues in a fair and nondiscriminatory manner.
(b) Each NGDC's operational and capacity council should, at a minimum, establish, in consultation with council participants, the following:
(1) A regular meeting schedule.
(2) An agenda for each meeting.
(c) The final determination of operational and reliability issues resides with the NGDC, subject to Commission review.
(d) The fact that statements were made, or positions were taken and were not considered or accepted, in operational and capacity council meetings should not be considered, or entered into evidence, in any formal proceeding before the Commission relating to any matter addressed in the council meetings.
[Pa.B. Doc. No. 00-985. Filed for public inspection June 9, 2000, 9:00 a.m.]
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