Beyond Order 636: Making the most of existing pipeline capacity

They`re not moving natural gas through the nation`s vast system of gas pipelines like they used to anymore. The process is becoming more efficient and less costly, but observers say there`s still plenty of room for improvement. A variety of new tools and techniques for optimizing pipeline capacity have taken hold under Federal Energy Regulatory Commission (FERC) Order 636, which deregulated and unbundled pipeline transportation and services in 1993. These new techniques allow local gas distribution companies (LDCs) and big end-users to use a variety of mechanisms to guarantee they will have enough capacity on peak-demand days at an economically attractive price. The LDCs and gas users do have to find their own supplies of gas, rather than purchasing it from the nearest pipeline as they did in the past. But market centers and hubs, along with services like backhauls, storage agreements and on-line contracting through electronic bulletin boards (EBBs), have popped up like dandelions since Order 636 enabling LDCs to buy gas from even distant sources and move it with ease from one pipeline to another to their service territories. Under Order 636, LDCs and users who have leased firm transportation capacity on a long-term basis are being allowed more » to release this capacity during periods when they don`t need it. A user can release, or resell, its excess pipeline capacity directly to another user, or it can ask the pipeline to find a buyer. If the transaction is for greater than a month, the package must be posted on an EBB and resold to the highest bidder. « less