Regulation

Order 637 (Pipeline Transportation Regulations)

The Federal Energy Regulatory Commission (FERC) amended its regulations governing the provision of unbundled pipeline transportation service (see discussion of Orders 636 and 436 below) in response to the growing development of more competitive markets for natural gas and its transportation. 

As an experiment, the rule waived for a two-year period cost-based price ceilings for short-term releases of capacity by shippers with long-term rights to the capacity. FERC later reinstated the cap. 

FERC encouraged pipelines to file for peak/off-peak and term-differentiated rate structures.  It also mandated significant new shipper transportation rights in terms of scheduling procedures, primary and secondary point rights, and the ability to segment shipper capacity paths. 

In order to remove economic biases in the existing regulations, Order 637 narrowed a shipper’s “right of first refusal” to re-subscribe to long-term capacity.