§717y Voluntary Conversion of Natural Gas Users to Heavy Fuel Oil

Summary

The Commission must make a rule to let some users switch from natural gas to heavy petroleum fuel oil by approving transfers of the right to receive gas under certain contracts. The rule covers gas from contracts made before September 1, 1977 (with limited exceptions), gas used in facilities that existed on that date, and gas under a prohibition order. Transfers may go to interstate pipelines, to local gas companies served by an interstate pipeline, or to a person served by an interstate pipeline for a high-priority use. The Commission will set terms for transfers, including that if the money paid for the transfer is more than the extra cost of using heavy fuel oil instead of the gas for the rest of the contract, the excess must be refunded. The Commission must also weigh whether a transfer will raise demand for imported refined petroleum. If the buyer of the contract will resell the gas, the buyer must get a certificate of public convenience and necessity. Contract clauses that block approved transfers, or that end a contract because of an approved transfer, cannot be enforced. The buyer takes on the seller’s contract duties, but the seller still is responsible for any duties the buyer does not perform. Payments for transfers are limited by formulas called “just compensation,” and the rule says how to figure any lost revenue for intrastate pipelines. A supplier’s required deliveries after a transfer cannot be more than the smallest of three amounts: the contract’s maximum delivery, the delivery the supplier would have owed under the curtailment plan if no transfer happened, or the volume actually delivered (or paid for) in the 12-calendar-month period before the transfer. Key terms in one line each: “Natural gas” — as defined in the Natural Gas Act; “contractual interests” — the right to receive gas under a contract as affected by a curtailment plan; “heavy petroleum fuel oil” — number 4, 5, or 6 fuel oil refined in the U.S.; “interstate pipeline” and “intrastate pipeline” — pipelines subject to or not subject to Commission jurisdiction, respectively; “local distribution company” — a company that delivers and sells gas to final users; “high-priority use” — a non-steam, non-electric use the Commission marks as high priority when no substitute fuel is reasonably available; “facility” — an electric powerplant or major fuel-burning installation; “curtailment plan” — a plan that sets service priorities during limited gas deliveries.