While fees rulemakings will be put into effect later than anticipated, the FERC is still committed to its revenue collection target of $45.1 million in FY 1984. The original estimate for revenue collections in FY 1985 under existing authority was $51 million; however, the Administration determined that this estimate be increased by $9.0 million. As a result, staff is still evaluating areas in which additional revenue enhancements may occur. Additional authorizing legislation may be required.

Regulatory Process in the Pipeline Certificate Program

Question: Describe your efforts to streamline the regulatory process in the pipeline certificate program. Can you quantify the savings in staff time?

Answer: The most recent such effort in the pipeline certificate area has been the blanket certificate program which is aimed at the more routine, non-controversial proposals. Under this approach, once an interstate pipeline obtains a blanket certificate, it is authorized to engage in certain, well-defined transactions which traditionally required individual approvals. At this time, virtually all interstate pipelines have been issued blanket certificates. The program should streamline the regulatory process in two principal ways: first, its self-implementing feature reduces the number of pipeline certificate and abandonment applications which would otherwise be handled on a case-by-case basis; and second, its prior notice procedure should speed up processing times through reduction in filing requirements, internal reports, and time allowed for staff review. The portion known as Phase I (facilities construction, abandonment, changes in delivery points, etc.) was approved during FY 1982. A final rule in Phase II (transportation, sales for resale, related revisions) was issued during FY 1983, with a rehearing order issued early in FY 1984.

Partly as a result of the blanket certificate program, the number of Section 7 applications is lower than for the same period last year. Decreased activity in the industry attributable to current excess deliverability may also have contributed to this reduction. However, the rate at which prior notice requests are being filed exceeds expectations. Most of these involve the transportation of "self-help" gas for end users. Moreover, the number of reports filed in conjunction with self-implementing transactions is considerable. The companies and the Commission staff require time to develop and implement procedures so that efficiencies can be achieved in the recently inaugurated blanket certificate program. It is contemplated that the blanket certificate program will ultimately achieve savings to industry of 24,000 hours annually. We cannot yet quantify the savings in staff time associated with streamlining the regulatory process in the pipeline certificate program.

Streamlining efforts continue to center around the Data Validation Program, which seeks to reduce unnecessary reporting and filing requirements through a comprehensive review of the Commission's regulations and forms, and the Delegation of Authority to high-level staff officials for certain non-contested regulatory activities. The reporting requirements associated with the pipeline certificate program are currently under review and we expect some additional reductions in industry burden and further streamlining of the regulatory processes to result.

Workload in the Gas Pipeline Certificate Program

Question: In the gas pipeline certificate area, where do you expect an increasing workload and why?

Answer: In FY 1985 workload should increase in the following product categories: Construction/Operation/Transportation/Exchange/ Storage (Non-Formal), Prior Notice Proceeding, and Import/Export. As deregulation takes effect in FY 1985, additional facilities construction and transportation arrangements should increase the number of pipeline certificate filings. Activity in the Prior Notice Proceedings is especially strong, owing mainly to the transportation arrangements involving lower-cost, self-help gas for end users. The number of requests to date (169) has surpassed the total originally projected for FY 1984 (145). This trend should continue into FY 1985 as additional categories of natural gas are deregulated and both producers and purchasers seek to have gas transported. When compared to FY 1983, the FY 1984 import/export workload is depressed due to the current deliverability surplus of U.S. pipelines and by a variety of circumstances in the exporting countries. Recent events in the exporting countries and the need by U.S. pipelines for long-term supplies may increase activity in this area during FY 1985. Moreover, if market demand begins to outpace domestic supplies, imports may be needed to fill the gap between the time when increased domestic drilling activity begins and actual production results.

Gas Pipeline Rate Workload Versus FY 1985 Budget Request

Question: Briefly describe the workload trends in the Pipeline Rate Regulation Program and the need for an increase in funding.

Answer: As I have previously stated in my budget testimony, any increase in funding is esssentially to maintain the current level of operations. Our staffing level for this program is constant between FY 1984 to FY 1985. Funding increases represent only a prorata share of general overhead expenses, including the recent salary increase.

Over the past two years, there has been an overall increase in the Gas Pipeline Rates actual workload. For example, in FY 1981, actual receipts and completions were 1690 and 1646 respectively while in FY 1983 the levels reached 2214 and 2477, a 20% increase. This high level is expected to continue at least through FY 1985. Completions for FY 1985 are expected to exceed incoming workload thereby resulting in a decrease in the pending workload even with the increasing receipt levels that have been experienced in recent years.

In lieu of filing rate change applications, pipelines are attempting to generate revenues by greater utilization of installed capacity on their systems primarily through the mechanism of transportation transactions. Enactment of the NGPA substantially increased the workload of the Gas Pipeline Rates area because these transactions have been the principal mechanism for the efficient reallocation of natural gas supplies from the intrastate to the interstate market. The receipt levels of these transactions have been increased each year as pipelines continue to respond to demands for increased transportation.

Recent Commission initiatives will accelerate the already subtantial increase in receipt levels of transportation transactions. These include the expansion of the blanket certiticate program to give producers access to new markets. Further, under certain conditions, interstate pipelines are now authorized to transport gas directly between producers and end-users without prior case-by-case Commission approval under Order Nos. 319 and 234 B. Finally, the Commission has authorized Special Marketing Programs for both pipelines and producers which embody transportation as an essential element.

Interstate pipelines' gas purchasing practices and resulting purchased gas adjustment filings (PGAs) will continue to be a significant factor in Gas Pipeline Rate Regulation. With the partial decontrol mandated by NGPA in 1985, it is expected that purchased gas costs may swing dramatically on various pipeline systems as existing contractual provisions such as market-out clauses, renegotiation provisions and various price escalation mechanisms become activited upon deregulation. The recent issuance of Commission Opinion No. 204 expanded the definition of fraud and abuse under the NGPA and has become the general standard for both evaluating the marketing problems faced by interstate pipelines and for denial of recovery of excessive purchased gas costs. It appears reasonable to expect that there will be more customer challenges and more litigation of PGA issues in 1985. Furthermore, because of the potential volatility involving purchased gas costs during this transitory period, many

pipelines are expected to request waivers of existing PGA regulations to permit concurrent flow through of significant changes of purchased gas costs and thus receive immediate market responses from gas consumers. Expansion of the Commission's onsite audits of purchased gas costs will be required to ensure that only allowable purchased gas costs are being flowed-through to consumers and are flowed-through in a manner consistent with the Commission's Regulations.

Hydropower Regulation Workload Trends

Question: Comment on the trends in workload for hydropower regulation over the last five years.

Answer: The Commission's licensing workload has grown rapidly over the past several years beginning with the Oil Embargo and the subsequent passage of the Public Utility Regulatory Policies Act (PURPA) in 1978. PURPA, along with attendant tax legislation, has increased the economic incentives for small hydro development in the United States.

During the past five years workload receipts in the major categories of the FERC hydropower regulation program have been as follows:

FY 1980 FY 1981 FY 1982 FY 1983 FY 1984

This data clearly illustrates the significant increase in the number of applications for new capacity licenses, preliminary permits, and exemptions over the last five years. This data also shows that upon completion of feasibility studies under preliminary permits, the workload has shifted toward more complex and labor intensive developmental applications (licenses and exemptions). Dam Safety inspections have also increased significantly as a direct result of the increase in license applications. This trend is expected to continue for the next several years.

Rationale for Increasing Efforts in New Capacity Licenses

Question: Explain the rationale for increasing efforts in new capacity licenses.

Answer: Staff effort has for many years emphasized timely processing of applications that would result in the installation of new or additional generating capacity. The staff's highest priority is processing license and exemption applications for projects that are ready to start construction. Putting these projects on-line will result in utilization of a renewable resource and corresponding savings in nonrenewable fossil fuel resources.

Resources Needed to Maintain The FY 1984 Pending Level

Question: What additional resources are needed to increase completions in order to maintain the FY 84 level of backlog or pending workload?

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Answer: Despite the prioritý efforts devoted to processing applications for projects with new generating capacity, the current and projected high levels of receipts for major and minor new capacity license applications will result in an increase in overall pending workload in the hydropower licensing area in FY 1985. these two new capacity licensing categories, pending workload at the end of FY 1985 will exceed the FY 84 year-end total by 125 actions. The increase will more than offset projected reductions in pending workload for the two other major hydroelectric workload areas--preliminary permits and exemptions from licensing. In order to increase completions in new capacity license categories, and thus to maintain the FY 1984 level of pending workload for hydropower licensing, approximately 25 additional positions and $1.0 million would be needed for the hydropower licensing program. Additional resources for this effort have not been requested in FY 1985 in conformance with Administration efforts to reduce Federal spending. Increases in productivity are expected during FY 1985 to help offset increases in pending workload. We will continue to explore areas to reduce pending workload within present staffing levels.

Hydropower Regulation

Question: How much is requested in FY 1985 for consultant inspection services in the dam safety program?

Answer: No funds are requested in FY 1985 for consultant inspection services in the dam safety program. Pursuant to the Commission's dam safety regulations, owners or licensees are required to retain an independent consultant. The independent consultant is an important aspect of the Commission's dam safety program as mandated by the Presidential directive on Federal