The Advance Payment Program: An Uncontrolled Experiment
Highlights
The Federal Power Commission (FPC), whose responsibilities were transferred to the Federal Energy Regulatory Commission (FERC), approved an experimental program in 1970 that permitted interstate pipelines to provide natural gas producers with advance payments. The expectation was that this would bring additional quantities of gas to the interstate market. These advances were interest-free loans to be used by producers to cover the cost of exploration, development, and production of natural gas. About $3.3 billion in fixed advance payment commitments were made during the program, and about $2.2 billion in indefinite advances can still be made to producers until December 31, 1980. As a result of a 1974 suit filed by the Public Service Commission of New York, FPC was ordered to evaluate the program fully.