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El Paso, SoCal Gas, CPUC Defend Recontracting of El Paso Capacity

El Paso Natural Gas, Southern California Gas and the California Public Utilities Commission (CPUC) responded separately Friday to shipper protests of a precedent agreement between El Paso and SoCal Gas that was filed on March 1. The agreement covers recontracting under six new firm transportation service agreements (TSA) for an average throughput of 750 MMcf/d on El Paso mainly from the San Juan Basin to California border delivery points.

El Paso said it would post the capacity for competitive bids to allow third party shippers a chance to win the capacity with a higher bid. Shippers, however, sharply protested having to bid for the entire package, saying the procedure virtually ensured that SoCal Gas would remain El Paso's largest customer because others would not be able to use all the capacity. Assembling it as a package is "anti-competitive and unduly discriminatory," shippers said.

SoCal Gas noted that the CPUC, which has instructed the company to contract firm transportation for its core customers, has approved the precedent agreement and it is in compliance with FERC rules. The precedent agreement includes two alternatives: one includes an additional 60 MMcf/d of firm transportation (FT) that SoCal did not previously hold; and the other excludes that 60 MMcf/d of capacity. The new basic agreements are for 450 MMcf/d less than SoCal's previous contracts for 1.2 Bcf/d, which had also covered non-core customers.

Responding to protests, El Paso posted its prearranged agreement with SoCal Gas for the 60 MMcf/d on March 18.

The pipeline company said the precedent agreement was filed with FERC only for review and acceptance of two provisions, one governing no exemptions from fuel charges and another stating the discounted rates under the TSAs are not subject to change under the Memphis clause of the TSAs. The rest of the agreements, and the linking of the agreements as a package, comply with its accepted tariff provisions and are not subject to challenge at this time.

SoCal Gas said most of the complaints relate to issues that are not open to discussion, including the package deal, the propriety of discounted rates, and cost responsibility for decontracted capacity. The latter two issues will be dealt with in El Paso's next rate filing, due June 30.

The TSAs, whose terms vary from three to five years starting Sept. 1, 2006, provide for rates between 27.5 cents and 32 cents per Dth/d from the San Juan to the border. SoCal Gas said it was making a substantial revenue commitment for the package, and for a bid to be competitive it should have to match the entire package.

Since the capacity is for its core customers, there is no similarity to the situation several years ago when a large block of turned back PG&E capacity was taken on by a marketer, an event that one shipper blamed for the 2000-2001 gas crisis in California. That argument "is absurd and wholly inapplicable."

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