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PG&E Ruby Pipeline Deal Gets OK

California regulators last Thursday unanimously approved Pacific Gas and Electric Co.'s (PG&E) 15-year, 375,000 Dth/d transportation contract on the proposed Ruby Pipeline from Wyoming to southeast Oregon where existing north-south interstate pipelines serve PG&E.

An administrative law judge at the California Public Utilities Commission (CPUC) in October recommended that the PG&E contract be approved, which the pipeline sponsors considered crucial to the project's viability.

Annual costs of the full volume capacity will be $93.1 million, according to the CPUC.

PG&E's long-term deal is viewed as a key element for getting the 680-mile pipeline built -- from the Opal Hub in Wyoming to an interconnect at Malin, OR. The San Francisco-based combination utility is considered the project's anchor shipper. The U.S. Bureau of Land Management (BLM) is in the process of holding public meetings to obtain comments on the environmental ramifications of the project.

El Paso Corp., the project's developer, noted that at the time of the ALJ's favorable recommendation that CPUC approval would allow PG&E to finalize its agreement with the $3.5 billion Ruby project. The favorable impact on the state's private-sector utility ratepayers from more gas-on-gas competition was cited by Commissioner Timothy Alan Simon in introducing the issue. He acknowledged that there were some potential conflict of interest issues that arose in the PG&E parent company's earlier attempts to take an equity position in Ruby. It subsequently dropped out of the project last May.

PG&E initially will take 250,000 Dth/d beginning July 1, 2011 for a four-month period through Oct. 31, 2011 to serve its electric generation needs. After that, the full 375,000 Dth/d would take effect Nov. 1, 2011.

"Ruby Pipeline will clearly provide benefits to California consumers," Simon said. "The transportation arrangements are reasonable and cost effective, providing the state with access to growing gas supplies in the Rocky Mountain region, diversifying PG&E's gas procurement away from Canadian supplies that are declining while demand increases."

While acknowledging a "conflict of interest between PG&E customers and shareholders when PG&E Corp. sought to obtain an ownership share in Ruby," Simon said there is no evidence that ratepayers were harmed by those now-abandoned transactions. "There was no violation of our [utility] affiliate transaction rules."

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