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PG&E Gets OK for Two 10-Year Gas Transport Deals

Pacific Gas and Electric Co. (PG&E) received conditioned approval Thursday for two 10-year natural gas transportation contracts with a major global glass manufacturer in Northern California from the California Public Utilities Commission (CPUC).

The regulatory action carries the condition that PG&E not offer Pilkington North America Inc. (PNA) discounted gas transportation rates until the company moves forward with a proposed $100 million modification of its glass-making facilities.

The CPUC took its action over the objections of both the Northern California Generation Coalition and the commission's independent consumer unit, the Division of Ratepayer Advocates (DRA). The generators argued that the utility allegedly failed to demonstrate that the duration of the contracts were "just and reasonable," and DRA raised issues related to the contract's duration beyond the utility's Gas Accord IV transmission framework, as well as whether PG&E would continue the contracts if PNA did not go through with its expansion program.

A key part of the case was the determination by a state business development services unit, California Business Investment Services (CalBIS), that the glass manufacturer was a "serious risk" for relocation of its manufacturing expansion outside California. That tipped the scales in favor of approving PG&E's long-term transportation deal. Terms are confidential.

"It is clear that CalBIS has the expertise and staff to identify and screen legitimate economic development candidates, and this position as the state's preeminent evaluator of economic development issues gives it unique and early access to would-be [economic development rate] applicants," the CPUC said in its order.

DRA was concerned that language in the contracts allows for discounted rates even if the $100 million expansion is not pursued, but PG&E assured the CPUC that it would not give the discounts without the expansion.

The amount of the discounts for the latter half of the 10-year deals will be determined in a CPUC gas transmission/storage rate case to cover the period after the current Gas Accord IV expires. That case will also determine who will pay for the shortfall between the discounted and market rates -- other ratepayers, shareholders or a combination of the two.

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