Sempra Energy is gearing up for the June 30 launch of a major operational overhaul of its Southern California natural gas transmission and storage system. The new system — six years in the making and including a bid-based market for firm pipeline access rights (FAR) and off-system deliveries (OFF) — is designed to provide more flexibility, reliability and a new citygate pricing point.

Sempra’s Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co. (SDG&E) are planning bidder information meetings in June, followed on June 30 by on-line bidding for firm pipeline capacity rights spread over 14 receipt points and six transmission zones. There will also be a secondary market where customers can buy and sell FAR. In play is 3.875 Bcf/d of total SoCalGas transmission capacity. Bidding rights already have been distributed and it all is scheduled to go into operation Oct. 1.

Interruptible capacity contracts can be done at any time for any of the receipt points, and they can be executed on-line at the SoCalGas website, www.socalgas.com/business/firmaccess, according to Rodger Schwecke, Sempra director for energy market supply and capacity products.

He believes a new pricing point will emerge — a single Los Angeles citygate — similar to the way a few years ago Pacific Gas and Electric Co. (PG&E) revised its gas transportation system in Northern California and established the PG&E citygate, which Sempra officials consider a well established pricing point now.

“A logical point for the citygate is a point where supplies are aggregated — either bought or sold,” Schwecke said. “When you add to that point our storage capabilities, it is a logical point with the potential for a lot of liquidity to be a pricing point just like the California border is.”

Currently only end-use customers hold transmission rights on the SoCal system, but under the new system any party (end-user; wholesale customer; SoCalGas and SDG&E gas-buying units; California gas producers; marketers; core aggregators, or “energy service providers; storage customers; and other creditworthy parties) can pick up these new firm rights, similar to how it is done on the PG&E system, according to Schwecke.

“The PG&E citygate has turned out to be a very good pricing point, and we think the same scenario will occur at the LA Citygate,” he said. “We have had contact with various pricing indices looking at how this is going to transition, and what kind of points they may want to have.”

NGI is soliciting comments from the industry on possible changes to its natural gas price indices to accommodate the changes in the marketplace. Dexter Steis, NGI executive publisher, has asked market participants for their comments on the need for a “SoCal” or “LA” Citygate index and other possible additions to the price table. In addition NGI will be hosting an informal luncheon forum at GasMart 2008 to discuss changes.

FAR offers a new pooling service designed to improve gas trading and exchanges at the new Los Angeles citygate. According to the SoCalGas website, virtual pooling occurs after the supplies are delivered through a receipt point using the receipt point access rights, which customers have the option of moving around. Ultimately the pool helps facilitate delivery of the gas to an end-user or storage account or for off-system deliveries from multiple receipt points.

Customers may opt to deliver off-system from the SoCalGas/SDG&E integrated gas transmission system to the PG&E delivery point at Kern River Station. For now that is the only off-system delivery point, but Schwecke said that later in the year the Sempra utilities will file with the CPUC to add other points. It would allow for suppliers in the Northwest to deliver to the El Paso system.

Currently there are only interruptible off-system deliveries, but that will change after an open season for firm off-system rights is held at a still-to-be-determined date, Schwecke said.

“Starting Oct. 1 customers will have the ability to pick up firm capacity on our system at specified receipt points that will get them transportation from that receipt point to a citygate market,” said Schwecke, noting that it will be similar, but with different terminology, to the operations of the PG&E transmission system in Northern California. “End-use customers will pick up gas at the citygate also with firm rights contracts for delivery to their end-use facilities.”

Within this system there will be a secondary market in which customers can buy and sell firm rights for given periods of time. Similar to PG&E’s “paths,” SoCalGas has established transmission zones. The difference between the two, however, is the zones all carry the same postage stamp rate; each PG&E path carries a different rate for transportation.

Even though the average demand on the Southern California transmission system is more than 1 Bcf/d below the total pipeline capacity (3.875 Bcf/d), there are constraints downstream from a number of the 14 receipt points spread over six transmission zones. For example, in the North Desert Zone, there is overall capacity of 1.59 Bcf/d, but the receipt points along the zone total more than 2 Bcf/d.

“We can’t take all the capacity from all the points at one time,” Schwecke said. “So when we look at how much firm rights to sell, we will not only be limited by how much capacity there is at an individual point, but also by the zone’s capacity.”

Customers that want receipt point capacity expanded can arrange with the Sempra utilities to get it done, and then pay for it in a lump sum or on an amortized contract basis, Schwecke said. While the SoCalGas system has 3.875 Bcf of potential access on any given day; average system demand is running about 2.6 Bcf, he said.

“With the total amount of receipt point capacities, along with our storage capabilities, we have more than enough capacity to meet the total system demand,” said Schwecke, using the example of a customer still wanting a particular receipt point upgraded for liquefied natural gas (LNG) flowing from North Baja California, Mexico.

“Sempra LNG and Coral Energy upgraded our capability to receive gas at Otay Mesa [south of San Diego near the Mexican border] and they paid for it, but that is at a particular point — not across the system. The total capacity across our system doesn’t change.”

The new restructured transmission/storage system integrating the two Sempra utilities took more than six years of proceedings at the California Public Utilities Commission (CPUC), which wrapped up the several phases of the case a little more than a year ago (see Daily GPI, March 2, 2007). The CPUC action closed years of regulatory proceedings and stakeholder settlements, giving the green light to SoCalGas having the FAR system for wholesale natural gas customers on the Sempra transmission and storage system.

Comments on possible changes to NGI’s gas price indices, including whether additional indices should be added at the various border receipt points, or information about the discussion forum at GasMart 2008 may be directed to dexter@intelligencepress.com or by calling Dexter Steis at (703) 318-8848.

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