CA Bill Would Impose Charges On Interstate Gas Pipeline Deliveries
With possible national implications, California has proposed a
state law that would impose "public goods" surcharges on all gas
sold for consumption within the state, including gas delivered by
several proposed federally-regulated interstate pipelines that seek
to bypass local distributors and directly serve large industrial
customers. The fees would support energy efficiency,
weatherization, public interest energy research and development,
and low-income programs. The proposed change undergoes its first
public scrutiny in a legislative committee hearing in Sacramento on
April 19. If passed it is sure to splinter the gas industry between
intra-and interstate interests.
The proposal's sponsor, Los Angeles-based Assemblyman Rod
Wright, has received assurance from FERC sources that the federal
regulators will try to accommodate California's provision should it
become state law, according to one well-placed energy lobbyist in
the state capital. "We know those are FERC-regulated pipelines, so
there has to be some help from the feds to make this thing work,"
the source said.
According to the bill, a non-utility gas provider shall collect
the surcharge from any person consuming natural gas in this state
who receives gas service from that non-utility gas provider. There
also are specific provisions for FERC-regulated natural gas
providers to notify the state of their status as "non-utility
natural gas providers" in a direct attempt to more broadly apply
the requirement for paying the surcharge.
The proposal (AB 1002), which was refined earlier this month in
the lower house of the California Legislature, would directly
impact current separate proposals by Williams' Kern River Pipeline
to extend its existing interstate pipeline south to Long Beach to
pick off large industrial loads in Southern California, and Questar
Corp.'s proposed Southern Trails Pipeline, a conversion of a former
oil pipeline from New Mexico's Four Corners area to Long Beach.
California regulators recently raised the issue in Questar's
certificate proceeding for the Southern Trails project because it's
the "first new bypass" in the state. "The FERC should either deny
Questar's certificate application or remedy the...problems"
associated with the stranding of social costs, the California
Public Utility Commission (CPUC) said in its protest [CP99-166].
The CPUC said the best solution is for FERC to require Questar
to impose a volumetric surcharge on its rates to recover the same
costs for social programs from its West Zone customers that they
would have otherwise had to pay if they were being served by
SoCalGas. Initially, the surcharge should be $0.07294/Dth
($0.07213/Dth for the state's low-income assistance program and
$0.00081/Dth for energy efficiency programs), said the CPUC, which
noted this was the current rate that a Long Beach Arco refinery
paid to SoCalGas for public-purpose programs.
"We're opposed to any state charge on interstate pipelines,"
said Jennifer Pierce, a Salt Lake City-based spokesperson for Kern
River. Attorneys and consultants, along with the Interstate Natural
Gas Association of America, are examining the legal aspects of
interstate pipelines being hit with state charges. One observer
said it was assumed that the Natural Gas Policy Act originally was
created to stop states from impeding interstate commerce by taxing
natural gas supplies crossing state lines. INGAA stands solidly
against the imposition of any state fees on FERC-regulated
interstate gas operations.
"There are only so many things you can do until FERC has acted,"
said a Questar spokesperson in Salt Lake City. "But everything is
pretty much a go. We're talking to local leaders impacted by the
project in California, Arizona and New Mexico, and we'll be ready
to go when we get the go-ahead from FERC."
In California, the customers of the state's three major natural
gas distribution utilities pay so-called public goods surcharges.
Without the proposed state law, customers not served by the three
utilities would escape the surcharge.
Richard Nemec, Los Angeles