With possible national implications, California has proposed astate law that would impose “public goods” surcharges on all gassold for consumption within the state, including gas delivered byseveral proposed federally-regulated interstate pipelines that seekto bypass local distributors and directly serve large industrialcustomers. The fees would support energy efficiency,weatherization, public interest energy research and development,and low-income programs. The proposed change undergoes its firstpublic scrutiny in a legislative committee hearing in Sacramento onApril 19. If passed it is sure to splinter the gas industry betweenintra-and interstate interests.

The proposal’s sponsor, Los Angeles-based Assemblyman RodWright, has received assurance from FERC sources that the federalregulators will try to accommodate California’s provision should itbecome state law, according to one well-placed energy lobbyist inthe state capital. “We know those are FERC-regulated pipelines, sothere 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 collectthe surcharge from any person consuming natural gas in this statewho receives gas service from that non-utility gas provider. Therealso are specific provisions for FERC-regulated natural gasproviders to notify the state of their status as “non-utilitynatural gas providers” in a direct attempt to more broadly applythe requirement for paying the surcharge.

The proposal (AB 1002), which was refined earlier this month inthe lower house of the California Legislature, would directlyimpact current separate proposals by Williams’ Kern River Pipelineto extend its existing interstate pipeline south to Long Beach topick off large industrial loads in Southern California, and QuestarCorp.’s proposed Southern Trails Pipeline, a conversion of a formeroil pipeline from New Mexico’s Four Corners area to Long Beach.

California regulators recently raised the issue in Questar’scertificate proceeding for the Southern Trails project because it’sthe “first new bypass” in the state. “The FERC should either denyQuestar’s certificate application or remedy the…problems”associated with the stranding of social costs, the CaliforniaPublic Utility Commission (CPUC) said in its protest [CP99-166].

The CPUC said the best solution is for FERC to require Questarto impose a volumetric surcharge on its rates to recover the samecosts for social programs from its West Zone customers that theywould have otherwise had to pay if they were being served bySoCalGas. 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, whichnoted this was the current rate that a Long Beach Arco refinerypaid 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 KernRiver. Attorneys and consultants, along with the Interstate NaturalGas Association of America, are examining the legal aspects ofinterstate pipelines being hit with state charges. One observersaid it was assumed that the Natural Gas Policy Act originally wascreated to stop states from impeding interstate commerce by taxingnatural gas supplies crossing state lines. INGAA stands solidlyagainst the imposition of any state fees on FERC-regulatedinterstate 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 ispretty much a go. We’re talking to local leaders impacted by theproject in California, Arizona and New Mexico, and we’ll be readyto go when we get the go-ahead from FERC.”

In California, the customers of the state’s three major naturalgas distribution utilities pay so-called public goods surcharges.Without the proposed state law, customers not served by the threeutilities would escape the surcharge.

Richard Nemec, Los Angeles

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