PG&E OFO Settlement is The First of Many Changes in CA
Although it gets 13 parties to agree on solving the nagging
problem of imbalances, a new Pacific Gas and Electric settlement
agreement on transmission and storage is just the first of a number
of changes anticipated under California's ongoing gas industry
restructuring. Even for this step, state regulators still must
react to the agreement and then market participants must assess
whether the provisions will result in the market efficiencies and
cost-savings that shippers are anticipating.
There is no dollar-value attached to the deal. PG&E has
agreed to absorb any initial implementation costs, but the
stakeholders generally are hoping for operating cost savings.
OFO noncompliance charges have been lowered in the settlement
(from 10 cents/therm to 2.5 cents/therm), and shippers with monthly
charges of less than $1,000 are exempted from the noncompliance
charges. The imbalances also have to be more than 5,000 Dth. (A
shipper could be out of balance in a percentage sense - 5 or 10% of
its contractual load - but if it equated to less than 5,000 dth,
the customer would not be targeted with an OFO.) In addition,
PG&E has agreed to improve the volume, flow and accessibility
of operating information, promising more on its Pipe Ranger Web
Individual OFOs can be called on up to 10 customers, under the
settlement. If the number is greater than that, a systemwide OFO
will be called, PG&E officials said.
Among the unresolved issues are those related to PG&E's gas
utility infrastructure, with parties such as Calgary-based Alberta
Energy's Wild Goose Storage in northern California arguing that
real control of the balancing problem is not possible longer term
without added storage and more extensive metering that provides
real-time (telemetered) information into the PG&E system
control room on an hourly basis.
Imbalances now are handled on a monthly time frame, but they
should be handled hourly as they are in western Canada, said Ben
Ledene, marketing director for Wild Goose, one of the 13 supporters
of the deal. "It is a matter of picking up the pace so you can
manage the market on an hour-by-hour basis."
PG&E, of course, thinks the proposed settlement is a slam
dunk for everyone and that regulators should approve it
expeditiously, but some of the parties are reserving judgment.
Under California's process for negotiated energy settlements,
parties have until Nov. 21 to register opposition to the deal,
although none has surfaced so far.
"Our hope is that no one will oppose it," said PG&E attorney
Patrick Golden. "We think this is a reasonable settlement. If there
is some opposition, we would hope that the (regulators) will still
decide that we can resolve it without a hearing."
PG&E feels the deal on handling operational flow orders
(OFOs) can go into effect while other larger issues are being
worked out in the overall gas restructuring case.
Other parties signing the settlement, which would extend through
2002, are: Calpine Corp., Enron, Kern River Pipeline, Utilicorp
Energy Solutions, the CPUC Office of Ratepayer Advocates and the
public schools' aggregator, SPURR among other aggregators and
PG&E's Golden acknowledged that some of the issues revolving
around the OFOs were not entirely resolved, but the parties agreed
to establish an Internet-based "forum" to collect feedback and
resolve operating problems that may arise from the implementation
of new customer-specific OFOs as a means to cut down on the more
costly system-wide orders which have steadily grown in number since
the Gas Accord first went into effect.
Richard Nemec, Los Angeles