CPUC Denies Relief from Border Price Discrepancy
California regulators last week turned down an emergency
six-month provisional avoided-cost measure that would have frozen
the gas prices used by utilities in their formula for paying
must-take qualifying facility (QF) electricity generators.
QF producers sought the rejection, noting the existing law
requires a monthly change in the formula, but SDG&E also
withdrew its earlier support for the measure, claiming QF output is
Southern California Edison Co. made the initial request, and a
California Public Utilities Commission administrative law judge
initially recommended the regulators' approve the action, but
subsequently the ALJ reversed that recommendation.
The CPUC is seeking longer-term relief through an ongoing
regulatory proceeding in which the natural gas border price indices
and their components are being examined.
By its own internal estimates, the continuing record spikes in
California-Arizona border natural gas prices at Topock, AZ, have
added $44 million to its payments to so-called qualifying facility
(QF) electricity generators the past two months, according to
The total impact on gas consumers, including California's
electric generation plants overall, was estimated to be $100
million by the CPUC last spring when it challenged a FERC ruling on
an El Paso Natural Gas Co. contract that it alleges is causing the
prices at the California border to skyrocket.
"Those estimates were based on some relatively modest increases
in gas costs of 15 to 30 cents earlier in the year," said Edison's
Lars Bergmann, director of its QF contracts. "When prices exploded
by a dollar or more, and then by three dollars or more in
September, we estimated that just for the September price bump, it
will increase our QF payments by $29 million and for October
another $15 million.
"Unfortunately [the CPUC action] is going to have the potential
to make costs higher than they otherwise should be, and we're
disappointed. The filing, however, certainly served the purpose of
making the (CPUC) aware of the relationship between its Section 5
(FERC) complaint against El Paso [Natural Gas and its merchant
affiliate] and how that immediately impacts the payments to QF
generators. It is now an issue that is addressed in our petition
along with the interstate transportation issue," Bergmann said.
Edison filed its emergency request asking for the CPUC to, in
effect, freeze the border price used in the QF payment formula at
August levels until the state regulators conclude a pending
investigation of the border price issue.
Richard Nemec, Los Angeles
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