SoCalGas Stunned by El Paso Capacity Shift
The Federal Energy Regulatory Commission last week told El Paso
Natural Gas to continue full-steam ahead on its reallocation
process at the Topock, AZ, delivery point into Southern California
despite pleas by Southern California Gas that its ratepayers could
suffer irreparable harm from the plan.
El Paso already has divided up its primary firm capacity at
SoCal/Topock among 11 shippers and will implement the plan on Feb.
SoCalGas claims it amounts to a robbery of its firm capacity at
the border because it takes 540 MMcf/d of SoCal/Topock-specific
delivery capacity and distributes it among three Topock delivery
points --- one of which doesn't even feed into SoCalGas's
distribution system --- and the Ehrenberg delivery point. SoCal
will be left with 40%, or about 200 MMcf/d, of its original
Lad Lorenz, director of capacity and operational planning for
SoCalGas, said last week in an interview that the utility's core
load requires at least 350 MMcf/d at SoCal/Topock.
SoCalGas' customers "aren't in any real danger in terms of
reliability," he said, "but they're in danger in terms of price.
The San Juan Basin is still one of the most attractive basins from
a price standpoint and that's why everyone wants the
SoCalGas/Topock delivery point because it has the best access to
San Juan Basin supplies rather than Permian Basin supplies. Our
core customers now have less of that. SoCalGas now has to go to
other more expensive basins to meet the needs of our customers." He
said the company has not estimated the potential financial impact.
SoCalGas initially estimated its costs of complying with the
order to be $50-$100 million, but that estimate turned out to be
"significantly understated," it said in a Nov. 24 request for
rehearing. The utility had requested a stay of the Commission order
until March 31, 2001 to allow time to find available capacity and
supply alternatives that would match up with its new delivery point
"The request for stay through the winter months is even more
critical," the utility told FERC. "As of this writing, spot
basin-border differentials exceed $10/MMBtu, about 20 times the
transport cost at the 'as billed' rate. Monthly indices indicate
the basin-border differential to be in excess of $6/MMBtu. This
transfer of wealth to El Paso and its affiliates will put severe
economic and operational strain on El Paso customers and will
threaten SoCalGas' system reliability."
"The price probably has tripled since we said that," said Lorenz
last Friday. "Today, prices are over $15/MMBtu. It's way up there.
"I think it's too soon to tell what kind of market impact this
is going to have," he said. "We've filed for rehearing. We hope
they will act on that request and come to the right conclusion that
the capacity should have been ours to begin with. If they deny our
rehearing, we may indeed appeal that to the courts. We're also
evaluating the order that they issued on clarification to see if El
Paso conducted the auction process consistent with that order. We
have some questions about that."
FERC's only consolation for SoCalGas was to push back the El
Paso implementation deadline a month to Feb. 1. SoCal had
complained that it needed at least until the end of March to
evaluate delivery point alternatives and adjust its capacity and
FERC clarified some of the other issues in the reallocation
process last week, but denied a request by Indicated Shippers to
exclude certain shippers from the process, particularly El Paso's
affiliate El Paso Merchant Energy and Williams Energy, who signed
up for turnedback capacity at discounted rates in 1999.
FERC clarified that a replacement shipper could participate in
the capacity election only if it had capacity that had been
permanently released. Several shippers holding released capacity
were outraged that they had been excluded from the process. Enron
complained that the delivery point rights for its released capacity
(released by SoCalGas) was being moved from SoCal/Topock to
Mojave/Topock. Cook Inlet filed a similar protest.
El Paso's revised capacity allocation results, which were filed
Nov. 21, put the 540 MMcf/d of firm delivery point rights at
SoCal/Topock in the hands of 11 shippers: Aera Energy (7.4 MMcf/d),
BP Energy (9.3 MMcf/d), Burlington (37.1), LADWP (13.4), El Paso
Merchant Energy (143.6 in two packages), Oneok (7.4), Saquarno
Power (7.4), SoCalGas (200.2), Texaco (64.9), US Borax &
Chemical (7.1) and Williams Energy (42.2 in two packages). At
SoCal/Ehrenberg the entire 1.2 Bcf/d was taken by 17 shippers. At
the PG&E/Topock delivery point, 121.2 MMcf/d was left
unsubscribed. SoCal/Mojave was fully committed at 400 MMcf/d, but
Southwest Gas/Topock was left with 43 MMcf/d uncommitted.