The Federal Energy Regulatory Commission last week told El PasoNatural Gas to continue full-steam ahead on its reallocationprocess at the Topock, AZ, delivery point into Southern Californiadespite pleas by Southern California Gas that its ratepayers couldsuffer irreparable harm from the plan.

El Paso already has divided up its primary firm capacity atSoCal/Topock among 11 shippers and will implement the plan on Feb.1.

SoCalGas claims it amounts to a robbery of its firm capacity atthe border because it takes 540 MMcf/d of SoCal/Topock-specificdelivery capacity and distributes it among three Topock deliverypoints — one of which doesn’t even feed into SoCalGas’sdistribution system — and the Ehrenberg delivery point. SoCalwill be left with 40%, or about 200 MMcf/d, of its originalSoCal/Topock space.

Lad Lorenz, director of capacity and operational planning forSoCalGas, said last week in an interview that the utility’s coreload requires at least 350 MMcf/d at SoCal/Topock.

SoCalGas’ customers “aren’t in any real danger in terms ofreliability,” he said, “but they’re in danger in terms of price.The San Juan Basin is still one of the most attractive basins froma price standpoint and that’s why everyone wants theSoCalGas/Topock delivery point because it has the best access toSan Juan Basin supplies rather than Permian Basin supplies. Ourcore customers now have less of that. SoCalGas now has to go toother more expensive basins to meet the needs of our customers.” Hesaid the company has not estimated the potential financial impact.

SoCalGas initially estimated its costs of complying with theorder to be $50-$100 million, but that estimate turned out to be”significantly understated,” it said in a Nov. 24 request forrehearing. The utility had requested a stay of the Commission orderuntil March 31, 2001 to allow time to find available capacity andsupply alternatives that would match up with its new delivery pointrights.

“The request for stay through the winter months is even morecritical,” the utility told FERC. “As of this writing, spotbasin-border differentials exceed $10/MMBtu, about 20 times thetransport cost at the ‘as billed’ rate. Monthly indices indicatethe basin-border differential to be in excess of $6/MMBtu. Thistransfer of wealth to El Paso and its affiliates will put severeeconomic and operational strain on El Paso customers and willthreaten SoCalGas’ system reliability.”

“The price probably has tripled since we said that,” said Lorenzlast 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 thisis going to have,” he said. “We’ve filed for rehearing. We hopethey will act on that request and come to the right conclusion thatthe capacity should have been ours to begin with. If they deny ourrehearing, we may indeed appeal that to the courts. We’re alsoevaluating the order that they issued on clarification to see if ElPaso conducted the auction process consistent with that order. Wehave some questions about that.”

FERC’s only consolation for SoCalGas was to push back the ElPaso implementation deadline a month to Feb. 1. SoCal hadcomplained that it needed at least until the end of March toevaluate delivery point alternatives and adjust its capacity andsupply contracts.

FERC clarified some of the other issues in the reallocationprocess last week, but denied a request by Indicated Shippers toexclude certain shippers from the process, particularly El Paso’saffiliate El Paso Merchant Energy and Williams Energy, who signedup for turnedback capacity at discounted rates in 1999.

FERC clarified that a replacement shipper could participate inthe capacity election only if it had capacity that had beenpermanently released. Several shippers holding released capacitywere outraged that they had been excluded from the process. Enroncomplained that the delivery point rights for its released capacity(released by SoCalGas) was being moved from SoCal/Topock toMojave/Topock. Cook Inlet filed a similar protest.

El Paso’s revised capacity allocation results, which were filedNov. 21, put the 540 MMcf/d of firm delivery point rights atSoCal/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 PasoMerchant Energy (143.6 in two packages), Oneok (7.4), SaquarnoPower (7.4), SoCalGas (200.2), Texaco (64.9), US Borax &Chemical (7.1) and Williams Energy (42.2 in two packages). AtSoCal/Ehrenberg the entire 1.2 Bcf/d was taken by 17 shippers. Atthe PG&E/Topock delivery point, 121.2 MMcf/d was leftunsubscribed. SoCal/Mojave was fully committed at 400 MMcf/d, butSouthwest Gas/Topock was left with 43 MMcf/d uncommitted.

Rocco Canonica

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