FERC last week gave El Paso Natural Gas high marks for carryingout firm capacity re-assignments in accordance with a plan that itapproved for the pipeline’s system last October. At the same time,it shot down all of the protests and rehearing requests lodged bySouthern California Gas (SoCal).

“The Commission.finds that the [capacity] election andassignment process was administered properly” by El Paso, therehearing order said. “Other than SoCal, no other shippers havecomplained about the [capacity] election and assignment process.”In fact, several shippers on El Paso said it “has been handled in afair, equitable and reasonable manner.”

Last October, FERC outlined its scheme to resolve the capacityallocation and scheduling problems on El Paso after the pipelineand its shippers failed to accomplish the task on their own. Itordered El Paso to carry out its plan to re-distribute the firmdelivery rights of the pipeline’s shippers to more evenly match thedesign capacity of each Topock delivery point on the pipeline. Thegoal was to reduce the traffic through the constrained SoCal/Topockpoint, which is the “most economically desirable delivery pointinto California from El Paso, and divert more gas deliveries to thethree other, less-traveled Topock points. The revised capacityallocations on El Paso are due to go into effect April 1, 2001.

On rehearing, SoCal argued that the Commission’s allocationscheme abrogated its contract, which it said entitled it to theentire 540 MMcf/d of firm primary delivery rights at SoCal/Topock.But FERC begged to differ. “In this case, the currently effectivecontract between SoCal and El Paso gives SoCal specific deliverypoint rights of 610,000 Mcf/d at Ehrenberg and 540,000 Mcf/d ofaggregate delivery point rights at the various Topock deliverypoints,” not just at SoCal/Topock, the order said [RP99-507-004].

Because the total of all shippers’ first elections atSoCal/Topock exceeded the firm design capacity of that point, ElPaso was forced to award delivery point rights on a pro-rata basis.SoCal received 489,822 Mcf/d at the various Topock points, of which202,281 Mcf/d was at SoCal/Topock. The California LDC then shiftedthe remaining 50,178 Mcf/d of its Topock delivery point rights toEhrenberg, FERC noted. “Thus SoCal received its full entitlement of540,000 Mcf/d of aggregate Topock delivery point rights, and itscontract has not been abrogated,” the order said.

In addition to the 200.2 MMcf/d held by SoCal at SoCal/Topock,the revised allocation results reveal that ten other shippers nowshare the delivery point rights at SoCal/Topock: Aera Energy (7.4MMcf/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), Texaco (64.9), US Borax & Chemical (7.1),and Williams Energy (42.2 in two packages).

Despite claims otherwise, neither [the California regulators]nor SoCal have shown how the Commission’s [allocation] order willmean that SoCal will not be able to serve its customers, nor howSoCal will not be able to provide service at just and reasonablerates,” it noted.

Given that FERC refused to confirm that SoCal has prior claim onthe full 540 MMcf/d of firm primary delivery rights intoSoCal/Topock, the California LDC asked that it be given the optionto step down its contract maximum daily quantity with El Paso. Butthe Commission wasn’t receptive to the idea.

“It would be inconsistent to allow SoCal to abrogate itscontract with El Paso, when a fundamental principle in thisproceeding has been to avoid abrogation of shippers’ contracts.Further, if SoCal were to relinquish its PG&E Topock and MojaveTopock capacity, El Paso could be exposed to a potential revenueshortfall if it was unable to remarket that capacity.”

FERC further rejected SoCal’s request to exclude El PasoMerchant Energy and Williams Energy Marketing and Trading from thecapacity election and assignment process on El Paso. The twocompanies acquired 1.4 Bcf/d of Topock capacity on El Paso lastyear, of which 487 MMcf/d had firm delivery point rights intoSoCal/Topock. This aggravated an already-constrained delivery pointat SoCal/Topock, claimed SoCal and other shippers.

“While the Commission acknowledges that [El Paso Merchant’s andWilliams’] acquisition of aggregate capacity at Topock may haveexacerbated the problems at SoCal/Topock, the contracts wereconsistent with El Paso’s existing tariff and did not prevent theother shippers from exercising their aggregate Topock rights,” theorder said. As a result, “the Commission finds that [they] shouldnot be excluded from the election and assignment process.”

FERC also refused a request to give shippers (who participatedin the capacity re-assignment process) first crack to acquireTopock capacity becoming available under expiring contracts beforethe pipeline offers it for sale. “Because the contractual rights ofthe Topock shippers have been satisfied and no contracts have beenabrogated, there is no reason to grant a first call on newcapacity, although certain shippers may not be satisfied with theallocations they received during the election and assignmentprocess,” the order said.

“After the revised capacity allocations are placed into effect,any shipper who wishes to acquire capacity that becomes availableat any of the Topock delivery points should be allowed to do sowithout regard to whether it was a pre-existing Topock shipper or anew shipper.”

The Commission did respond favorably to Indicated Shippers’request for a review of the system-wide capacity allocationproblems on El Paso. Indicated Shippers argue that the constraintsaren’t just limited to the Topock delivery points, but also can befound on El Paso’s Havasu Crossover, the Maricopa Crossover and thePlains-to-Eunice line.

FERC ordered El Paso and its shippers to begin addressing thesystem-wide allocation issues as part of the pipeline’s Order 637proceeding. It further directed El Paso to submit a proposalfocusing on the system-wide concerns within 30 days of the order.

The California Public Utilities Commission (CPUC) asked FERC torule that shippers of Block I capacity (500 MMcf/d) did not havethe same rights at the SoCal/Topock delivery point as firm shipperswith primary receipt and delivery points at Topock, but FERC deniedthe request.

The CPUC further claimed the Commission’s capacity-allocationscheme did not offer any deterrent to El Paso’s practice ofoverselling capacity at SoCal/Topock. It suggested that FERCrequire El Paso to offer capacity only when shippers are assuredtheir full contractual entitlements will be honored.

But FERC pointed out in the order that — contrary to theCPUC’s claim — it never found that El Paso oversold capacity atSoCal/Topock or any other Topock delivery point. “Rather, theCommission found that the manner in which El Paso allocateddelivery point capacity was unjust and unreasonable. The solutionto the problems at the SoCal/Topock delivery point was to direct ElPaso to assign specific delivery point rights at each of the Topockdelivery points.”

As a result of last October’s order, “El Paso is prohibited fromselling at any of the Topock points that is above the designcapacity of the point. The Commission finds that no other action isnecessary…”

Lastly, FERC ruled that shippers acquiring El Paso capacitythrough the secondary market were entitled to receive a pro-ratashare of the rights to delivery point capacity that were allocatedto the releasing shippers under the capacity election/assignmentprocess.

Susan Parker

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