Parties in ongoing settlement negotiations have given up hope ofan all-encompassing, permanent solution to California’s futurenatural gas unbundling puzzle following an Oct. 6 meeting in LosAngeles. The best and most realistic hope now appears to be forattaining consensus on an interim solution by the regulator-imposedOct. 27 deadline, along with what parties describe as an”aggressive” timetable of up to two years for resolving andimplementing the issues of intra-state transmission and storageunbundling.

There are only two more days scheduled for negotiations beforethe Oct. 27 pre-hearing conference before the California PublicUtilities Commission: Oct. 18 and the afternoon and late into thenight Oct. 26. Since one veteran observer contends that everyone”prefers resolution over litigation,” the expectation is that theparties will get behind an interim agreement that replaces SouthernCalifornia Gas’ so-called “windows” with a form of OFOs and createsat least one new receipt point at Hector Road for Southwestsupplies coming across the Arizona-California border.

Longer term, there will have to be a balance worked out betweenthe Pacific Gas and Electric and SoCalGas systems, which continueto operate differently. Allocation of supplies through constraintpoints on the SoCal system is a major issue, with the Wheeler Ridgepoint being the biggest sticking point. “There are too manyparties trying to get too much gas through the point,” according toa participant with an interest in Wheeler Ridge.

“If SoCalGas makes everyone match their nominations into theirsystem with the schedules on the upstream side, we will besatisfied,” said a California-based shipper. “I think the receiptpoint problem is caused by marketers making unrealistic use of theSoCal system depending on market conditions nationwide.” Theyeither flood the California market or pull out all of theirnominations, depending on whether the East-of-California price isup or down. The “free parking” of excess supplies without a marketis the real problem.

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.