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SoCalGas, El Paso Close to New Capacity Deal

SoCalGas, El Paso Close to New Capacity Deal

Sempra Energy's Southern California Gas Co. and its principal interstate supplier, El Paso Natural Gas Co., have a preliminary agreement on a new contract for 750 MMcf/d of capacity on El Paso's system to take care of SoCalGas' core customers, according to a Securities and Exchange Commission filing last Tuesday by El Paso. SoCal's offices were closed Thursday for the Christmas holiday, so the company could not confirm the details.

In play are the long-term contracts for 1.2 Bcf/d that SoCal has with El Paso that will expire Sept. 1, 2006. El Paso still needs to ink a formal contract with the nation's largest gas distributor that establishes future terms and conditions, and SoCal, in turn, has to gain approval for the new supply deal from the California Public Utilities Commission.

The deal also would have to go through a posting and bid process that is required under El Paso's tariff as authorized by the Federal Energy Regulatory Commission.

The remaining capacity under the El Paso current contract -- 450 MMcf/d -- historically has been used to serve SoCal's larger commercial/industrial customers, the so-called "non-core" load. The CPUC, however, has been considering whether it should require the state's major natural gas utilities to hold capacity for non-core customers.

In the meantime, El Paso is attempting to re-contract for this capacity directly with the large customers or other parties, pending a CPUC decision.

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