Fighting what it views as illegal pipeline charges, a coalition of Southern California's major electricity generators last Monday filed with FERC to get federal regulators to turn back proposed state-sanctioned access fees for interstate shippers wanting to use the Southern California Gas Co. (SoCalGas) backbone transmission system. The fees are scheduled to go into effect in the second half of next year.

At stake are millions of dollars of potential annual access charges that carry no rights to firm or interruptible service on SoCalGas' intrastate transmission system, which represents 3.87 Bcf/d of firm capacity and an annual average daily load of about 2.5 Bcf/d, with in- and out-of-state receipt points that carry 5.67 Bcf/d of total capacity.

"Interstate shippers that acquire access rights but which are not also intrastate shippers will incur an increased cost of five cents/Dth/d as a reservation charge for firm access rights, or five cents/Dth/d as a volumetric charge for interruptible access rights," said the Southern California Generation Coalition (SCGC) in its filing.

SCGC, which represents private- and public-sector generators with more than 12,000 MW of gas-fired capacity in the southern half of the state, argued to state regulators earlier this year that Federal Energy Regulatory Commission jurisdiction preempts California authorizing access fees on the transmission system that is connected to various interstate transmission pipes.

The generators, which are seeking to create more diversity of gas supplies and have supported the need for liquefied natural gas (LNG) imports, contend that the California Public Utilities Commission (CPUC) authorization for SoCalGas to charge access fees "unlawfully encroaches upon [the Federal Energy Regulatory Commission's (FERC)] exclusive jurisdiction" over interstate pipeline transportation of gas.

"[FERC] has already addressed the legality of SoCalGas charging access fees to interstate pipeline shippers for the right to nominate deliveries" when the utility attempted to assess similar access charges on the then-new Kern River and Mojave interstate pipelines at its new Wheeler Ridge receipt point in 1993, SCGC said in its filing.

FERC then determined that it was only after SoCalGas receives the interstate supplies into its system at the receipt point that its exemption from FERC jurisdiction (the Hinshaw exemption) applied. "Hinshaw draws the 'line of demarcation' between federal and state regulation at the point when the intrastate company receives the gas from an interstate shipper," SCGC said. Prior to that time, SoCalGas had picked up all of its interstate supplies at the California-Arizona border, so there were no FERC-jurisdictional pipelines traversing Southern California.

"The Wheeler Ridge case definitively establishes that [FERC] -- not the CPUC -- has jurisdiction over interstate pipeline shipper access to the SoCalGas system," SCGC said.

The generators' coalition said it plans to file an appeal in the California courts related to the CPUC's denial of its Jan. 16 petition for rehearing of a state regulatory panel's Dec. 14, 2006 decision. This litigation will deal with issues involving state law in the case. For issues of federal preemption, SCGC said it will limit its pleading to FERC.

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