Interstates Not Welcome in SoCal Territory

California's anti-bypass policy would remain firmly in place on Southern California Gas' system under a peaking service proposed by SoCal that was approved last week by a California Public Utilities Commission (CPUC) judge (see NGI, June 4), according to the sponsor of a prospective pipeline.

The peaking service was introduced to replace the controversial back-up residual load service (RLS) on the SoCal Gas system. The RLS has been challenged as an "anti-bypass" mechanism.

"We were hoping for something less punitive, something that would encourage interstate pipeline construction, but this is more punitive. This will prevent any further investment in infrastructure," said Chadd Jones, spokesperson for Questar, which has an oil pipeline conversion project ready to go at the border. Jones said Questar, which has already started to convert a 16-inch oil line to natural gas outside California's border, is hoping the full CPUC will take a closer look and make some changes to the judge's decision. Otherwise, the converted Southern Trails line will have to stop at the border due to lack of customers.

If the new peaking service is approved as it stands, customers of an interstate line into the state, instead of paying the RLS charge for back-up service supplied by the utility, would pay the even more onerous peaking charge. The peaking charge, added onto the charges paid for space on the interstate, makes the choice of interstate transportation prohibitive. Jones said the Southern Trails line is fully subscribed from the Four Corners area to the border, but "no one is willing to take service on the in-state portion of the line to Long Beach, for fear of having to pay peaking rates." Customers have been interested, but the potential cost is prohibitive.

"It's the reason no interstate pipelines have been built into SoCal Gas' territory," Jones said. He noted that Pacific Gas & Electric has no back-up service charge. The only interstate to penetrate California's borders, Kern River Pipeline, delivers to Bakersfield, which is outside the SoCal Gas system.

Jones said the back-up service rate is more punitive than Questar has seen anywhere else. "Usually, if there is a peaking charge, it is based on the whole system's needs on a peak day. This is based on a single customer's peak day. It makes the rate exorbitant."

Besides the Southern Trails project, several other proposed new interstate pipelines could be affected if the peaking service makes them uneconomic. Meanwhile, the California Energy Commission has cited the lack of in-state pipeline capacity as the major reason for natural gas price spikes at the Southern California border (see related story, this issue).

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