FERC OKs El Paso Project to Feed Gas to AZ Plants

FERC last Wednesday signed off on a proposal by El Paso Natural Gas to construct and operate two delivery point facilities and about six miles of lateral pipeline to supply a total of 620 MMcf/d of gas to two power plants in Arizona. At the same time, the Federal Energy Regulatory Commission said that issues raised by several producers related to a full requirements contract involving Pinnacle West Energy should be addressed in a separate forum.

El Paso earlier this year filed an application for the facilities to provide service to proposed gas-fired electric generation facilities of Pinnacle and Duke Energy Maricopa LLC in Maricopa County, AZ. Pinnacle's 2,120 MW Redhawk power plant will require about 410 MMcf/d of gas, while Duke's 1,000 MW Arlington Valley plant will burn 210 MMcf/d. Both plants have scheduled in-service dates of June 1, 2002. They are designed to serve the entire western United States.

But the relatively minor pipeline additions did not go unchallenged at FERC. In April, several shippers, including seven major producers, Pacific Gas and Electric and Southwest Gas Service, criticized El Paso's plan to provide "full requirements" service of 410 MMcf/d to the Redhawk plant, arguing that the service would further constrain an already capacity-tight El Paso system. They also argued that the plan would give Pinnacle West Energy a competitive rate advantage over existing customers on the pipeline (see NGI, April 23). Specifically, the producers and utilities objected to El Paso's proposal to assign the full-contract (66,042 MMBtu/d) of Arizona Public Service Co. to affiliate Pinnacle West Energy, as well as give a "huge increase" in the contract amount in order to serve the Redhawk plant.

The producers asked the Commission to reject the Pinnacle "full-requirements" contract as not being in the "public interest," and to order the company to negotiate a specified contract demand under a new contract and pay demand charges on that basis. But before negotiating a new contract, they said El Paso should be required to expand its system and to demonstrate that it can serve this incremental demand for Pinnacle and that it has eliminated scheduling cuts for existing firm shippers on its system. PG&E and Southwest Gas, who were concerned about degradation of service to existing El Paso customers as well, made similar requests.

Although FERC signed off on El Paso's bid to construct its proposed project, the Commission determined that issues involving the full-requirements service would be addressed more properly in a separate Order 637 proceeding.

At FERC's bi-weekly meeting last week, Commissioner Pat Wood III singled out the El Paso case for discussion. Specifically, Wood said he was interested in FERC's power to look at the "entire ability of this pipeline from the upstream to this point in Arizona to handle the increased capacity." To that end, Wood floated the idea of asking El Paso to detail how it plans to address concerns raised at the Commission meeting in the form of a letter to FERC.

Wood said that such a letter would be used only for informational purposes, not for additional FERC action, and would detail El Paso's plans related to upstream capacity from Maricopa County upstream "just so I know that things aren't going to blow up two years from now down the pipeline because we punted it out of this proceeding."

After a brief discussion among FERC staff and Commissioners related to procedural issues raised by the letter, FERC Chairman Curt Hebert called for a last-minute vote by the Commission on whether to request such a letter from El Paso. All five Commissioners voted in favor of seeking the letter.

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