Questar Assesses Options for Proposed Pipeline Under New CA Gas Rate

The sponsors of an oil-to-natural gas converted pipeline are weighing their alternatives for the California portion of the line in the wake of a state-created "peaking rate" for end-users choosing new gas service options. At stake is a potential added 120 MMcf/d of supplies to Southern California, and possibly more.

Although not giving up its search for customers, Salt Lake City-based Questar Corp.'s converted pipeline from the Four Corners of New Mexico remains stymied in operating its California portion under a newly revised "peaking tariff" for Southern California Gas Co., according to Questar officials who have been analyzing the new rate established Aug. 2 by state regulators. Questar now is looking at alternative uses for the California portion of the approved interstate pipeline.

Sponsors of a host of other proposed interstate pipeline projects which seek to cross the border and deliver gas in the southern part of the state have yet to weigh in on how their projects will be affected by the new tariff.

California Public Utilities Commission member Richard Bilas acknowledged that it is difficult to find an "ideal peaking rate for gas," and the CPUC President Loretta Lynch said the regulators' challenge is to come up with charges that keep SoCalGas whole so its other customers are not stuck with higher charges, and at the same time allow the state to "encourage and promote additional natural gas resources." Questar argues the regulators have failed to achieve the latter.

"We can't work with (the rate) as it is," said Chad Jones, a Questar spokesperson. "It definitely doesn't go far enough to remove the obstacles in the way of developing new pipelines in southern California. It still doesn't level the playing field, although it is better than the current RLS (residual load service) tariff; it still punishes customers who want to take partial service from a SoCalGas competitor.

"Customers still have to pay higher interruptible penalties than in other parts of the state, and higher rates for balancing services. We're at the point where we're not going to stop trying to market capacity on Southern Trails, but we're definitely at the point where we have to consider some alternative uses for the California portion (of the 700-miles, 16-inch-diameter) pipeline."

One of the alternatives would be to operate the California part of the line as a petroleum or liquids line carrying product from the Long Beach Harbor area to existing petroleum or liquid products pipelines in and around the California-Arizona border. That's the alternative, however, Jones said, but finding a customer for a major portion of the converted pipeline's 120 MMcf/d capacity is still Questar's preference.

After months of reviewing the issue and weighing alternatives, the California Public Utilities Commission established a new "peaking" or standby charge for customers taking partial service from a SoCalGas competitor, allowing those customers to pay only for the amounts of gas they use at any given time from the local gas transmission and distribution utility, SoCalGas.

Questar officials said last week that they have pretty much exhausted their appeal resources, and they are "not about to go head-to-head with the established big boys" in lobbying California's governor or state legislature, Jones said. "Thus, we're still looking for a large customer who would be willing to break the gridlock in southern California in the name of promoting competition."

The east-of-California portion of the Southern Trails pipeline is already fully subscribed and will start operations mid-year next year, Jones said.

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