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PG&E Gas Transmission/Storage Rate Structure Set for 2004

PG&E Gas Transmission/Storage Rate Structure Set for 2004

Obscured somewhat by the multi-billion-dollar PG&E bankruptcy, the utility's updated natural gas transmission/storage market structure (Gas Accord 2) was approved last month by state regulators, keeping in place pretty much the same unbundled framework of the past five years.

The utility's gas transmission revenue requirement was set at $436.4 million for 2004 with a 2.94% hike in storage rates, compared to last year.

As with most major decisions at the California Public Utilities Commission, a slim 3-2 majority among the five CPUC commissioners approved the updated Gas Accord, covering rates, terms and conditions for the PG&E natural gas utility transmission pipeline and storage backbone system.

The new structure allows for direct hook-ups by some of the largest customers to the PG&E backbone system, but only if the load is new or developed after 1998. The utility had suggested a four-tiered rate, with the largest user tier getting the lowest rates, but that plan was denied. It must now file a new "backbone rate" by March 19 to be effective by the beginning of 2005.

Commissioners Loretta Lynch and Carl Wood argued that the so-called "backbone rates" would create problems in power plant siting down the road. Arguments for and against broke down among large generator, according to whether or not they are located close to PG&E utility gas transmission pipelines.

Generators, such as Duke Energy North America, which owns generating plants along the central California coast and away from major gas transmission pipelines, favored the utility's four-tier proposal; while power plant operators, such as Calpine and numerous cogenerators along the pipeline corridors in the East San Francisco Bay and Central Valley, favored the CPUC choice of a direct hook-up and bypass of the transmission charges.

The utility has indicated it will probably re-submit its four-tier options as part of a filing later in the year to set natural gas transmission/storage charges for 2005.

Originally effective in 1998, the unbundling of the PG&E utility gas transmission system, know as the Gas Accord, expired at the end of 2002, but was extended by the CPUC through the end of last year, based on a settlement that was carved out in August 2002. Rates, terms and conditions for the pipeline were renewed as of the first of the year; the same elements of the storage operations will not be effective until April 1.

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