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Some See 'FAR' as Unfair in CA's Restructured Gas Market

Proposed "firm access rights" (FAR) for wholesale gas customers on the Sempra Energy utilities' natural gas transmission and storage system is far from perfect, according to critics, particularly those planning to import regasified LNG into the California market.

FAR will be a component of two competing proposals scheduled for a decision Thursday at the California Public Utilities Commission (CPUC). Both an administrative law judge's proposal and an alternative from CPUC Commissioner Geoffrey Brown adopt the FAR proposal, calling it a "balanced" approach. ALJ John Wong's and Brown's proposed decisions differ only regarding the creation of a peaking-rate tariff.

In a complex process that will take time to sort out, the Sempra utilities have proposed terminating any remaining access agreements at Wheeler Ridge south of Bakersfield, CA, meaning the largest electric generators, Southern California Edison and San Diego Gas & Electric, no longer would have access to a specific amount of daily capacity at Wheeler Ridge.

The two proposed decisions both conclude the new FAR system will spawn "gas markets at the [Southern California] citygate, as well as at the [Arizona-California] border. The FAR system will provide gas shippers, marketers and end-users with new options and opportunities."

However, some market participants say the proposed 5 cent/Dth monthly reservation charge for FAR has no corresponding cost basis. For interruptible receipt point access service, SDG&E and SoCalGas proposed -- and the two proposed decisions adopt -- a volumetric rate of up to 5 cents/Dth. SDG&E and SoCalGas have proposed a 90/10 (ratepayer-to-shareholder) incentive sharing mechanism, with a $5 million/year cap on the shareholder portion for interruptible revenues, the proposed decisions state.

"[The utilities] contend this will provide an incentive to ensure that the maximum amount of interruptible capacity is offered, and to ensure that firm capacity cannot be profitably withheld from the secondary market," Brown said in his alternate proposal.

To respond to the CPUC's concerns about monitoring market power under the new FAR system, SDG&E and SoCalGas propose to make quarterly reports to the regulators.

With an estimated implementation cost of $3.5 million for the two Sempra utilities, FAR is expected to include a three-step open season process that would be repeated every three years. Implementation initially will take about 12 months, the utilities told the CPUC.

Among the active participants and critics of the utilities' proposal for establishing FAR are: the CPUC's independent consumer unit, the Division of Ratepayer Advocates (DRA); The Utility Reform Network (TURN), a utility consumer watchdog group; Southern California Cogeneration Coalition; an "ad hoc" coalition called the "Indicated Producers," including Chevron, ConocoPhillips, Occidental Energy Marketing and BP America; and LNG developers, such as BHP Billiton.

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