California regulators have filed a protest of El Paso Natural Gas Co.'s proposed rate increase. They have requested a hearing in the matter, and asked the Federal Energy Regulatory Commission to suspend El Paso's proposed rates for the maximum five-month period.

In its tariff filing dated Sept. 30, the El Paso Corp. pipeline subsidiary said it is seeking a revenue requirement of $613 million, which is lower than the amount that El Paso Natural Gas sought in its previous rate proceeding. However, because El Paso now asserts that the level of firm transportation (FT-1) has substantially dropped, at least partially due to the most severe recession in the United States in the last 80 years, it is filing for a rate increase of approximately 31% in FT-1 rates to California, and an even larger percentage increase in FT-1 rates to other rate zones [RP10-1398].

In a separate yet related docket, El Paso is requesting authorization to abandon two compressors that provide 222 MMcf/d of capacity over El Paso's southern system to California, and the pipeline intends to abandon or mothball additional facilities, the California Public Utilities Commission (CPUC) said [CP-510].

"While the CPUC has some sympathy for El Paso's travails and lost revenues during this period of extreme economic duress and after an uncommonly cool summer in California, El Paso's proposed reaction, a massive rate increase and request to reduce capacity on its system, will not incentivize financially stressed customers to sign up for more capacity on El Paso's system, nor allow El Paso to compete more successfully for customers with gas supply and transportation options," the CPUC said..

"The recession was not some scheme cooked up by ratepayers to shortchange El Paso. El Paso's lowered throughput is not primarily due to fundamentals in the gas industry but external factors originating from the poor economic climate," the state agency said.

"While the failure of El Paso to meet its expected revenue targets and rate of return over the past two years is indeed an injury to El Paso, it is one that pales against the level of economic suffering that has descended upon the Southwest. Yet El Paso treats its lower revenue from throughput, a symptom of the economic duress, as the disease itself, with the primary 'cure' a huge rate increase to attempt to make up for El Paso's 'lost' revenues, without any analysis of how such a rate increase will affect currently historically low subscription rates for firm transportation, or affect the weak economies in is service areas.

"El Paso appears committed to taking advantage of a unique confluence of economic weakness and an unusually cool California summer, leading to abnormally low gas usage, to foist a massive rate increase upon customers for years to come and lower the capacity of its system, rather than soberly assessing the current, unique circumstances, reasonably estimating future gas usage, and proffering a rate proposal that will encourage greater usage of El Paso's system," the CPUC said.

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