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El Paso, Edison Dispute Decision on Turnback Accord

El Paso, Edison Dispute Decision on Turnback Accord

El Paso Natural Gas has asked FERC to overturn a July ALJ initial decision that found it failed to "seriously confront the potential impact of...turned-back capacity on the remaining customers on its system and take adequate steps to remarket the capacity" when it first learned that Southern California Gas (SoCal Gas) planned to step down its capacity commitment effective January 1996. If upheld by the Commission, El Paso would be required to shoulder the costs for half of the 300 MMcf/d of capacity that the LDC turned back.

The ALJ decision was issued in response to Southern California Edison's challenge to a turned-back capacity settlement between El Paso and the majority of its customers, which was approved by FERC in April 1997. Edison, a contesting party, was severed from the agreement and allowed to litigate its case separately. The California utility challenged the settlement on a number of fronts, but particularly focused on El Paso's efforts to remarket turned-back capacity on its system in the mid-1990s.

If affirmed by FERC, the initial ruling of ALJ Michel Levant would pertain solely to Edison. The California utility would receive rate savings due to El Paso being required to include 150 MMcf/d of additional billing determinants in the calculation of its rates [RP95-363-002]. However, concerns have been raised that other El Paso customers that were parties to the 1997 settlement might be negatively affected.

In El Paso's Aug. 17th filing complying with the Levant decision, Edison said that El Paso allocated the costs associated with the 150 MMcf/d to its California customers rather than to itself, as was required. "Thus, El Paso again proposes that its California customers bear the costs associated with its failure to remarket its turnback capacity."

Although Levant ruled in its favor on several points, Edison took issue with the finding that the costs associated with turned-back capacity would be shared equally between the pipeline and its customers. Given its alleged failure to actively remarket turned-back capacity, El Paso - not its customers - should foot the entire bill for the associated costs, the utility argued.

"To allow El shift 50% of the turnback costs into its calculation of Edison's costs is inequitable and ill-advised. Contrary to the Commission's established policy, which requires a pipeline to bear its 'fair share' of turnback capacity costs even when it diligently attempts to remarket the capacity, the initial decision imposes no penalty on El Paso for its failure to actively engage in any meaningful remarketing effort," Edison noted.

In contrast, El Paso said its efforts to remarket the unsubscribed capacity on its system in the mid-1990s were "exhaustive," and that, as a result, it should be allowed to recover all prudently incurred costs associated with that capacity.

Susan Parker

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