FERC Rejects Trailblazer Settlement Contested by Amoco

Amoco's objections and its standing as a major customer of Trailblazer Pipeline have made it impossible for the Federal Energy Regulatory Commission to approve a settlement on new rates, FERC said in dumping the dilemma back in the lap of an administrative law judge.

The Commission advised it can approve a settlement and segregate out the interests of dissenting parties only if the parties have only a minor interest and if the disputed issues are relatively minor. Neither is the case in the Trailblazer proceeding (RP97-408-004). An order voted out during FERC's bi-weekly open meeting last Wednesday instructed all the parties to try again for a total settlement or file briefs so the Commission may decide the issues point-by-point.

Amoco, the lone producer holdout among "Indicated Shippers," has argued Trailblazer's rates going forward are 86% higher than what would be just and reasonable, and are based on a rate base which exceeds the standard by 24.5% and a cost of service that is beyond reasonable by 74.3%. The producer disputes four major cost of service items including depreciation expense, other taxes, rate of return and the Columbia exit fee credit. In addition Amoco objects to the revenue crediting mechanism, saying the billing determinants are understated because they do not include any for short-term firm service. Ellen Beswick

California Schedules Slower, More Cautious Approach to Unbundling

The perception that there is no need to "rush" natural gas unbundling and customer choice has prevailed in California following actions by the state legislature and energy regulators. That allows the major investor-owned gas utilities to prepare for more competition and gain more experience in wide-ranging settlements that they negotiated with their major suppliers, shippers and marketers.

Despite the fact that 1998 began with projections of a natural gas industry overhaul by the end of year, California has run into utility and legislative concerns that have pushed back unbundling and full customer choice for another year under a revised timetable established by the California Public Utilities Commission earlier this month. This is a new "road map" in response to new state legislation (SB 1602) that delays major gas changes until 2000.

A Pacific Gas and Electric utility spokesperson said its so-called Gas Accord settlement with its major shippers contains provisions against some unbundling while the five-year agreement is still in effect. Further, the PG&ampE utility still "has concerns about safety issues that need to be investigated," the spokesperson said.

A pre-hearing conference by the California Public Utilities Commission will be held Nov. 4 in San Francisco to start the process leading to a full report and recommendations to the state legislature by mid-part of next year. For now, all of the same outstanding issues-many of which are controversial among the state's investor-owned gas utilities-will be covered in the upcoming hearings, according to a CPUC staff analyst familiar with the gas case.

That means everything from unbundled billing/meter reading services to competitive intrastate transmission/storage services is in play-at least theoretically- although the state's three major natural gas utilities collectively have expressed a lot of concerns with proposals to unbundle gas to the same degree as the electric industry is being opened up. Concerns about public safety and consumer protection have been strongly expressed by Southern California Gas Co., PG&ampE and San Diego Gas and Electric Co.

"Timing is the main difference" now as opposed to where the CPUC was headed earlier in the year on natural gas, said the CPUC staff analyst, noting that the issues on the table are still the same, including a proposed divestiture of intrastate transmission and storage assets, along with the formation of a third-party independent (transmission pipeline) system operator, or ISO, like the one currently operating most of California's electricity transmission grid.

Under the delayed schedule, evidentiary hearings will be held in December, briefs by the parties will be filed in January, oral arguments will be held in February, and a final report with proposed actions will be provided to the state legislature by mid-year. Under current state law, the CPUC cannot begin further unbundling gas services until 2000.

In the meantime, the CPUC is expected this month to circulate for comments a set of gas consumer protection guidelines. Once those are in place-assuming that step can be taken apart from overall gas strategy-the CPUC believes it can lift all restrictions on the state's controlled, pilot project offering residential and small business customers choice of their gas suppliers by pooling their energy loads with others under an "aggregator." This is the so-called "core aggregation" program that has been ongoing in California since 1991.

On the question of safety and proposed "after-meter" service unbundling, a Revenue Cycle Services Working Group was unable to agree on a recommendation in a safety report it submitted in early September. Therefore, the issue is still alive and will be addressed in the upcoming proceedings, the CPUC staff analyst said.

Richard Nemec, Los Angeles

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