Interim Restructuring Proposal Floated in Southern CA
The possibility of a quick-fix, interim settlement that would
open up receipt points on the Southern California Gas Co.
transmission system emerged as the only positive development from
another round of all-party talks last week, according to one of the
major shippers attending the session. It came at the conclusion of
the all-day session in a downtown LA hotel. Talks are expected to
resume Sept. 23, with a counter-proposal from Enron being offered
for discussion prior to a SoCalGas all-parties meeting. Other
meetings among some of the parties will be held Sept. 15.
"They could implement something as a 'quickie' via advice letter
[to state regulators] and take some of the pressure off the talks,"
said a large shipper on the Kern River Pipeline system. "It just
may work in a couple of weeks." Based on reports from the
confidential discussions, the interim proposal would open receipt
points along the SoCalGas system and leave them open to the maximum
level with large penalties for inflating nominations. "The market
would basically decide what they have to do," said the large
shipper. "If abusers begin to do the usual over-nominating, they
would be revealed pretty quickly."
Also attached to this interim change might be the addition of at
least one new receipt point on the SoCalGas system at a point used
internally by the large gas-only utility. It is called Hector Road
in the eastern part of SoCalGas' territory near the transmission
pipelines coming in from the Arizona border. A consultant for one
of the interstate pipelines noted that while "not as much progress
was made as the parties would have hoped for," SoCalGas
demonstrated that it is "not dragging its feet, and is seriously
committed to trying to get things done." Having said that, the same
insider said some of the proposals being floated could disadvantage
A lot of the focus has been on the Wheeler Ridge receipt point
in the Bakersfield area where Kern River, Mojave and PG&E
interstate pipelines interconnect, along with Elk Hills lines.
However, Enron's principal concern is where Transwestern's pipeline
comes into the state at the Arizona border near Ehrenberg.
Since different parties and groups of parties have such widely
differing interests, observers are skeptical about the possibility
of a true all-party settlement and a more consistent gas
transmission and storage system inside the state. "Real market
pricing for a cost-based public utility like SoCalGas does not
necessarily work for everyone," said the interstate pipeline
Representatives for the city of Long Beach municipal gas
utility, a wholesale customer, raised issues regarding wholesalers
who have firm rights on the interstate pipelines upstream and core
customers depending on them downstream. How do the proposed
settlement changes affect their rights and responsibilities before
and after the SoCalGas system? No one reportedly had any good
With two more months of breathing room to work out a long-term
solution, SoCalGas modified its original restructuring proposal for
the Sept. 9 resumption of settlement negotiations. The major
changes SoCal made include the elimination of so-called "windowing"
of various receipt points along its intrastate transmission
network, keeping monthly balancing as opposed to the proposal to
switch to daily balancing (except under OFO conditions), and the
use of operational flow orders (OFOs) when the system gets too far
out of balance as are used on the Pacific Gas and Electric Co.
intrastate gas transmission system in the north.
The utility distributed its revised proposal to all parties
before the Labor Day weekend. The action followed the Sept. 1
decision by state regulators to extend until Oct. 27 the deadline
for achieving an all-party settlement or providing tangible
evidence of a settlement being achievable.
California regulators have been strongly encouraging SoCalGas
and PG&E's gas utility to work out an all-encompassing
settlement that will provide a market solution to the remaining
unbundling of California's gas business, particularly focusing on
transmission and storage operations. Without a market solution, the
California Public Utilities Commission is set to conduct a series
of evidentiary administrative law hearings early next year.
Richard Nemec, Los Angeles