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PG&E OFO Settlement is The First of Many Changes in CA

PG&E OFO Settlement is The First of Many Changes in CA

Although it gets 13 parties to agree on solving the nagging problem of imbalances, a new Pacific Gas and Electric settlement agreement on transmission and storage is just the first of a number of changes anticipated under California's ongoing gas industry restructuring. Even for this step, state regulators still must react to the agreement and then market participants must assess whether the provisions will result in the market efficiencies and cost-savings that shippers are anticipating.

There is no dollar-value attached to the deal. PG&E has agreed to absorb any initial implementation costs, but the stakeholders generally are hoping for operating cost savings.

OFO noncompliance charges have been lowered in the settlement (from 10 cents/therm to 2.5 cents/therm), and shippers with monthly charges of less than $1,000 are exempted from the noncompliance charges. The imbalances also have to be more than 5,000 Dth. (A shipper could be out of balance in a percentage sense - 5 or 10% of its contractual load - but if it equated to less than 5,000 dth, the customer would not be targeted with an OFO.) In addition, PG&E has agreed to improve the volume, flow and accessibility of operating information, promising more on its Pipe Ranger Web Site.

Individual OFOs can be called on up to 10 customers, under the settlement. If the number is greater than that, a systemwide OFO will be called, PG&E officials said.

Among the unresolved issues are those related to PG&E's gas utility infrastructure, with parties such as Calgary-based Alberta Energy's Wild Goose Storage in northern California arguing that real control of the balancing problem is not possible longer term without added storage and more extensive metering that provides real-time (telemetered) information into the PG&E system control room on an hourly basis.

Imbalances now are handled on a monthly time frame, but they should be handled hourly as they are in western Canada, said Ben Ledene, marketing director for Wild Goose, one of the 13 supporters of the deal. "It is a matter of picking up the pace so you can manage the market on an hour-by-hour basis."

PG&E, of course, thinks the proposed settlement is a slam dunk for everyone and that regulators should approve it expeditiously, but some of the parties are reserving judgment. Under California's process for negotiated energy settlements, parties have until Nov. 21 to register opposition to the deal, although none has surfaced so far.

"Our hope is that no one will oppose it," said PG&E attorney Patrick Golden. "We think this is a reasonable settlement. If there is some opposition, we would hope that the (regulators) will still decide that we can resolve it without a hearing."

PG&E feels the deal on handling operational flow orders (OFOs) can go into effect while other larger issues are being worked out in the overall gas restructuring case.

Other parties signing the settlement, which would extend through 2002, are: Calpine Corp., Enron, Kern River Pipeline, Utilicorp Energy Solutions, the CPUC Office of Ratepayer Advocates and the public schools' aggregator, SPURR among other aggregators and agricultural interests.

PG&E's Golden acknowledged that some of the issues revolving around the OFOs were not entirely resolved, but the parties agreed to establish an Internet-based "forum" to collect feedback and resolve operating problems that may arise from the implementation of new customer-specific OFOs as a means to cut down on the more costly system-wide orders which have steadily grown in number since the Gas Accord first went into effect.

Richard Nemec, Los Angeles

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ISSN © 2577-9877 | ISSN © 1532-1266
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