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El Paso's Partial Capacity Segmentation Plan Under Fire

El Paso's Partial Capacity Segmentation Plan Under Fire

A capacity segmentation tariff filing by El Paso Natural Gas is "yet one more stonewalling attempt on El Paso's part to avoid compliance with [FERC] rules and regulations," Indicated Shippers told the Commission last week.

El Paso's proposal has come under heavy fire from producers and marketers. Municipal shippers, however, like the plan, which declares that full segmentation is not operationally feasible because El Paso's system is not pathed and capacity is allocated on a pro rata basis.

The proposal would limit capacity segmentation on El Paso's system to three proposed routes: San Juan to Topock, Permian to Ehrenberg and Anadarko to Plains (Docket RP00-336-001). El Paso made the filing on Aug. 15 in compliance with Commission Order 637, which required all pipelines to allow shippers to segment their firm capacity into separate parts for use or release to other shippers to the extent it was operationally feasible.

Several months ago, El Paso filed for and received a deferral from FERC for the segmentation filing to allow time for a settlement in an ongoing complaint proceeding regarding the pipeline's capacity allocation methods (Docket RP99-507). A settlement, however, has not been reached, and shippers, including Dynegy, BP Energy, Burlington, Conoco and others, say the pipeline has been "unwilling to completely path its system and has no incentive to do so unless ordered by the Commission because it is able to game the system today by enabling it to oversell firm capacity."

"The fundamental issue in this [capacity segmentation] case (and the related complaint case)," said Indicated Shippers, "is that El Paso is attempting to retain for its own use all system flexibility in order to permit it to maximize revenues by selling more capacity that it has available on a pathed basis, rather than providing its firm shippers with flexible rights to use the firm capacity for which they have paid."

Sempra Energy told FERC the proposal is "too little, too late. It will not work in the competitive environment envisioned in and promoted by Orders Nos. 637, et al. Accordingly the Commission must direct El Paso to develop procedures expeditiously that will result in full pathing and full segmentation opportunities for its shippers at the earliest possible date." Sempra requests a technical conference be convened on the issue.

In contrast, municipal shippers told the Commission they agree with El Paso that FERC should not "force a cookie cutter policy" on El Paso's unique system. "The last thing El Paso should be trying to do today is reduce the ability of its shippers to access gas in the San Juan basin, which would be the result of full segmentation... This summer, gas sourced from the San Juan basin has cost more than a full dollar less than gas sourced at the alternative Permian basin. That gas price differential is many multiples of any potential value of segmented capacity..... Thus full segmentation and full pathing of the system is not in the public interest," the El Paso Municipal Customer Group said.

Rocco Canonica

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