California regulators last Thursday approved changes for intrastate natural gas transmission pipeline and storage systems, made a major rate decision for Pacific Gas and Electric Co.’s (PG&E) beleaguered pipeline network and signaled the need for market-based changes for Sempra Energy pipelines.

PG&E received approval from the California Public Utilities Commission (CPUC) to increase its rates annually over the next four years to support its natural gas transmission pipeline and storage system, which has been placed under a microscope since a pipeline rupture and explosion in San Bruno last year (see NGI, Sept. 13, 2010). Rate changes are effective May 1.

Sempra’s Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co. (SDG&E) received CPUC approval to tweak firm access rights (FAR), receipt points and rates charged for transportation services. The Sempra utilities will implement the new scheme by Oct. 1. The changes are expected to improve the performance of the FAR system during periods when access to the Sempra utilities’ pipeline system is constrained, the CPUC said.

The CPUC approved PG&E’s Gas Accord V settlement, which was developed before the San Bruno incident. Final action was postponed in the wake of that tragedy, with some modifications being made, one of which was to require semi-annual pipeline and storage safety reports from the San Francisco-based combination utility.

The stepped-up CPUC oversight will allow regulatory safety staff to better “monitor PG&E’s pipeline-related activities to assess whether high-risk projects are being built and to track whether [the utility] is spending its allocated funds on pipeline-related safety, reliability and integrity activities,” a CPUC spokesperson said.

PG&E by its own admission has failed to spend allocated funds for specific pipeline maintenance and repair projects. Critics contend the work was delayed and the funds deferred to projects the utility determined were of a more critical nature. CPUC staff apparently was not always aware of the changes by the utility.

The CPUC’s rate decision authorizes $514.2 million for PG&E transmission and storage operations this year, with an increase each year through 2014, when the authorized revenues for pipeline and storage operations will be $614.8 million. PG&E called the decision “an important step in preserving the long-term safety and reliability of natural gas service at reasonable rates.”

PG&E said the decision will allow it to spend close to $200 million upgrading and replacing pipelines and regulating facilities on its transmission backbone system. The increased rates will result in less than a 1% increase for residential gas utility customers, a utility spokesperson said.

The Sempra utilities’ FAR, which were established by CPUC five years ago (see NGI, Dec. 18, 2006), have been updated to eliminate further scheduling system uncertainty for shippers. There will be supply transfers at individual receipt points, enabling increased commodity trading and supply administration at those points, according to the CPUC order.

The change should improve the operations of the receipt-point access system and establish the rate design for backbone transmission services on the SoCalGas-SDG&E system, according to CPUC Commissioner Timothy Alan Simon.

A Sempra spokesperson said the CPUC action “adopts operational modifications that were unanimously recommended by the participating parties to further reduce scheduling uncertainty and improve operations of the FAR system. We will be ready to implement it Oct. 1.”

The CPUC approved a $135.2 million revenue requirement for the Sempra pipeline system, representing an annual increase of $87.2 million, but for the most part the increase is offset by reductions of other end-use transmission rates, Simon said. A new rate design proposed by the utilities and major core and noncore customer representatives was also adopted.

For PG&E, the latest CPUC decision is “not without its contestants or controversy,” according to Simon. Unresolved is a dispute involving SoCalGas and SDG&E, which contend that they have the right from a 1997 deal to firm shipping capacity on the PG&E intrastate transmission system to deliver gas to the PG&E citygate.

The two Sempra utilities also wanted to force PG&E to make its gas storage activities public, following federal guidelines that SoCalGas and SDG&E follow. “The issue of whether the CPUC should adopt the federal posting requirement for PG&E storage was beyond the scope of this proceeding,” Simon said. “But I remain open to a comprehensive evaluation of whether an increased transparency and storage reporting requirement on a statewide basis will benefit the market.”

In the SoCalGas-SDG&E decision, changes in the rates will result in a 163% increase in the firm reservation charge on the transmission system, but Simon said the impact of this increase is somewhat offset by reduction of other end-use transportation pipeline charges. In their next transmission pipeline cost rate filing, SoCalGas and SDG&E are mandated to prepare a new backbone embedded cost study.

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