Even with favorable momentum at FERC (see NGI, Oct. 11), Questar’s Southern Trails Pipeline won’t get very far without California regulatory help in removing what it views as the main impediment to its locking up multi-year deals with at least three large end-users who currently ship gas on SoCalGas.
A special “residual load service” (RLS) rate, which is unique to the SoCalGas system, allows the utility to charge large noncore commercial/industrial customers proportionally for the supplies they choose to have delivered through a competitor. The rate makes it nearly impossible for new pipelines, such as Questar’s proposed conversion of an existing, but inactive, oil pipeline from New Mexico’s Four Corners to the port city of Long Beach in SoCalGas’ territory, to sign up new customers from among existing large end-users.
A reexamination of this rate, which has yet to be applied (no one has been able to challenge SoCalGas’ monopoly) in its four years of existence, is currently taking place as part of the gas utility’s pending rate case. A proposed decision is expected by Thanksgiving and a final decision in January, according to a staff member at the California Public Utilities Commission. Questar and several other parties have advocated the anti-bypass rate be dropped.
“It doesn’t look like there will be a decision this year,” the CPUC staff member said. “More realistically it will come at one of the January meetings.” A Western energy consultant noted his clients “hope the CPUC will trash the RLS,” otherwise, he says its continued existence will be a boon for consultants and attorneys who will be hired to try to kill it through other means. With the specter of this rate device, Questar cannot close deals with three customers who would like to sign five- to 10-year deals representing 177,500 Dth/d of gas, nor with others who expressed interest in an earlier open season, a Salt Lake City-based Questar spokesperson, Chad Jones, said last week. In its FERC filing, Questar said its open season a year ago garnered 22 bids, totaling 810,000 Dth/d.
The RLS tariff imposes a surcharge on noncore gas customers that bypass the SoCalGas system to take part of their deliveries from another pipeline, leveraging another pipeline against the SoCalGas transmission/distribution system. “The tariff insulates SoCalGas from pipeline competition and discourages customers from taking a portion of their gas from another pipeline,” Questar argues in a prepared question-and-answer document on the subject. “In fact, the RLS tariff permits SoCalGas to demand a peaking rate that is so high as to force a customer into a choice between 100% service from SoCalGas or 100% from the bypass pipeline. The tariff restricts the competitive service option available to noncore customers in Southern California.”
Questar is hopeful the CPUC will overturn its action of four years ago and drop the RLS tariff. Jones pointed out that the CPUC last year, in approving the merger of SoCalGas’ and San Diego Gas and Electric Co.’s parent companies into the newly named Sempra Energy, made a strong pitch for encouraging “competition and the threat of competition.”
Questar recommends the tariff be replaced with a “standby rate that is based on the actual cost of providing peaking services to noncore customers.”
Richard Nemec, Los Angeles
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