Even with favorable momentum at FERC Questar’s Southern TrailsPipeline won’t get very far without California regulatory help inremoving what it views as the main impediment to its locking upmulti-year deals with at least three large end-users who currentlyship gas on SoCalGas.

A special “residual load service” (RLS) rate, which is unique tothe SoCalGas system, allows the utility to charge large noncorecommercial/industrial customers proportionally for the suppliesthey choose to have delivered through a competitor. The rate makesit nearly impossible for new pipelines, such as Questar’s proposedconversion of an existing, but inactive, oil pipeline from NewMexico’s Four Corners to the port city of Long Beach in SoCalGas’territory, to sign up new customers from among existing largeend-users.

A reexamination of this rate, which has yet to be applied (noone has challenged SoCalGas’ monopoly) in its four years ofexistence, is currently taking place as part of the gas utility’spending rate case. A proposed decision is expected by Thanksgivingand a final decision in January, according to a staff member at theCalifornia Public Utilities Commission. Questar and several otherparties have advocated the anti-bypass rate be dropped.

“It doesn’t look like there will be a decision this year,” theCPUC staff member said. “More realistically it will come at one ofthe January meetings.” A Western energy consultant noted hisclients “hope the CPUC will trash the RLS,” otherwise, he says itscontinued existence will be a boon for consultants and attorneyswho will be hired to try to kill it through other means. With thespecter of this rate device, Questar cannot close deals with threecustomers who would like to sign five- to 10-year dealsrepresenting 177,500 Dth/d of gas, nor with others who expressedinterest in an earlier open season, a Salt Lake City-based Questarspokesperson, Chad Jones, said last week. In its FERC filing,Questar said its open season a year ago garnered 22 bids, totaling810,000 Dth/d.

The RLS tariff imposes a surcharge on noncore gas customers thatbypass the SoCalGas system to take part of their deliveries fromanother pipeline, leveraging another pipeline against the SoCalGastransmission/distribution system. “The tariff insulates SoCalGasfrom pipeline competition and discourages customers from taking aportion of their gas from another pipeline,” Questar argues in aprepared question-and-answer document on the subject. “In fact, theRLS tariff permits SoCalGas to demand a peaking rate that is sohigh as to force a customer into a choice between 100% service fromSoCalGas or 100% from the bypass pipeline. The tariff restricts thecompetitive service option available to noncore customers inSouthern California.”

Questar is hopeful the CPUC will overturn its action of fouryears ago and drop the RLS tariff. Jones pointed out that the CPUClast year, in approving the merger of SoCalGas’ and San Diego Gasand Electric Co.’s parent companies into the newly named SempraEnergy, made a strong pitch for encouraging “competition and thethreat of competition.”

Questar recommends the tariff be replaced with a “standby ratethat is based on the actual cost of providing peaking services tononcore customers.”

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