A capacity segmentation tariff filing by El Paso Natural Gas is”yet one more stonewalling attempt on El Paso’s part to avoidcompliance with [FERC] rules and regulations,” Indicated Shipperstold the Commission this week.

El Paso’s proposal has come under heavy fire from producers andmarketers. Municipal shippers, however, like the plan, whichdeclares that full segmentation is not operationally feasiblebecause El Paso’s system is not pathed and capacity is allocated ona pro rata basis. The proposal limits capacity segmentation on ElPaso’s system to three proposed routes: San Juan to Topock, Permianto Ehrenberg and Anadarko to Plains (Docket RP00-336-001).

El Paso made the filing on Aug. 15 in compliance with CommissionOrder 637, which required all pipelines to allow shippers tosegment their firm capacity into separate parts for use or releaseto other shippers to the extent it was operationally feasible. ElPaso filed for and received a deferral from FERC for thesegmentation filing to allow time for a settlement in an ongoingcomplaint proceeding regarding the pipeline’s capacity allocationmethods (Docket RP99-507). A settlement, however, has not beenreached, and shippers, including Dynegy, BP Energy, Burlington,Conoco and others, say the pipeline has been “unwilling tocompletely path its system and has no incentive to do so unlessordered by the Commission because it is able to game the systemtoday by enabling it to oversell firm capacity.”

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

In contrast, municipal shippers told the Commission they agreewith El Paso that FERC should not “force a cookie cutter policy” onEl Paso’s unique system. “The last thing El Paso should be tryingto do today is reduce the ability of its shippers to access gas inthe San Juan basin, which would be the result of fullsegmentation… This summer, gas sourced from the San Juan basinhas cost more than a full dollar less than gas sourced at thealternative Permian basin. That gas price differential is manymultiples of any potential value of segmented capacity….. Thusfull segmentation and full pathing of the system is not in thepublic interest,” the El Paso Municipal Customer Group said.

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