El Paso Natural Gas has asked FERC to overturn a July ALJinitial decision that found it failed to “seriously confront thepotential impact of…turned-back capacity on the remainingcustomers on its system and take adequate steps to remarket thecapacity” when it first learned that Southern California Gas (SoCalGas) planned to step down its capacity commitment effective January1996. If upheld by the Commission, El Paso would be required toshoulder the costs for half of the 300 MMcf/d of capacity that theLDC turned back.

The ALJ decision was issued in response to Southern CaliforniaEdison’s challenge to a turned-back capacity settlement between ElPaso and the majority of its customers, which was approved by FERCin April 1997. Edison, a contesting party, was severed from theagreement and allowed to litigate its case separately. TheCalifornia utility challenged the settlement on a number of fronts,but particularly focused on El Paso’s efforts to remarketturned-back capacity on its system in the mid- 1990s.

If affirmed by FERC, the initial ruling of ALJ Michel Levantwould pertain solely to Edison. The California utility wouldreceive rate savings due to El Paso being required to include 150MMcf/d of additional billing determinants in the calculation of itsrates [RP95-363-002]. However, concerns have been raised that otherEl Paso customers that were parties to the 1997 settlement might benegatively affected.

In El Paso’s Aug. 17th rate filing complying with the Levantdecision, Edison said that El Paso allocated the costs associatedwith the 150 MMcf/d to its California customers rather than toitself, as was required. “Thus, El Paso again proposes that itsCalifornia customers bear the costs associated with its failure toremarket its turnback capacity.”

Although Levant ruled in its favor on several points, Edisontook issue with the finding that the costs associated withturned-back capacity would be shared equally between the pipelineand its customers. Given its alleged failure to actively remarketturned-back capacity, El Paso – not its customers – should foot theentire bill for the associated costs, the utility argued.

El Paso said its efforts to remarket the unsubscribed capacityon its system in the mid-1990s were “exhaustive,” and that, as aresult, it should be allowed to recover all prudently incurredcosts associated with that capacity.

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