After grousing that it didn’t think any changes to its existingpro-rata capacity allocation procedures were “necessary orappropriate,” El Paso Natural Gas reluctantly last week compliedwith FERC’s order and submitted a proposal for a new allocationscheme that would assign “pathed” rights for delivery of a portionof the primary firm gas volumes transported over its system to theCalifornia border.

The proposal “strikes a middle ground between the [pro-ratamethod] in use today and a rigorously pathed approach,” El Pasotold the Commission. It said the proposal was “an acceptable way torevise its capacity-allocation procedures, if a revision to thoseprocedures is actually necessary, appropriate and desired by ElPaso shippers.”

Producers and marketers on El Paso’s system desire a change.They contend the pipeline continually has overbooked primary pointcapacity to the Southern California Gas (SoCalGas) delivery pointat Topock, AZ, in excess of the take-away capacity. The result hasbeen significant pro-rata curtailments. As part of a Section 5complaint proceeding last November, the Commission ordered El Pasoto come up with a better capacity-allocation method [RP99-507].

Under the plan filed last Wednesday, El Paso proposes toallocate primary firm capacity designating a percentage of eachfirm shipper’s contract demand (CD) as “pathed,” with the remainingto be assigned as “non-pathed.”

With “pathed” rights, firm shippers would create specificreceipt-and-delivery point combinations. The “pathed” rights wouldgive shippers a “high degree of assurance that thosetransactions…..would not normally be curtailed due to the marketdecisions of other shippers,” said Bill Healy, vice president ofoperations control and pipeline planning. Under “non-pathed”rights, shippers would continue with the existing practice ofselecting a specific delivery point, but not a receipt point. Theseshippers still would be vulnerable to curtailments.

“What we’re trying to do is take El Paso’s system and give theshippers something that looks more like what they view as normalfirm on other pipelines, where you have a receipt point, aparticular path…..on which you retain capacity and a particulardelivery point,” Healy told NGI.

He believes the proposal will resolve the capacity problems atthe SoCal-Topock delivery point. “There would be a limited quantityof pathed rights assigned to the SoCal-Topock point…..The pathedrights total less than SoCal’s take-away capacity, and you’d have ahigh degree of assurance on getting that pathed gas in there. Thenthe current competition for market share, which is really what thisis all about, would continue to go on using the non-pathed rights,”Healy said.

The pathed rights “are not entitlements to new or additionalcapacity, nor are they entitlements to a new kind of service.”Rather, it’s a “right to designate, in the daily schedulingprocess, whether a shipper want[s] a nomination to be considered’pathed’ or ‘non-pathed’ for purposes of capacity allocation.”

El Paso would divide its allocation of primary firm capacityinto two phases. This would give firm shippers with primary rightstwo opportunities during each scheduling cycle to be allocatedsystem capacity ahead of the shippers using either firm alternatepoints or interruptible service.

During the first phase of the scheduling cycle, El Paso said itwould schedule only those firm transactions with “pathed” rights.Firm shippers who submit nominations for service using “non-pathed”rights (i.e. rights to system-wide receipt points as specified intheir transportation agreements) would be scheduled during thesecond phase.

“If capacity were insufficient to schedule all of the volumesnominated in either phase of the primary firm scheduling process,El Paso would, in each phase, allocate the available capacity on apro rata basis just as it does today. However it is extremelyunlikely that allocation would occur with respect to pathedrights,” El Paso noted.

Pathed rights also would be allocated to the three blocks ofturned-back capacity established by El Paso’s 1996 settlement.Volumes not identified in the nomination process as “pathed” wouldbe treated as “non-pathed” during capacity allocation. El Paso’sFT-2 shippers, which account for a small portion of capacity on thepipeline, would be allocated capacity “‘off the top,’ or first, asis the case today,” according to El Paso. Lastly, it would allocateany remaining capacity to nominations for alternate firm,interruptible and overrun service.

On a system-wide basis, El Paso estimates it will be able toassign “pathed” rights to 3,590 MMcf/d out of the 5,100 MMcf/d ofcontract demand and billing determinants applicable to its firmtransportation agreements.

By segments, the breakdown of “pathed” rights would be: 450MMcf/d for shippers on the Plains-to-Eunice Transfer Lines; 625MMcf/d on the Bondad-to-Blanco Line; 68 MMcf/d out of the AnadarkoBasin; 1,990 MMcf/d out of the San Juan Basin; 1,550 MMcf/d out ofthe Permian Basin; about 60 MMcf/d on the East End; about 418MMcf/d at El Paso’s interconnect with SoCalGas at Topock, AZ; about883 MMcf/d at El Paso’s interconnect with Pacific Gas and Electric(PG&E) at Topock; about 331 MMcf/d at El Paso’s interconnectwith Mojave Pipeline at Topock; and a maximum of 35 MMcf/d at ElPaso’s interconnect with Southwest Gas at Topock.

In an appendix, El Paso designates for each firm customer theamount of capacity that will be “pathed,” as well as the pathedrights for unsubscribed capacity. The total amount of pathed rightsassigned to all El Paso shippers would be based on the “physicalforward-haul transportation capability of the El Paso system undernormal, not optimal, operating conditions.” Any additional capacitycreated by backhaul or other displacement transportation would notbe considered part of the capacity used to serve “pathed” shippers.

In the November order, FERC not only said that El Paso’sallocation practices at delivery points on its system were causing”serious operational [problems] and economic harm,” but itindicated that there were similar troubles on the pipeline’s systemwith respect to its allocation of receipt-point capacity. It wasreferring to El Paso’s failure to assign primary receipt points toits customers. Instead, the pipeline permits shippers cart blancheaccess to receipt points, up to the maximum limit of theircontracts.

“This Commission apparently intends for El Paso to limit thisflexibility by designating specific receipt point rights which eachshipper must use to deliver gas into the system on a primarybasis,” El Paso said in its proposal.

“If El Paso attempted to assign pathed rights based on thecombination of 144 receipt points and 296 delivery points, therewould be at least 42,624 paths that El Paso would have to createthrough its system and that shippers would have to specify in theirdaily nominations,” it said. This “not only [would] be a difficultprocess, but it would, in large part, not reflect the shippers’transactional preferences.” To avoid this, El Paso proposes to useseven pooling areas as receipt points – Anadarko, Blanco, BondadStation, Bondad Mainline, Keystone, Plains and Waha.

To address El Paso’s contracting problems at the Californiaborder, the pipeline proposes to treat the four interconnects atTopock — SoCal, PG&E, Mojave and Southwest Gas — asindividual delivery points for pathing purposes.

Susan Parker

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