NGI The Weekly Gas Market Report
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 last 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 would limit capacity segmentation on El Paso’ssystem to three proposed routes: San Juan to Topock, Permian toEhrenberg and Anadarko to Plains (Docket RP00-336-001). El Pasomade the filing on Aug. 15 in compliance with Commission Order 637,which required all pipelines to allow shippers to segment theirfirm capacity into separate parts for use or release to othershippers to the extent it was operationally feasible.
Several months ago, El Paso filed for and received a deferralfrom FERC for the segmentation filing to allow time for asettlement in an ongoing complaint proceeding regarding thepipeline’s capacity allocation methods (Docket RP99-507). Asettlement, however, has not been reached, and shippers, includingDynegy, BP Energy, Burlington, Conoco and others, say the pipelinehas been “unwilling to completely path its system and has noincentive to do so unless ordered by the Commission because it isable to game the system today by enabling it to oversell firmcapacity.”
“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.”
Sempra Energy told FERC the proposal is “too little, too late.It will not work in the competitive environment envisioned in andpromoted by Orders Nos. 637, et al. Accordingly the Commission mustdirect El Paso to develop procedures expeditiously that will resultin full pathing and full segmentation opportunities for itsshippers at the earliest possible date.” Sempra requests atechnical conference be convened on the issue.
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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