Not only did FERC yesterday find that El Paso Natural Gas’controversial methods for allocating capacity at delivery points”may be unjust and unreasonable,” but it expanded the scope of thereview to include the pipeline’s allocation methods and poolingprocedures at all of its receipt points.

In response to a complaint, the Commission said AmocoProduction, Amoco Energy Trading Corp. and Burlington Resources Oil& Gas “have presented valid arguments” that El Paso’sallocation practices at delivery points on its system “are causingserious operational and economic harm.” And “while not raised bythe…complaint, there are similar problems on the El Paso systemwith respect to the allocation of receipt-point capacity…,” theorder said [RP99-507]. As a result, “the Commission, on its owninitiative, will expand the scope of this proceeding to include ElPaso’s receipt point allocation methods.”

FERC took this step after concurrently rejecting El Paso’sproposal to revise its pooling practices [RP98-407]. The Commissionbelieves there’s a direct link between the pipeline’s poolingproblems and the allocation practices that have been raised in thecomplaint. Consequently, it said the issues should be “examined inone proceeding.”

FERC said it was “reluctant to impose a solution” to theallocation and scheduling problems on El Paso’s system but insteadbelieved any changes would be “best worked out between El Paso, itscustomers and other affected parties.” Toward this end, it orderedthe pipeline to submit a detailed proposal for changing its currentcapacity-allocation methods within 60 days. It also directed FERCstaff to convene a technical conference to discuss the proposalafter shippers have had a chance to review it.

In drafting its proposal, El Paso “should take into account theprinciple that capacity should be allocated to those shippers thatvalue a particular point most,” and it “should not favor any oneshipper based on the historical accident of when the shipperobtained its firm transportation rights to the El Paso system,” theorder said. “In setting these parameters, the Commission recognizesthat its conclusions here might have some effect on the value of ElPaso’s existing contracts. But this would appear to be nothing morethan what the complainants state is already occurring due to theimpact of El Paso’s pro rata nomination and allocation procedures.”

In their complaint, Amoco and Burlington accused El Paso ofoverselling capacity at its interconnection with Southern CaliforniaGas (SoCalGas) at Topock, AZ, resulting in the need to allocatecapacity on a pro rata basis at the delivery point (see Daily GPI, Set. 23,Sept. 28 and Oct. 15). As a result,Amoco and Burlington report shippers have experienced scheduling cutsas high as 57% of nominations. As a remedy, they proposed that El Pasobe required to limit primary delivery point capacity at theinterconnection with SoCalGas to the take-away capacity of the LDC’ssystem (540 MMcf/d). Amoco estimates it’s losing $1-$2 millionannually and Burlington is losing $3,000/day because of thecurtailments at the Topock point.

The Commission agreed El Paso’s practice of allocating capacityon a pro rata basis is contrary to existing policy. FERC’s “generalpolicy is that, where operationally feasible, pipelines shouldassign customers specific capacity rights at receipt and deliverypoints,” it said, adding El Paso does neither.

Although the Commission sided with Burlington and Amoco on manyissues, it said it was “inappropriate” for them to seek fast-trackprocessing of the complaint. The “complex nature of the issuesraised by the complaint do not lend themselves to the fast trackprocess,” the order said. But “more importantly, El Paso’s existingdelivery point capacity-allocation method,” which is at the centerof the complaint, “is in conformance with its Commission-approvedtariff and there is no claim that El Paso has deviated from thosemethods.”

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