FERC yesterday gave El Paso Natural Gas high marks for carryingout the firm capacity re-allocation plan that it approved for thepipeline’s system last October. At the same time, it shot down allof the protests and rehearing requests lodged primarily by SouthernCalifornia Gas (SoCal).

The Commission “finds that the [capacity] election andassignment process was administered properly,” the order said. Withthe exception of SoCal, a number of shippers on El Paso reportedthat it “has been handled in a fair, equitable and reasonablemanner.”

In an Oct. 26 order, FERC outlined its plan to resolve thecapacity allocation and scheduling problems on El Paso after thepipeline and its shippers failed to accomplish this on their own.The Commission sought to re-distribute the firm delivery rights ofEl Paso shippers to more evenly match the design capacity of eachTopock delivery point on the pipeline. In short, less gas will gothrough the busy SoCal/Topock point, which is the “mosteconomically desirable” delivery point into California from ElPaso, and more gas will be diverted to the other three Topockpoints. Revised capacity allocations on El Paso are due to go intoeffect April 1, 2001.

On rehearing, SoCal argued that the Commission’s allocationscheme abrogated its contract, which it said awards it the entire540 MMcf/d of firm primary delivery rights at SoCal/Topock. ButFERC begged to differ. “In this case, the currently effectivecontract between SoCal and El Paso gives SoCal specific deliverypoint rights of 610,000 Mcf/d at Ehrenberg and 540,000 Mcf/d ofaggregate delivery point rights at the various Topock deliverypoints,” not just at SoCal/Topock, the order said [RP99-507-004].

Because the total of all shippers’ first elections atSoCal/Topock exceeded the firm design capacity of that point, ElPaso was forced to award delivery point rights on a pro-rata basis.SoCal received 489,822 Mcf/d at the various Topock points, of which202,281 Mcf/d was at SoCal/Topock. The California LDC then shiftedthe remaining 50,178 Mcf/d of its Topock delivery point rights toEhrenberg, FERC noted. “Thus SoCal received its full entitlement of540,000 Mcf/d of aggregate Topock delivery point rights, and itscontract has not been abrogated,” the order said.

Moreover, “neither [the California regulators] nor SoCal haveshown how the Commission’s [allocation] order will mean that SoCalwill not be able to serve its customers, nor how SoCal will not beable to provide service at just and reasonable rates,” it noted.

Given that FERC refused to confirm that SoCal has prior claim onthe full 540 MMcf/d of firm primary delivery rights intoSoCal/Topock, the California LDC asked that it be given the optionto step down its contract maximum daily quantity with El Paso. Butthe Commission wasn’t receptive to the idea.

“It would be inconsistent to allow SoCal to abrogate itscontract with El Paso, when a fundamental principle in thisproceeding has been to avoid abrogation of shippers’ contracts.Further, if SoCal were to relinquish its PG&E Topock and MojaveTopock capacity, El Paso could be exposed to a potential revenueshortfall if it was unable to remarket that capacity.”

FERC further rejected SoCal’s request to exclude El PasoMerchant Energy and Williams Energy Marketing and Trading from thecapacity election and assignment process on El Paso. The twocompanies acquired 1.4 Bcf/d of Topock capacity on El Paso lastyear, of which 487 MMcf/d had firm delivery point rights intoSoCal/Topock. This aggravated an already-constrained delivery pointat SoCal/Topock, claimed SoCal and other shippers.

“While the Commission acknowledges that [El Paso Merchant’s andWilliams’] acquisition of aggregate capacity at Topock may haveexacerbated the problems at SoCal/Topock, the contracts wereconsistent with El Paso’s existing tariff and did not prevent theother shippers from exercising their aggregate Topock rights,” theorder said. As a result, “the Commission finds that [they] shouldnot be excluded from the election and assignment process.”

FERC also refused a request to give Topock shippers first crackto acquire capacity becoming available under expiring contractsbefore the pipeline offers it in an open season. “Because thecontractual rights of the Topock shippers have been satisfied andno contracts have been abrogated, there is no reason to grant afirst call on new capacity, although certain shippers may not besatisfied with the allocations they received during the electionand assignment process,” the order said.

“After the revised capacity allocations are placed into effect,any shipper who wishes to acquire capacity that becomes availableat any of the Topock delivery points should be allowed to do sowithout regard to whether it was a pre-existing Topock shipper or anew shipper.”

The Commission did respond favorably to Indicated Shippers’request for a review of the system-wide capacity allocationproblems on El Paso. Indicated Shippers argue that the constraintsaren’t just limited to the Topock delivery points, but also can befound on El Paso’s Havasu Crossover, the Maricopa Crossover and thePlains-to-Eunice line.

FERC ordered El Paso and its shippers to begin addressing thesystem-wide allocation issues as part of the pipeline’s Order 637proceeding. It further directed El Paso to submit a proposalfocusing on the system-wide concerns within 30 days of the order.

The California Public Utilities Commission (CPUC) asked FERC torule that shippers of Block I capacity (500 MMcf/d) do not have thesame rights at the SoCal/Topock delivery point as firm shipperswith primary receipt and delivery points at Topock, but FERC deniedthe request.

The CPUC further claimed that the Commission’scapacity-allocation scheme did not offer any deterrent to El Paso’spractice of overselling capacity at SoCal/Topock. It suggested thatFERC require El Paso to offer capacity only when shippers areassured their full contractual entitlements will be honored.

Significantly, the order pointed out that FERC never found thatEl Paso oversold capacity at SoCal/Topock or any other Topockdelivery point. “Rather, the Commission found that the manner inwhich El Paso allocated delivery point capacity was unjust andunreasonable. The solution to the problems at the SoCal/Topockdelivery point was to direct El Paso to assign specific deliverypoint rights at each of the Topock delivery points.”

As a result of last October’s order, “El Paso is prohibited fromselling at any of the Topock points that is above the designcapacity of the point. The Commission finds that no other action isnecessary…”

Lastly, the Commission ruled that shippers acquiring El Pasocapacity through the secondary market must be awarded a pro-ratashare of the delivery point capacity allocated to the shippers fromwhom they obtained the capacity.

©Copyright 2001 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.