After several years of battling, both in the courts and at FERC,the Commission last week finally approved a version of El PasoNatural Gas’ 1996 rate and capacity-turnback settlement that seemedto satisfy all parties involved. But to get to that point, El Pasowas forced to make some big concessions along the way to quellconcerns.

The biggest concession was made to Southern California Edison.The pipeline agreed to pay the California utility $32 million plusinterest and make certain rate concessions in exchange for Edisonwithdrawing its long-running opposition to the settlement. TheCommission approved the agreement between El Paso and Edison lastweek, calling it “fair and reasonable.”.

The D.C. Circuit Court of Appeals had remanded the ordersapproving the settlement on the grounds that FERC had unfairlydeprived Edison of its right to litigate its objections to thesettlement as an indirect customer of El Paso. That rulingthreatened the foundation of the 1996 settlement and ultimately ledto the agreement between the pipeline and Edison.

The agreement provides for a ten-year resolution of any ratesissues between El Paso and Edison and settles the utility’s otherobjections. It does so while preserving the terms and conditions ofthe original settlement for El Paso’s other transportationcustomers.

In response to another court remand, the Commission last weekupheld its original ruling allowing for downward adjustments tofuel charges based on the refunctionalization of El Paso’s Chacocompressor station facilities as gathering. But, it stressed, theChaco refunctionalization did not warrant a change in the basetransmission rate under the 1996 settlement.

“There is a sound reason for not changing the settlement’s basetransmission rate but the same logic cannot apply to fuelcharges…The cost-of-service underlying the settlement’stransmission rates is a ‘black-box’ number so that it is notpossible to determine what costs of a particular facility wereincluded in the agreed-upon cost-of-service amount,” the order said[RP95-363-002].

In contrast, “the fuel charge is based on actual fuel costs forjurisdictional facilities. After the Commission finds that aparticular facility must be refunctionalized as gathering, the fuelcosts for that non-jurisdictional facility would no longer enterinto the calculation of the transmission fuel charges.” TheCommission ordered El Paso to immediately remove these costs fromits jurisdictional fuel charges.

Susan Parker

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