For the second time in a little over two months, El Paso Natural Gas full-requirement (FR) shippers have thumbed their noses at the pipeline’s offer of turned-back transportation capacity on its system.

In an open season that ended Oct. 31, El Paso reported it received no bids from FR shippers for the total of 521,636 Mcf/d of capacity that it made available for bidding during a 16-day period. All of the capacity had been turned over by El Paso’s contract demand (CD) shippers to assist FR shippers in their FERC-ordered conversion to CD service next year. The CD shippers’ binding offers of turned-back capacity have since expired, the pipeline said, adding that the capacity will remain with the original CD holders.

This followed similar action by El Paso’s converting FR shippers during an open season that ended in mid-August. The majority of FR shippers at the time boycotted the bidding for 725 MMcf/d of available turned-back capacity. Only one FR shipper, MGI Supply, and five California-regulated utilities bid on the capacity, and were awarded a total of 220 MMcf/d (See NGI, Aug. 19).

The open seasons for the turned-back capacity were critical steps in the FERC plan to convert all of El Paso shippers to CD service by May 2003. By requiring El Paso’s FR shippers (or east-of-California customers) to subscribe to CD service, the Commission is hoping to put to rest a years-long dispute between the two shippers’ camps over the disparate manner in which transportation capacity has been allocated on the pipeline.

While both open seasons were intended primarily for the benefit of the pipeline’s FR shippers, the FR shippers held off from bidding on turned-back capacity due to a continuing dispute with the pipeline over how much west-flow El Paso transportation capacity (existing and expansion capacity) will be available for allocation to them when they convert to CD service.

In a letter submitted to El Paso President Patricia Shelton on Oct. 31, an attorney for FR shippers said the group would not be in a position to submit bids for turned-back capacity until “critical predicates” first are satisfied. For starters, the FR shippers noted they have asked FERC to increase El Paso’s “preferred capacity number” for FR shippers by 210 MMcf/d in the winter and 270 MMcf/d in the summer to reflect a recent decision by FERC Judge Curtis Wagner. Wagner ruled that El Paso withheld 210 MMcf/d or possibly more from California during the state’s energy crisis.

Moreover, they said El Paso’s Oct. 15 proposed east-of-California capacity allocation was “fundamentally inconsistent” with prior FERC orders in the case. “Therefore, given the continuing uncertainty as to El Paso’s true capacity, and absent Commission action to date, we (like you and all the other parties) must await further Commission action to resolve these initial allocation issues before we will know how much, if any, turnback capacity may be needed.”

El Paso “should not misunderstand that while at this time we are unable to participate in the capacity turnback process as unilaterally structured by El Paso, it does not mean that we are not interested in additional capacity,” said the FR shippers’ attorney.

The price for the turned-back capacity was another reason FR shippers stayed away from the open season, said Roger Buhrer, a spokesman for Southwest Gas, a major FR shipper on El Paso. “The price was such that it was a California border price. We felt we could do better on the open market,” he told NGI. In addition, it “didn’t meet our needs on when the capacity became available,” he said.

FR shippers — which mostly serve Arizona, New Mexico and Texas — have had almost unfettered access to capacity on the El Paso line over the years, often without paying reservation costs for incremental capacity, which prompted numerous complaints from the CD shippers who supply natural gas to California. CD shippers claimed FR shippers were hijacking El Paso capacity that was intended to serve the California market. The complaints propelled FERC to order the system-wide conversion to CD service on El Paso.

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