A FERC judge’s ruling in an El Paso Natural Gas complaint proceeding last month raises questions about the basis for the Commission’s action in ordering full-requirements (FR) shippers on the El Paso system to convert to contract-demand (CD) service next March, two large FR customers said. They asked FERC for a rehearing on the conversion order in light of the judge’s ruling.

The initial decision by FERC Chief Administrative Law Judge Curtis Wagner supports FR shippers’ claims that capacity curtailments to CD shippers at the California border during the state’s energy crisis were due to the “aberrational” actions of El Paso pipeline and the CD shippers themselves, rather than to the expanding capacity needs of FR shippers, said Arizona Public Service Co. (APS) and affiliate Pinnacle West Energy Corp [RP00-336].

The “aberrational” actions, as Wagner cited, included El Paso’s withholding of “at least 345 MMcf/d” of transportation capacity from the California market during the critical 2000-2001 period, when the state was plagued by exorbitant natural gas and electricity prices (See NGI, Sept. 30). The judge’s ruling further confirmed that California CD shippers suffered pro rata curtailments because they refused to make use of available capacity from the Permian Basin “during periods when the price of gas makes such use uneconomic in California,” the companies said.

Absent a hearing on these issues raised by Wagner, “the Commission has no evidentiary basis for its conclusion that the growth in FR contract requirements was ‘the most significant part of the [CD curtailment] problem,” APS and Pinnacle West noted. In its May decision ordering the service conversion, FERC concluded FR shippers, who serve the Southwest gas markets, essentially were hijacking El Paso capacity that was contracted for by CD shippers and intended for California markets (See NGI, June 3).

By requiring all of El Paso’s shippers to subscribe to CD service, the Commission is hoping to put an end to a years-long dispute between the FR and CD sides over the way capacity is allocated on the pipeline system.

“APS is not requesting consolidation or suggesting that the outcome of this [conversion] case depends upon the Commission’s affirmance of the ALJ decision” regarding capacity withholding by El Paso. “However, the ALJ decision demonstrates that the reasons and causes of curtailment on the El Paso system involve complex factual issues that require a hearing,” the companies said.

In a related filing, Arizona regulators and all of the existing FR shippers on El Paso, including APS and Pinnacle West, asked FERC to increase the amount of westward capacity that will be available to FR shippers during the initial capacity allocation, scheduled to occur on Oct. 15. The upward adjustment is necessary because of Wagner’s finding that El Paso understated its available winter capacity to the California border by 210 MMcf/d (270 MMcf/d summer) by not operating its system at the maximum allowable operating pressure (MAOP), they said.

This should put the amount of westward capacity available for FR conversions at 4.61 Bcf/d in the winter, and 4.27 Bcf/d in the summer. The Arizona Corporation Commission and FR shippers urged FERC to adopt Wagner’s conclusions on El Paso’s available westward capacity “immediately, so that El Paso’s initial allocation of capacity to FR shippers in this case can proceed without error.”

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.