Proposed tariff changes that could jeopardize the future existence of the controversial full-requirements (FR) contracts on El Paso Natural Gas came under attack last week from the pipeline’s East-of-California (EOC) customers.

At issue is a proposal that would require FR customers who move to new primary delivery points on El Paso’s system to permanently convert to contract demand (CD) status. A majority of El Paso’s FR customers is located in the EOC market.

FR service, which provides EOC customers with unlimited access to firm capacity at no additional demand charges, has been a source of considerable dispute on El Paso, with CD customers arguing that the service aggravates the capacity shortage situation on the pipeline.

But Salt River Project Agricultural Improvement and Power District (SRP) and Phelps Dodge Corp., both FR customers, contend the proposed tariff revision would permit El Paso to “unilaterally modify [their] bargained-for contract provisions,” which they say allow them to add new FR delivery points, and to convert FR delivery points to delivery points with fixed maximum daily quantities, without affecting their FR status.

With its proposed tariff revisions, El Paso is attempting to “implement back-door changes to shipper contracts,” the two shippers told FERC last week (RP02-47). SRP and Phelps Dodge urged FERC to reject the tariff changes outright, or, in the alternative, to postpone them until El Paso can meet the “heavy burden” of demonstrating why the revisions are required by the public interest. They believe the proposals should be considered as part of El Paso’s ongoing Order 637 proceeding at the Commission.

Public Service Company of New Mexico (PNM), an FR customer on El Paso, was similarly concerned that the tariff changes would invalidate its existing contract rights. In addition, it said FR customers that temporarily release capacity would be required to permanently convert to CD status under El Paso’s proposal.

“Such sweeping changes, which abrogate contract rights currently held by PNM, could be obtained only through a Section 5 filing and are not appropriate in these proceedings,” the New Mexico local distribution company said.

Not surprisingly, Dynegy Marketing and Trade, a CD customer, supported the proposed El Paso tariff change, saying the pipeline “has correctly mandated that full- requirements customers moving to a new primary delivery point must permanently convert to contract demand status.”

But the marketer had problems with a proposal that would require shippers wanting to change primary delivery points on the North System and South System to give El Paso prior notice of five business days, and to give 20 calendar days’ prior notice for changes in other primary delivery points.

Dynegy argues that the waiting periods are “inconsistent” with the requirements of Order 637, are “unreasonable and unjustified,” and would render released capacity “effectively useless.” Although Order 637 did not specify an “exact timing” for segmented capacity-release transactions, the Commission in 637 did require pipelines “to make the process of segmentation as easy as possible, for example, by permitting segmentation to take place quickly and efficiently through the nomination process.”

While El Paso’s proposed tariff changes “may technically allow shippers to change to new primary points,” Dynegy contends that the five-business-day/twenty-day time delay “will ensure that shippers cannot use this right effectively.” Other pipelines are able to determine quickly whether primary delivery point changes can be made without affecting their operations, it said, adding that El Paso should be able to make these decisions “instantaneously and, if not, certainly in less than one hour.”

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