As the first of a two-part move toward an all-party settlementregarding California’s future natural gas restructuring, PacificGas and Electric is expected this week to file with stateregulators a proposed settlement for the tighter management ofsystem imbalances – both their frequency and cost. A proposal,including provisions for using individual operational flow orders(OFOs), will be sent to the California Public Utilities Commissionfor approval Oct. 20, according to sources close to thenegotiations last week.

PG&E reportedly announced internally last Thursday that ithad “reached agreement in principle with key parties” on an OFOsettlement, an informed source said.

An overall result hoped for by the parties supporting thesettlement is that changes in the PG&E utility’s gastransmission operating guidelines and tariffs will create a moreefficient and cost-effective gas transmission system in thenorthern half of California.

Among the parties expected to support the CPUC filing areCalpine Corp., Enron, Wild Goose Storage, Utilicorp EnergySolutions, the CPUC Office of Ratepayer Advocates and the publicschools’ aggregator, SPURR, among others. The life of thesettlement is expected to be through 2002 when the PG&E GasAccord is scheduled to lapse.

With nearly two years of experience with the Gas Accord, thesettlement addresses various adjustments in the PG&E gasutility system, particularly in the way system balancing is handledand billed. In addition, it is expected to reduce the number ofsystem-wide OFOs, reduce OFOs’ market impact, and streamline thePG&E utility gas transportation and storage system byfine-tuning the Gas Accord procedures.

Shippers had expressed concern about the growing frequency ofOFOs and their inability to predict when they would be called bythe utility. As a result, shippers have complained about having totake “costly steps to correct imbalances.” Among the settlementitems are: a “forum” of system participants to resolve futurebalancing issues and monitor its effectiveness in reducing costsand the incidence of system-wide OFOs; use of customer-specificOFOs; and provision of “significantly more information” onPG&E’s Pipe Ranger Web Site, including daily operationalinformation, forecasts, and historical data. With certainconditions, exemptions from OFO noncompliance charges will beallowed customers with small imbalances.

A CPUC staff manager supporting the two-year-old natural gasrestructuring proceeding indicated there is no clear processestablished for dealing with the PG&E settlement and astill-to-be-consummated deal with Southern California Gas. The CPUCproceeding scheduled for Oct. 27 is expected to address both. Theregulators’ expectation for an “all-party agreement” envisionedresolution of the natural gas transportation and storage systemoperations statewide, and to every extent possible, moving toward amore seamless, consistent system between the two utilities,according to the CPUC staff person.

Richard Nemec, Los Angeles

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