Although getting 13 parties to agree on how to solve the naggingproblem of imbalances, a new Pacific Gas and Electric Co.settlement agreement on its transmission and storage operations isjust the first of a number of changes that are anticipated underCalifornia’s ongoing gas industry restructuring program. Even forthis step, state regulators still must react to the agreement andthen market participants must assess whether the provisions willresult in the market efficiencies and cost-savings that shippersare anticipating.

There is no dollar-value attached to the deal. PG&E hasagreed to absorb any initial implementation costs, but thestakeholders generally are hoping for operating cost savings.

PG&E, of course, thinks the proposed settlement is a slamdunk for everyone and that regulators should approve itexpeditiously, but some of the parties are reserving judgment.Under California’s process for negotiated energy settlements,parties have until Nov. 21 to register opposition to the deal,although none has surfaced so far.

“Our hope is that no one will oppose it,” said PG&E attorneyPatrick Golden. “We think this is a reasonable settlement. If thereis some opposition, we would hope that the (regulators) will stilldecide that we can resolve it without a hearing.”

PG&E feels the deal on handling operational flow orders(OFOs) can go into effect while other larger issues are beingworked out in the overall gas restructuring case. The OFO talkswere started as a quick fix for a problem that many partiesexpressed frustration with during state hearings in January thisyear. A staff member working on the case for the California PublicUtilities Commission said that the regulators could incorporate theOFO deal with the larger proceedings, or they could approve itseparately or send it back to the parties with suggestions forchanges, which ultimately can only be made by the stakeholders.”We’re always interested in working with the industry to getprocesses in place that are going to make the market moreefficient,” said Ben Ledene, marketing director for one of the 13supporters of the deal, Calgary-based Alberta Energy’s Wild GooseStorage in northern California. Ledene noted that “in theory” thisis what the OFO settlement filed with the California PublicUtilities Commission Oct. 22 is supposed to do. “But only time willtell,” he 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. The concern has been that too manysystemwide OFOs were being called to correct imbalances, creatingunnecessary costs and operating headaches for PG&E’s customers.

Among the parties signing the settlement in addition to merchantunderground storage operator, Wild Goose, are: Calpine Corp.,Enron, Kern River Pipeline, Utilicorp Energy Solutions, the CPUCOffice of Ratepayer Advocates and the public schools’ aggregator,SPURR among other aggregators and agricultural interests.Collectively the parties include marketers, shippers, wholesale andretail end-use customers, and regulatory representatives. The lifeof the settlement is expected to be through 2002 when the PG&EGas Accord is scheduled to lapse.

PG&E’s Golden acknowledged that some of the issues revolvingaround the OFOs were not entirely resolved, but the parties agreedto establish an Internet-based “forum” to collect feedback andresolve operating problems that may arise from the implementationof new customer-specific OFOs as a means to cut down on the morecostly systemwide orders that have grown in number steadily sincethe Gas Accord first went into effect.

“It’s an attempt to keep the dialogue going,” Golden said. “Weunderstood that certain issues were not totally resolved, so wedecided to create a place where folks could come and discuss andresolve them. This settlement indicates we can work issues out withour customers in productive ways without necessarily going throughtwo or three weeks of testimony and legal briefs.”

OFO noncompliance charges have been lowered in the settlement(from 10 cents/therm to 2.5 cents/therm), and shippers with monthlycharges of less than $1,000 are exempted from the noncompliancecharges. The imbalances also have to be more than 5,000 Dth. (Ashipper could be out of balance in a percentage sense-5 or 10percent of its contractual load-but if it equated to less than5,000 dth, the customer would not be targeted with an OFO.) Inaddition, PG&E has agreed to improve the volume, flow andaccessibility of operating information, promising more on its PipeRanger Web Site.

(Individual OFOs can be called on up to 10 customers, under thesettlement. If the number is greater than that, a systemwide OFOwill be called, PG&E’s officials said.)

Among the unresolved issues are those related to PG&E’s gasutility infrastructure, with parties such as Wild Goose arguingthat real control of the balancing problem is not possible longerterm without added storage and more extensive metering thatprovides real-time (telemetered) information into the PG&Esystem control room on an hourly basis.

Imbalances now are handled on a monthly time frame, Ledene said,noting that they should be handled hourly as they are in westernCanada. “It is a matter of picking up the pace so you can managethe market on an hour-by-hour basis.”

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