A producer-marketer group has called on FERC to “reject and totally disregard” Southwest Gas Corp.’s emergency plea for a five-month extension of the deadline to convert full-requirements (FR) transportation service on El Paso Natural Gas to contract demand (CD) service. But Public Service Company of New Mexico (PNM), who like Southwest Gas is an FR shipper, believes that deferring the conversion from Nov. 1 to April 2003 is the right thing to do to protect gas customers in the southwestern region next winter.

The Las Vegas, NV-based gas distribution company’s request “is another last-minute desperate attempt to delay the proceedings by misrepresentation and omission of the facts,” contend Indicated Shippers, which included Aera Energy LLC, BP America Production, BP Energy Co, Burlington Resources Oil & Gas, Conoco Inc., Coral Energy Resources and Texaco Inc. Southwest Gas, one of the largest FR shippers on El Paso’s system, serves customers in Arizona, Nevada and parts of California.

In its Aug. 14 plea, Southwest Gas said it hasn’t been able to make arrangements for its winter gas supply because of the uncertainty over capacity allocation on the El Paso system, and it claimed that producers would be able to extract monopoly prices from Southwest and other FR shippers for their winter supply because of this uncertainty, Indicated Shippers noted.

Southwest “alleges that monopoly power has been transferred from El Paso to the Indicated Shippers. This claim is absurd on its face,” the producer-marketer group told FERC [RP00-336-02]. The claim is “even more ridiculous” for producers in the San Juan Basin, who over the past years have sold natural gas at a “considerable discount” to the Henry Hub index, it noted.

“Gas producers connected to El Paso’s mainline in the Bondad region of the northern San Juan Basin have generally been forced to sell gas at a discount to the index due to oversupply of gas and gas-on-gas competition from extremely low prices in the Rockies,” Indicated Shippers said. “This demonstrates that there is actually a buyer’s market” for Southwest Gas and other shippers, the group noted.

Indicated Shippers further insisted that Southwest Gas is to blame for not making arrangements for its winter gas supply. “Even though Southwest received bids [from producers] for winter supply in July, it has not yet awarded the contracts.”

Southwest Gas and other FR shippers haven’t been able to confirm their winter supplies because “they still do not know the answer to such fundamental questions as how much capacity they will have or where they will have it” next heating season, PNM countered. “It is now the middle of August,” and existing FR shippers on El Paso are in the dark on this, it said.

“An extension of time to April 1, 2003 will allow for a resolution of the uncertainties for all parties…without causing unnecessary harm to the thousands of consumers throughout the Southwest that rely solely on natural gas delivered through the El Paso system for their heating and other human needs,” the New Mexico utility said.

Indicated Shippers, however, urged the Commission to stick to the timeline for the service conversion laid out in the May 31 order, which directed El Paso’s FR shippers to switch their transportation service to CD contracts by Nov. 1. By putting all of El Paso’s customers under the same type of service, FERC is hoping to end a years-long dispute over the disparate manner in which capacity has been allocated on the pipeline.

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