A proposed settlement that calls for the restructuring of thetransportation and sales arrangements of Pacific InterstateTransmission (PITCO) is close at hand and could be filed at FERC assoon as today, says an official involved in the negotiations.

“I have some last…negotiations and discussions with partiestoday, and we’re hopeful that we will file” either Wednesday orThursday,” said Lad Lorenz, director of capacity and operationalplanning for Southern California Gas (SoCalGas), a PITCO affiliate.

Parties involved in the negotiations echoed similar sentimentsin comments filed last week at the Commission, hinting that asettlement was imminent. Most shippers withheld comments that werecritical of the PITCO proposed arrangement for now, but asked thatthey be allowed to protest later if they disliked the finalsettlement.

The proposal, which was unveiled during the summer, calls forPITCO to sell its 30% interest in 351 miles of loops on NorthwestPipeline back to the pipeline, and to assign the 240,000 Mcf/dcapacity it holds on Northwest and PG&E Gas Transmission,Northwest Corp. to Pan-Alberta (U.S.). PITCO has asked FERC for awaiver of the rules so it can permanently assign the capacityrather than release it [CP98-529].

The proposal is largely in response to a 1994 global settlementbetween SoCalGas and its customers in which the LDC was stronglyencouraged to restructure its gas supply and transportationarrangements with PITCO, which most agree has outlived its purpose.

PITCO was created solely to buy and transport Canadian gassupplies for resale to SoCalGas at a time, in the early 1980s, whenLDCs were severely restricted in their ability to purchase gas atthe international border and transport it. Since then PITCO hasfunctioned as a “middleman” between willing suppliers and buyers,and as an owner of capacity on pipelines to provide bundled salesservice. This has placed it in an “anomalous and unnecessarysituation” while the rest of the gas industry moves towardcompetition, it told FERC.

The global settlement would allow SoCalGas to share the PITCOrestructuring costs with ratepayers, but the amount of passthroughto SoCalGas would be limited to $31 million and the costs wouldhave to be incurred before the end of this year.

Lorenz declined to cite any trouble spots in the proposedsettlement. “At this stage, I’d rathernot comment about stickingpoints.” But Southwest Gas, an LDC served by Northwest Pipeline,believes that the permanent assignment of PITCO’s capacity, one ofthe largest shippers on Northwest, to Pan-Alberta could mean arevenue shortfall for the pipeline. “This scenario could create thepotential that the remaining firm transportation customers may berequested to bear the financial responsibility for the absence ofPITCO on the Northwest system.” It also said “the absence of thetraditional PITCO flow of Canadian natural gas could impact thereliability and quality of Northwest’s transportation service toits other firm transportation customers.”

The Northwest Industrial Gas Users want shippers to beadequately assured that, upon the assignment of the PITCO capacity,Pan-Alberta will flow the gas according to thecontract-specificoperational flow order (OFO) in the existing PITCO-Northwestagreement. The contract OFO is critical, they noted, because”Northwest relies on PITCO’s gas flows to provide displacementnecessary for [it] to provide Part 284 transportation service onbehalf of Northwest’s other shippers.”

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