The Wheeler Ridge receipt point in the southern end of the SanJoaquin Valley is viewed as the critical focus in future settlementdiscussions on California’s future natural gas unbundling becauseit is of concern to at least four major gas players in California:Kern River Pipeline, Pacific Gas and Electric, El Paso andOccidental Petroleum, which reportedly has an added 200 MMcf/d ofgas from its Elk Hills properties that it wants to bring on themarket.

Oxy’s participation brings up two other contentious issues: (1)added compression at Wheeler to allow more firm supply capacity andwho pays for the addition; and (2) the question of whether an oldstate law mandating preference for California-produced suppliesgives Oxy an unfair advantage in getting its supplies to marketthrough Wheeler Ridge.

“Once the Wheeler Ridge issue is tucked away and the majorparties (PG&E, Kern River, Oxy) are okay with it, we canprobably cobble something (for a settlement proposal) together,”said a major shipper. “There is probably a feeling at theCalifornia Public Utilities Commission (which had tworepresentatives attend the meetings) that there is progress beingmade, but I think there will be some slippage on the schedule.”

The latest all-party meeting, hosted Sept. 23 by SouthernCalifornia Gas, was inconclusive, according to an experienced gasindustry observer who is part of the discussions. The next meetingis tentatively set for Oct. 6.

“We’re a month away (from the regulators’ Oct. 27 deadline), andwe’re not close yet,” said the source. “People are still arguingtheir own positions and I don’t see enough give-and-take to bringthe parties to a resolution in the next month. A lot of people aresetting forth their litigation positions as opposed to theirsettlement positions. If that keeps up, then we’re probably notgoing to meet the deadline.”

A proponent of a second merchant underground storage field in adepleted gas field in northern California near Lodi, Western HubProperties, offered a proposal for unbundling storage and balancingas part of the settlement, but most of the parties are not expectedto embrace this approach because it would mean daily balancing ofthe California transmission pipeline system, which no one in thetalks wants. Transwestern Pipeline made a proposal regarding use ofSoCalGas’ operating receipt point at Hector Road which is whereTranswestern’s supplies were first brought into California in the1960s. It was viewed as “too self-serving,” according to a majorshipper involved in the talks, noting that the major concern islimited to Transwestern and El Paso Natural Gas.

The CPUC has strongly encouraged SoCalGas and PG&E’s gasutility to work out an all-encompassing settlement that willprovide a market solution to the remaining unbundling ofCalifornia’s gas business – particularly focusing on transmissionand storage operations. Without a market solution, the CPUC judgeis set to conduct a series of evidentiary hearings early next year.

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.