Calpine, Mirant Seen As Winners in Gas Accord

A comprehensive deal on most aspects of Pacific Gas & Electric?s gas rates was approved by the California Public Utilities Commission, despite concerns that it favors specific merchant power plant owners? and that it could skew siting away from where electricity is used to where gas is more cheaply available. Known as the ?gas accord,? the deal approved December 18 has in it?among dozens of regulations?lower rates for noncore customers who connect directly to PG&E?s ?backbone? gas transmission pipeline. That rate, however, applies only to new customers hooking into the main line after mid-1998. ?That advantages Calpine and Mirant to the disadvantage of others, and the advantage is huge,? said commissioner Loretta Lynch. The Utility Reform Network, however, supports the deal on backbone rates. Commission president Mike Peevey said that small distributed generation and cogeneration customers (those using less than 250 kW) would not be saddled with a rate increase under the accord. By allowing cheaper rates for customers directly tapped into the backbone, it could promote siting new power plants along that backbone, according to commissioner Carl Wood. In so doing, it could affect power plants being sited in more efficient geographical areas?that is, where the people and businesses that use the electricity are located. That would put the onus on developing new transmission lines to take the power from the backbone sites to users?a far more difficult task than getting new power plants built. In addition, the move could induce power plants to be built on greenfield sites along the backbone instead of existing brownfield sites, possibly leading to more extensive environmental damage. The CPUC also declined, as it did with the original gas accord in 1997, to roll in rates from PG&E?s pipeline No. 401 to pipeline No. 400. The former is used primarily by noncore customers, the latter by core customers. <b>Gas Accord Details</b> <ul><li>Extends firm tradable rights structure for two years.</li> <li>Authorizes a revenue requirement just for 2004 of $436 million?a little over 1.5 percent increase. PG&E must file again in March to set rates for 2005.</li> <li>Sets a systemwide load factor of 77 percent. Next year?s revenue filing will reflect ?more definitively? the impact of changes in throughput due to electrical generation, according to commission member Loretta Lynch.</li> <li>Provides more flexibility to offer storage to noncore customers.</li></ul>