Stakeholders Weigh in on CPUC?s Gas Supply Rulemaking

By Published On: April 17, 2004

Immersed in a rulemaking focused on shoring up and diversifying the state?s long-term natural gas resources, the California Public Utilities Commission has received a range of comments and warnings from stakeholders. Liquefied natural gas projects have generated the most controversy, but also on the table are thorny interstate capacity and storage issues. The Office of Ratepayer Advocates cautioned in recent written comments that trying to pin down a predesignated mix of interstate pipeline capacity, storage, and LNG ?will only lock in the procuring utility?s position, stifle competition and likely increase the price of gas.? ORA endorsed a novel proposal by Southern California Gas and San Diego Gas & Electric that would allow the utilities?not the commission?to approve short-term, small-volume interstate capacity contracts for utilities in the state?s gas market. A lengthy regulatory approval process could likely foreclose some of the more desirable contract options, ORA said. SoCal Gas and SDG&E pointed out that an ORA review would help ensure that the transactions are reasonable and within a range the commission has already approved. The amounts and terms of the commitments would be limited but further diversify quantity, terms, and sources of supply, said the utilities. A key concern in the current market is access to economical gas supplies. The Southern California Generation Coalition (SCGC) urged the commission to prevent SoCal Gas from giving preference to some pipelines over others. SCGC also asked the commission to ?direct California gas utilities to adopt an open access policy? that ensures that suppliers willing to bear appropriate interconnection costs have access to their systems and eliminate peaking rates. On LNG, SoCal Gas and SDG&E propose a generic guideline that would put ratepayers on the hook for infrastructure investments. Consumer advocates, LNG developers, and others have panned the move, arguing that costs for facilities needed to access supply sources should instead be handled on a case-by-case basis. The Kern River Gas Transmission and Questar Southern Trails Pipeline companies worried that such a policy would advance certain interconnection projects without fully evaluating the supply sources that they would access. According to ORA and The Utility Reform Network, the proposal could give Baja California LNG facilities a competitive advantage since supplies from the region?s facilities already have good access to the California market. For their part, SoCal Gas and SDG&E assert that ratepayers should pay for infrastructure costs because they will benefit from more plentiful supplies. Kern River and Questar said that eliminating constraints at certain supply receipt points would increase access to the ?most prolific and least cost? gas supplies in North America. These receipt points are located at Wheeler Ridge in Southern California and a location proposed by SoCal Gas known as the North Desert Zone, which stretches from southeastern California to the Arizona border. Wild Goose Storage urged the commission to keep storage in the supply equation and asserted that nonutility storage could be the most cost-effective option. Next week, the commission is expected to launch an investigation into Sound Energy Solutions? (SES) plan to construct and operate an LNG terminal at the Port of Long Beach. Despite the Federal Energy Regulatory Commission?s assertion that it has jurisdiction over the project, the CPUC has said it will require SES to file an application for a certificate of public convenience and necessity, which would put the project under state regulators? oversight. In related news, the commission on April 12 released a draft decision that would deny a petition by Wild Goose and the California Natural Gas Producers Association asking that the CPUC weigh in on whether nonutility gas storage providers can interconnect with nonutilities such as gas producers. Wild Goose and the Natural Gas Producers also ask whether these connections amount to a pipeline transportation service. The plan released this week would defer making these decisions until broader issues of gas supply planning are resolved.

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