10. Modifications to the Open Season Process
This proceeding considers whether the structure and operation of the Open Season process are reasonable, including eligibility of upstream arrangements to serve core loads for Pre-Open Season Step 1, and the proposal to eliminate re-contracting and interruptible sales from the Open Season process. We adopt the recommendations of the JRO to modify the Open Season process, as discussed below.
10.1. Revisions to Step 1 Set-Aside Eligibility Criteria
The Step 1 set-aside eligibility criteria is revised to require qualifying interstate contracts to have a minimum term of 12 months and be in effect two months prior to the Open Season beginning date.51 The total set-aside provided to the Utility Gas Procurement Department or any other core customer must not exceed the customer's average daily usage during the Base Period, as defined in Special Condition 32 of Schedule G-BTS.
Currently, interstate contracts must be in effect for at least 18 months of the three-year backbone transmission cycle to qualify for Step 1 set-asides, and such contracts must be in place at least three months prior to the start of Open Season. The Application proposed to reduce from 18 months to 12 months the minimum term required for qualifying interstate contracts to be eligible to participate in Step 1, and that such contracts be in place at least one month prior to the start of Open Season. SDG&E/SoCalGas requested this change in order to better match core customers' short-term contracting practices and reliability needs.
Requiring qualifying interstate contracts to have a minimum term of 12 months and be in effect two months prior to the Open Season beginning date to be eligible for Step 1 set-asides is reasonable because it accommodates Applicants' desire to better match core customers' short-term contracting practices and reliability needs, provides customers adequate time to prepare for Step 2 bidding, and resolves parties' concerns about the potential for the Utility Gas Procurement Department to broker FAR rights to constrained receipt points.
10.2. Revisions to Step 1 Qualifying Contract Eligibility Criteria
Schedule G-BTS is modified to allow a wholesale customer a Step 1 set-aside up to the wholesale customer's average daily core usage during the Base Period, as defined in Special Condition 32 of Schedule G-BTS, based on the wholesale customer's (1) qualifying upstream pipeline contracts and/or (2) a suppliers' upstream pipeline contracts associated with the average daily contract quantity set forth in the wholesale customer's long-term firm gas supply agreement with that supplier to serve its core load.52 If the set-aside is based on the second option, the wholesale customer must identify the firm upstream capacity rights held by its supplier that are in place at least two months prior to the Step 1 assignment process for a term of 12 months or longer during the applicable FAR period.
Currently, certain long-term contract holders have the option to acquire Step 1 set-asides. Long Beach requests that Special Condition 25 of
Schedule G-BTS be revised to make eligible for Step 1 set-asides the long-term contracts held by the entity supplying gas to Long Beach.53
Because Long Beach does not have its own separate upstream pipeline contracts, SoCalGas will not qualify Long Beach's core load for participation in the Pre-Open Season Step 1 process. Therefore, Long Beach was not permitted to participate in the 2008 FAR Pre-Open Season Step 1 process. As a result,
Long Beach may experience decreased reliability and higher costs to its core customers.
Long Beach has not entered into its own separate upstream pipeline contracts because it procures most of its out-of-state gas, including the delivery of that gas on a firm basis, pursuant to a 30-year prepaid gas supply agreement. The gas that Long Beach receives pursuant to the prepaid gas supply agreement is used primarily and exclusively for the Long Beach core customer load.
No party opposes Long Beach's request. However, SDG&E/SoCalGas recommend that, for a supply agreement to qualify for a Step 1 set-aside, it should, at a minimum, have a term of 12 months or longer, the supply service should be provided on a firm basis, and the supplier must hold firm upstream pipeline capacity rights for a term of 12 months or longer coincident with the supply agreement term sufficient to meet the supply requirements specified in the contract.
The Commission has previously determined that the core loads of wholesale customers must share top priority to pipeline capacity with the core load of the primary utility.54 Long Beach's core load should be treated the same as the core load of SDG&E/SoCalGas and other wholesale customers.
It is reasonable to qualify an upstream pipeline contract associated with a wholesale customer's long-term firm gas supply agreement for a Step 1 set-aside because it ensures that supply agreements such as Long Beach's are treated similarly to other qualifying upstream contracts.
10.3. Notice of the Potential for Set-Aside Quantities
SDG&E/SoCalGas must provide notice of the potential for set-aside quantities immediately after the deadline for qualifying contracts to be in place, and provide a minimum of two months notice of the available capacity after set-asides are selected.55
As discussed above, SDG&E/SoCalGas initially proposed that qualifying contracts be in place at least one month, instead of three months, prior to the start of Open Season. SCE opposed this proposal because it did not provide FAR customers sufficient time to adequately prepare for the Step 2 bidding process. Above, we adopted the JRO recommendation to modify the Step 1 set-aside eligibility criteria to require, among other things, that qualifying interstate contracts be in effect two months prior to the Open Season start date.
Because the amount of time between the deadline for qualifying interstate contracts for Step 1 set-asides and the start of the Step 2 bidding process has been reduced, it is reasonable to require SDG&E/SoCalGas to provide a minimum of two months notice on the available capacity after set-asides are selected and to promptly provide notice of the potential for set-aside quantities so that Open Season participants have sufficient notice and time to prepare for the Step 2 bidding process.
10.4. Change Step 1 Set-Aside Option from
"Must-Take" to "Up-To"
The Step 1 set-aside is changed from "must-take" to "up-to" as an option for all customers, including the Utility Gas Procurement Department. Schedule G-BTS is modified to allow all Step 1 set-asides, including those for the Utility Gas Procurement Department, to be any quantity of the customer's choosing up to the maximum qualifying amount.56 This will allow a customer, including the Utility Gas Procurement Department, to take all of its set-aside option at one receipt point, a portion of its set-aside option at another, and possibly no set-asides at a third receipt point.
Currently, any eligible Step 1 customer, except the Utility Gas Procurement Department, receiving a set-aside may take a percentage of its maximum set-aside option at each receipt point (i.e., the "up-to" option). However, the Utility Gas Procurement Department must take its entire Step 1 set-aside or nothing (i.e., the "must-take" option).
SDG&E/SoCalGas requests that the Utility Gas Procurement Department be given an "up-to" set-aside option, similar to others receiving a Step 1 set-aside. It is reasonable to change the Step 1 set-aside from "must-take" to "up-to" as an option for all customers, including the Utility Gas Procurement Department because the Utility Gas Procurement Department should have the same flexibility as other customers to take all, some, or no set-asides at each receipt point.
10.5. Seasonal Differentiation of Step 2 Bidding
Rights for Core Customers
Schedule G-BTS is modified to provide the Utility Gas Procurement Department monthly bidding rights in Step 2, in addition to annual average bidding rights, so that quantities bid during the summer months that are less than the annual average will be provided as monthly bidding rights during the winter months such that the total yearly bidding rights do not exceed the average historical usage.57 The actual bidding capability of the Utility Gas Procurement Department must be no different nor be provided any preference over noncore customers.
SDG&E/SoCalGas request that all core customers, including the Utility Gas Procurement Department, be allowed monthly bidding rights in Step 2, in addition to annual average bidding rights.58 Thus, instead of only the annual average bidding rights currently provided to the Utility Gas Procurement Department and other core customers, these customers will also have monthly bidding rights defined on a seasonal basis to reflect the difference between Utility Gas Procurement Department's Commission-approved minimum summer interstate capacity requirements and minimum winter interstate capacity requirements at the time of the Open Season. The monthly summer bidding rights will be set at the Commission-adopted minimum interstate capacity requirement of the Utility Gas Procurement Department for core customers.
The quantities during the summer months that are less than the annual average will be provided as monthly bidding rights during the winter months such that the total yearly bidding rights will not exceed the average historical usage. Other core customers will be provided the same ratio of seasonal bidding rights as the Utility Gas Procurement Department.
SCGC recommends that the Utility Gas Procurement Department be subject to the same Step 2 bidding procedures as other customers that are eligible to bid in Step 2, and that the resulting monthly contracts not receive any preferential treatment. SCGC further recommends that bids made by Utility Gas Procurement Department for partial years should be awarded after annual base load bids are accepted.
Giving all core customers, including the Utility Gas Procurement Department, a seasonal differentiation of the bidding rights for Step 2, with no preferential treatment for any customer, is reasonable because it provides customers with bidding rights flexibility that will benefit customers and resolves concerns that the Utility Gas Procurement Department could receive preferential treatment.
10.6. Elimination of Step 3B from the Open
Season Process
Schedule G-BTS is modified to 1) eliminate Step 3B from the Open Season process, 2) clarify that all capacity expansion requests must be addressed through the procedures in SDG&E Gas Rule No. 39 and SoCalGas Gas Rule No. 39, and 3) change the name "Step 3A" to "Step 3."59 Except for the name change, Step 3A will remain unchanged.
Step 3, referred to as "Long Term Open Season", consists of Step 3A and Step 3B, for awarding receipt point capacity for contract terms of 3 to 20 years. Step 3A makes available to any creditworthy party, through one round of bidding, the existing receipt point capacity that remains available after Step 2 of the Open Season process. Step 3B makes available to any creditworthy party, through one round of bidding, the remaining base load existing capacity, expansions at existing receipt points, and new receipt point capacity.
Only one customer participated in Step 3A bidding during the last Open Season, and was awarded a contract for a 10-year term. No one participated in the Step 3B bidding during the last Open Season.
SDG&E/SoCalGas propose eliminating Step 3B from the Open Season process, and that "Step 3A" be renamed "Step 3." SDG&E/SoCalGas recommend that requests for receipt point expansion be processed on a continuous first-come, first-served basis outside of the Open Season process, pursuant to the procedures in SDG&E/SoCalGas Gas Rule 39.
It is reasonable to eliminate Step 3B from the Open Season process and for Step 3A to be renamed "Step 3" because capacity expansion requests can be addressed through the procedures set forth in SDG&E/SoCalGas Gas
Rule No. 39.
10.7. Shorten the Re-Contracting Period to Three Days
Special Condition No. 62 of Schedule G-BTS is modified to shorten to three days the current two-week re-contracting period following the Open Season process, and to clarify that re-contracting may be conducted on a continuous basis through the SoCalGas EBB.60 FAR holders are able to conduct these kinds of transactions on a continuous basis through the SoCalGas EBB.
As summarized above, after the conclusion of the Open Season, FAR holders have two weeks to exchange (re-contract) any part of their allocated capacity from any receipt point to a different receipt point to the extent capacity is available at the requested receipt point. SDG&E/SoCalGas recommend eliminating the re-contracting and interruptible sales transactions from the Open Season process because these transactions can be conducted on a continuous basis through the SoCalGas EBB.
Two weeks were originally allowed for re-contracting because no electronic system was available at the time to facilitate the re-contracting process. However, re-contracting can now be done continuously electronically. It is reasonable to shorten the re-contracting period from two weeks to three days because a three-day period will provide customers sufficient time to re-contract receipt point allocations, and because FAR holders may subsequently conduct transactions on a continuous basis through the SoCalGas EBB.
51 This adopts Recommendation No. 1.a of Exhibit No. JRO-1.
52 This adopts Recommendation No. 1.b of Exhibit No. JRO-1.
53 Long Beach requests that Special Condition 25 of Schedule G-BTS be modified to allow all wholesale customers to acquire firm receipt point access rights for their core load in Step 1 of the FAR allocation process equal to either the customer's existing upstream pipeline contracts or the applicable average Daily Contract Quantity set forth in the gas supply contract entered into by the wholesale customer to serve its core load.
54 D.88-12-099 (30 CPUC2d 545, 555).
55 This adopts Recommendation No. 1.c of Exhibit No. JRO-1.
56 This adopts Recommendation No. 1.d of Exhibit No. JRO-1.
57 This adopts Recommendation No. 1.e of Exhibit No. JRO-1.
58 SDG&E/SoCalGas state that, in addition to the proposal to provide seasonally differentiated Step 2 bidding rights, SDG&E/SoCalGas intend to implement the modification adopted in D.09-01-015 for calculating of bidding rights for tolling parties. Recommendation No. 1.f of the JRO confirms that Step 2 bidding rights be modified pursuant to D.09-01-015.
59 These are Recommendations Nos. 1.g and 1.h of Exhibit No. JRO-1.
60 This adopts Recommendation No. 1.i of Exhibit No. JRO-1.
