V. Comments on Draft Decision
The draft decision was electronically distributed and mailed to the service list on December 6, 2001. In accordance with Rule 77.7(f)(9), the time for filing comments to the draft decision was shortened to December 10, 2001. Comments to the draft decision were filed by SoCalGas and by Duke Energy. Those comments have been considered and appropriate changes have been made to the decision.
1. D.01-06-086 authorized SoCalGas to perform the well design work that would allow it to free up and reclassify the 14 Bcf of cushion gas as working gas available for sale.
2. D.01-06-086 authorized SoCalGas to recover the cost of the well work performed in order to reclassify the cushion gas.
3. D.01-06-086 prohibits SoCalGas from selling the reclassified cushion gas until the Commission directs it to do so on the terms and conditions specified in a Commission decision.
4. D.01-06-086 stated that there would be a second phase of this proceeding to address all of the remaining ratemaking issues, including the allocation of the anticipated net gain on sale, the anticipated reduction in operating costs, and the allocation of benefits among customer classes.
5. D.01-06-086 solicited opening and reply comments on whether any restrictions should be imposed on SoCalGas with respect to the sale of the 14 Bcf of reclassified cushion gas, and whether Phase 2 of this proceeding should be handled in SoCalGas' BCAP.
6. SoCalGas proposes that the 14 Bcf of gas be sold in a one-round sealed bid process, with all bids made in increments of 1 Bcf.
7. ORA proposes that 70% of the reclassified cushion gas (9.8 Bcf) be allocated at book cost to core customers, and that the remaining balance of 4.2 Bcf be sold using a competitive sealed bid procedure.
8. ORA also proposes that SoCalGas be allowed to recover from the sale proceeds of the 4.2 Bcf the book cost of the cushion gas plus the capital cost of the improvements, and that the remaining net proceeds be allocated between SoCalGas' shareholders and noncore customers.
9. None of the commenting parties supported the idea of giving electric generators and qualifying facilities a preference over others to purchase the 14 Bcf of gas.
10. No hearings are needed.
11. The proposals of SoCalGas and ORA both have their own advantages and disadvantages.
12. Two public policy reasons to consider are procuring gas supplies for core customers at reasonable prices, and whether SoCalGas has earned a rate of return on this cushion gas in the past.
13. Directing SoCalGas to transfer all of the reclassified cushion gas, 14 Bcf, to its core portfolio at an interim floor price set at book value will ensure that core customers have adequate gas supplies for the winter, and will free up additional system capacity during the winter season for noncore customers.
14. All of the Phase 2 issues will be addressed in this proceeding since the issues are better suited for resolution in this proceeding than in the BCAP.
1. In order to decide under what terms and conditions the reclassified cushion gas should be sold, the Commission should consider each proposal's advantages and disadvantages, as well as other policy considerations and current market conditions.
2. SoCalGas should be directed to transfer 100% of the reclassified cushion gas, 14 Bcf, to SoCalGas' core portfolio at an interim floor price set at book value subject to a possible upward adjustment in Phase 2 of this proceeding.
3. The final determination of the price to be paid by the core for the 14 Bcf of reclassified cushion gas, as well as what should be done with any remaining net proceeds, if any, will be decided in Phase 2 of this proceeding in conjunction with the other Phase 2 issues.
IT IS ORDERED that:
1. Southern California Gas Company (SoCalGas) is directed to transfer 100% of the reclassified cushion gas, 14 Bcf, at its Aliso Canyon and La Goleta storage facilities to SoCalGas' core portfolio at an interim floor price using the book value of the cushion gas ($4.4 million or 31 cents per Mcf), subject to possible upward adjustment following the development of an evidentiary record in Phase 2 of this proceeding.
2. SoCalGas shall track in the previously authorized memorandum account the difference between the interim floor price of 31 cents per Mcf and the final price that will be decided by the Commission in Phase 2 of this proceeding.
3. Within five days of the transfer of 100% of the reclassified cushion gas to the core portfolio, SoCalGas shall file and serve a notice describing the date upon which this transfer took place.
4. The assigned Administrative Law Judge, in consultation with the assigned Commissioner, shall develop a schedule for the Phase 2 portion of this proceeding.
This order is effective today.
Dated , at San Francisco, California.
