PG&E's Comments

PG&E filed comments in support of its application to conduct an open season to provide the market with the opportunity to obtain capacity beyond the end-date of the Gas Accord. PG&E chose the timing of the open season so as to be competitive with other market participants offering capacity to California. PG&E argues that its open season application should be approved as it protects the core customers, limits the amount any one shipper can obtain, allows customers to choose the length of a contract term that is appropriate for their needs, and reserves capacity for a future open season.

PG&E submits that none of the issues raised by the protestants require prolonged review at this time. PG&E contends that issues raised by parties can be addressed in the Gas Accord II application and that most pipeline capacity commitments are made without price guarantees. PG&E believes the open season should take place now in order to allow it to compete with other interstate pipelines. PG&E believes that if the Commission denies or delays the open season, the market for interstate and intrastate capacity is and will be moving forward rapidly, with or without the participation of PG&E and many of its customers.

PG&E notes that by conducting an open season before the expiration of the Gas Accord, PG&E hopes to facilitate upstream interstate expansions and avoid potential supply constraints that will likely significantly increase market prices for all customers.

PG&E believes that with respect to core capacity, PG&E is withholding more than sufficient capacity to satisfy any reasonable level of capacity to be assigned to the core for the future. If PG&E or the Commission determines that more capacity is needed for its core customers, PG&E has other reserves it can assign to the care; if over-withheld, PG&E can make the excess available to the market.

To address the concerns regarding smaller, non-core customers, PG&E has again withheld a sufficient amount of capacity and will make that capacity available, with preferred access to the smaller non-core customers, in the second open season to be held next year. PG&E's rationale in setting aside this capacity was that some customers might not be in a position to commit to long-term contracts, or to commit to a contract this far ahead of the end of the Gas Accord and might choose short-term capacity closer to the start of the new contract term (January 1, 2003).

PG&E also limits the amount of capacity one shipper, including affiliate shippers, can control on any one path to mitigate the risk that a single shipper could acquire enough capacity to control the price of gas at PG&E's Citygate.

PG&E points out that neither the Commission's tariffs nor Commission policies prohibit long-term contracts and that PG&E need only seek Commission approval to enter into long-term agreements.