ALJ/TJS/avs DRAFT CA-4

11/29/2001

Decision DRAFT DECISION OF ALJ SULLIVAN (Mailed 10/26/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company to Continue the Unbundling of Interstate Transmission Charges from Core Transport Rates, and to Address Canadian Transmission Capacity and Charges As They Relate to Core Transport Rates, Beginning January 1, 1998.

Application 96-09-028 (Filed September 18, 1996)

OPINION GRANTING IN PART

PETITION TO MODIFY DECISION 97-12-032

I. Summary

We grant in part the Petition of the Association of Bay Area Governments Publicly Owned Energy Resources (ABAG POWER) and the School Project for Utility Rate Reduction (SPURR) to modify Decision (D.) 97-12-032 (Petition) to require PG&E to offer natural gas aggregators serving core customers an assignment of a proportionate share of the gas transmission capacity on the Canadian pipelines known as ANG and NOVA at the "as-billed" rate.

Over the last year, the extreme volatility in the market price for gas transportation on these pipelines has threatened to destabilize the 6 percent of the core natural gas market served by core aggregators. For example, gas transportation costs on the ANG and NOVA pipelines in December 2000 rose to a market price of $9.18 per Dth, - a 35-fold increase in cost from the "as-billed" rate of $.26 per Dth that PG&E's customers paid. The remedy sought by ABAG POWER and SPURR, an assignment of transmission capacity at the "as-billed" rate, will introduce a measure of certainty and stability to the costs of transporting gas from Canadian basins.

Granting core aggregators an assignment of transmission capacity will produce positive benefits for all core customers. In particular, it will help preserve customer choice for all customers, will stabilize the operations of a diverse set of gas suppliers and purchasers now operating in the core market, and it will result in reduced prices to the customers of core aggregators. Although granting core aggregators an assignment of ANG and NOVA capacity last year would have resulted in price increases to core customers of about 1 percent, this is a reasonable cost for stabilizing this sector of the gas supply market. Moreover, market conditions this year should produce no increased prices to core customers.

Finally, we adopt a series of restrictions on those seeking an assignment of gas transportation capacity on the ANG and NOVA lines to ensure that regulations will stabilize the gas market without subsidizing the provision of gas by core aggregators. In particular, as a condition for receiving an assignment of ANG or NOVA capacity, a core aggregator must make a one-time decision to subscribe to capacity on ANG, NOVA and PGT until the end of the Gas Accord. Moreover, the assignment of capacity is limited to the average taken in the year ending June 1, 2001, the year preceding the filing of the petition.