Maximum Length of Contract Terms

PG&E offers bidders a range of options from one to 15 years. PG&E believes this is fair, even though large end-use customers may actually want longer contract terms. Calpine argues that it should be allowed to present bids for longer terms at negotiated rates.

NCGC/TURN are also concerned about the proposed 15-year term of contracts as well as the amount to be sold. NCGC/TURN believe those issues should be considered as part of a deliberative Gas Accord II process.

The Indicated Producers support the consistency of setting the maximum length of the contracts equal to the term of the Gas Accord II structure. The current Gas Accord was adopted for a five-year period. Until PG&E makes its Gas Accord II filing the term is unknown, as is the prospective structure of the system.

Coral weighs in on the issue of contract term length and questions the reasonableness of an open season process that invites capacity bids for a period that is likely to be longer that the Gas Accord II structure.

ORA is concerned that the proposed open season procedures are geared toward large end-users and that the 15-year term will only exacerbate this inequity. PG&E announced that the primary criteria for awarding capacity will be the highest economic value to PG&E, determined by multiplying the reservation rate times the requested term of service. A commitment of 10 to 15 years may be untenable for many small noncore customers, so they will de-facto be eliminated from the process. Large marketers and end-users that have the financial ability to make long-term commitments will bid for the longer terms, and will be awarded the contracts. ORA wants the contract term, as well as other important issues, thoroughly addressed in the Gas Accord II proceeding.