VI. Discussion

The greatest challenge to moving forward with the proposed open season is that it specifically targets contracts for periods after the expiration of the Gas Accord framework. The Commission has not determined the appropriate market structure and rules to apply to PG&E's intrastate pipelines and potential bidders are asked to commit to purchase capacity before knowing what they are buying. In addition, the proposed terms of the open season raise numerous policy questions that the Commission must address. It is most appropriate to consider these issues in PG&E's anticipated Gas Accord II proceeding which will provide a forum for considering the appropriate framework and rules for intrastate transportation on PG&E's system in the years beyond 2002.

Within one day of receiving PG&E's application for approval of its open season procedures, the Commission identified five key issues it needed to address to review the application. With the exception of Calpine, all other participants⁹ agreed that that these issues had to be understood before the application could be processed. Many respondents also raised other equally important topics that need review and analysis as part of the application process. Not one of these respondents felt that the expedited time schedule for the application afforded them the opportunity or the time to gather the data necessary for a thorough, thoughtful analysis.

In theory, we could allow PG&E to continue its current open season while we consider its Gas Accord II proposal. However, this would leave potential bidders in an untenable position -- forced to consider entering into long-term business arrangements when they cannot know the conditions that will apply. On balance, an expedited review of the Gas Accord II application, prior to any resulting open season, best serves market participants and consumers.

In summary, in the absence of the Gas Accord II filing and the deliberative process that will accompany that proceeding, neither the Commission, nor any of the parties can adequately process the issues that are necessary and germane to the future structure of the gas market in PG&E's territory. Therefore, the Commission is denying PG&E's application for approval of its open season procedures, and deferring further review of the open season to the Gas Accord II proceeding.