BACKGROUND

SoCalGas filed Advice Letters 2924 and 2925 to request authority for two customers, AAA Glass by AL 2924 and HF Coors Company by AL 2925 to deviate from the two-year time commitment specified by Special Condition 4 of the core subscription tariff, G-CS. Currently, the contract expiration dates are August 1, 2001 for HF Coors and February 2, 2002 for AAA Glass. SoCalGas states that the request was made so that AAA Glass and HF Coors could take service under another rate schedule allowing them to procure natural gas supplies from a third party provider or marketer.

TURN protested SoCalGas' Advice Letters 2924 and 2925 on June 21, 2000 on the basis that the requests were not accompanied by sufficient data and justification to allow a deviation from Special Condition 4 of G-CS for the two customers, unduly discriminating against core subscription customers that are subject to the time commitment required by G-CS. TURN also protests that SoCalGas does not address how it intends to treat similar requests by other core subscription customers. TURN is concerned that allowing the deviations without clear and certain reason may result in an "end run" around Special Condition 4. TURN is also concerned about cost shifting impacts on the core allocation of the Interstate Transition Cost Surcharge (ITCS).

SoCalGas' responded to TURN's protest on June 28, 2000 and filed supplemental Advice Letters 2924-A and 2925-A on July 7, 2000 recognizing the points made in TURN's protest regarding the ITCS obligation and future treatment of the two-year requirement of G-CS. In its response to TURN's protest, SoCalGas requests similar treatment to a prior request, Advice No. 2521, in which the customer was released from G-CS service upon paying a fixed reservation charge on its remaining contract term. SoCalGas amended its request in ALs 2924-A and 2925-A to indicate that the customers would enter service under core rate schedules upon termination of their G-CS contracts, and pay the same amount of interstate pipeline demand costs under G-CS. Addressing the second part of TURN's protest, SoCalGas clarifies that it would extend the same deviation to any G-CS customer with the provision that the customer pays for remaining reservation charges under its G-CS contract. Finally, SoCalGas states that it "does not anticipate many, if any, of the approximately 130 remaining G-CS customers requesting early termination of their contracts."

Core subscription service was established in D.90-07-065, to make available procurement and transportation services to noncore customers who wished to procure gas supplies at a high level of transportation priority from the utility. Customers taking service under core subscription service were committed to two-year contracts with take-or-pay provisions.

The certainty of the customer's commitment provided by the contract term is not only a key element in the purpose of providing core subscription service, but impacts financial and operational planning of the utility. D.90-09-089 states the following regarding the contractual obligation:

"The service was intended to provide a reliable, premium service for customers who do not want competitive options and who are willing to make a commitment to the service.

We stated our view that core subscription should be a service for customers willing to make a commitment to the utility in trade for a reliable service that will require little or no effort on the customer's part. The customer's commitment would in turn reduce utility risk and improve operational and financial planning.

D.90-07-065 also stated that the purpose of the core subscription service would not be to provide noncore customers with access to utility gas supplies when they happen to be priced comparatively low, or a means to increase utility loads. The purpose of the core subscription service would not be to provide customers with yet another competitive option on a short-term basis."¹

Impacts on the core ITCS as a result of the core subscription program were well- considered in D.91-11-025, which set recovery of the ITCS. A volumetric charge is designed to recover stranded costs from interstate pipeline capacity. The core class has a cost responsibility of up to 110% of its core reservation. D.91-11-025 identified Utility Distribution Company (UDC) planning considerations for core subscription service as a potential cause of stranded capacity, stating, "Stranded capacity could also occur as a result of the reservation of transportation capacity for core subscription customers... Stranded costs could occur if demand for the core subscription service declines in subsequent years or if the utilities are unable to broker excess core subscription capacity in off-peak periods."²

1 1. D.90-09-089, p.68, slip opinion.

2 2. D.91-11-025, p.14, slip opinion.