DISCUSSION
We deny approval of SDG&E Advice Letter 1210-G. SDG&E's proposal would essentially allow gas curtailment of the three power plants it serves on a prorata basis, and would relieve C&I customers of the possibility of curtailment. We agree that C&I customers should not be curtailed, considering that curtailment of C&I customers would have an insignificant impact on the overall level of curtailment of the three power plants. However, we are not convinced, given the short time we have had to review SDG&E's Emergency proposal that Encina and South Bay should be curtailed either. We are very concerned about the apparent impact of the operation of the Rosarito plant on the capability of the Southern California Gas Company and SDG&E to provide adequate capacity to SDG&E's customers.
The Encina and South Bay Generation customers were encouraged by SDG&E to switch to firm noncore service in April 2000. Now, SDG&E requests approval to reduce these customers level of service to interruptible, thus treating them differently from other firm noncore customers.
Although SDG&E purports that the stresses their gas system has recently begun experiencing came on "suddenly and unexpectedly", our preliminary review of the information we have received indicates that the primary cause of the stresses on the SDG&E gas system was the start up of the Rosarito plant on June 29, 2000. SDG&E has had knowledge of the Rosarito project since the early 1990's. SDG&E should have anticipated an increase in the load on their system with the start up of the Rosarito plant.
SDG&E could also have easily anticipated some of the changes to EG load brought about by electric restructuring. SDG&E indicates that one of the reasons it is having difficulty is that the new power plant owners are operating their plants differently from the manner by which SDG&E operated the plants. This seems like something which could have been anticipated earlier.
During the SoCal Gas/SDG&E BCAP A.98-10-12/A.98-10-031, and the Rosarito phase A.98-07-005 of that proceeding, SDG&E represented that its transportation system had enough capacity to support existing customers as well as the Rosarito load. Nothing in SDG&E's direct testimony discussed the impact of the Rosarito load on the existing line. The testimony discussed only adding a 3.7 mile pipeline extension from the Harvest Regulator Station, at the terminus of the gas transmission system, to a point east of the Otay Mesa border crossing. The facilities would include a metering station at the border and a potential compressor station near the border, if required. EGA notes in its protest that in the most recent BCAP, SoCalGas and SDG&E presented gas resource plans with minimal outlays for new facilities or upgrades to their existing gas transmission system. It is also the recollection of Energy Division staff that, in a meeting with SDG&E staff on March 30, 2000, utility personnel told the staff that they anticipated minimal problems delivering adequate gas supply to customers in the SDG&E area.
The increase in capacity demand on the SDG&E system does not appear to be temporary. SDG&E staff has told Energy Division that Rosarito demand is expected to increase from its current level of about 75 MMcfd to
over 100 MMcfd next year. The gas capacity shortage could be further exacerbated if the planned Otay Mesa plant begins operation as expected in the year 2003. SDG&E estimates completions of expansions and enhancements to its gas transmission system are 3 to 5 years in the future.
ORA notes that Sempra is a co-sponsor of a proposed pipeline project which could serve not only gas demand in Mexico, but also gas demand in the SDG&E area. The North Baja Pipeline Project extends from the California/Arizona border through southeastern California to Mexico, and then westerly to the Tijuana area. ORA implies that SDG&E and SoCalGas may have had a conflict of interest in expanding their own capacity if such expansion would potentially compete with the North Baja Pipeline Project. We note that the 2000 California Gas Report shows a sharp decrease in gas transportation service to the Electric Generation load of SDG&E beginning in the year 2003 and further declining in 2004.
It appears that gas curtailment of power plants in the SDG&E area could result in a reduction in electric supply to the SDG&E area. EGA states that it would need to derate Unit 1 of South Bay by 10 per cent if a gas curtailment occurs. Second, EGA states that it would take an hour to switch from gas to oil and during that time the power plant could not operate higher than a 50% capacity factor. In addition, the ISO is concerned that switching the power plants from gas to fuel-oil can cause the power plant to trip off-line. The impact of such an event from the perspective of the ISO, is measured by its effect on system reliability. Meanwhile, we have been informed by SDG&E that the Rosarito plant is supplying no electricity to the U.S.
SDG&E represents that approval of AL 1210-G will "help air quality" because it relieves C&I customers with "dirtier" alternative fuel capability of curtailment. We agree that C&I customers should not be curtailed, so the question with regard to SDG&E gas curtailment is whether the power plants in the San Diego area should be curtailed on a prorata basis along with the Rosarito plant. We have received several protests from parties which warn us of the potential air quality problems which may arise if a curtailment occurs, and power plants begin to burn fuel oil. It could be that a curtailment of the Rosarito plant would result in additional oil burning by that plant, but we do not currently have enough information about what Sempra (the owners of Rosarito) would do in the event of a curtailment or even if that plant has alternate fuel capability.
With its advice letter proposal, SDG&E has not demonstrated that they have taken adequate measures to prevent this situation from occurring. The customers of SDG&E should not have to suffer due to SDG&E's apparent lack of planning and foresight with regard to their gas transmission system. Gas curtailments triggering both decreased electric generation and increased air pollution caused by the firing of fuel-oil on the San Diego area are unacceptable. Given the information we have received to date regarding SDG&E's emergency proposal, we believe an alternate approach to curtailment is preferable to curtailing the power plants in the SDG&E area on a prorata basis. In the event a curtailment of gas transportation is necessary due to system capacity constraints, SDG&E shall be required to curtail the Rosarito plant first and only during each and every curtailment until adequate capacity is built to support the Rosarito load. In the event the total capacity utilized by the Rosarito plant at the time a curtailment is called is not adequate to support the required necessary reduction, the remaining amount of load to be curtailed shall be taken from all other power plants in SDG&E's territory, on a pro rata basis, simultaneously.
The Commission shall open an Investigation (OII) into the activities of Sempra Energy, SoCalGas and San Diego Gas and Electric with regard to the capacity planning of the SDG&E gas transmission system and its providing of service to the Rosarito plant.
This new curtailment procedure shall be permanent; until such time as the capacity constraints on the San Diego system are relieved permanently or until the Commission completes its investigation and rules otherwise.
SDG&E shall file an advice letter revising SDG&E's Gas Tariff Rule 14 to reflect these new curtailment procedures within 5 days following Commission approval of this Resolution.
