SoCalGas/SDG&E
SoCalGas/SDG&E have a contract for 52,508 Dth/d of capacity on GTN until October 2023. They are concerned that if GTN is successful in raising rates by $0.214/Dth beginning in 2012, SoCalGas/SDG&E's costs would increase by $4.1 million annually (52,508 Dth/d x $0.214/Dth x 365 days) or approximately $48 million over the life their contract.
We are skeptical of GTN's claim that it will receive FERC approval to increase rates by $0.214 Dth in 2012 if the Ruby Pipeline is built, which would be an increase of 65% over GTN's existing FERC-approved rate of $0.33/Dth. PG&E and Ruby LLC have highlighted several possible flaws in GTN's calculation of the $0.214 rate increase, which raises legitimate doubts about the calculation.67 As noted by Ruby LLC, FERC requires pipelines to share the risk for unsubscribed capacity.68 Thus, if there is a rate increase, GTN will have to bear some of the increase itself. There are also the realities of the marketplace. If GTN raises its rates by 65%, its shippers would have a strong incentive to seek less expensive options. In light of these circumstances, it is not at all clear that GTN can impose, or that FERC will authorize, any rate increase as a result of Ruby, let alone an increase in the range of $0.214/Dth. For the preceding reasons, we conclude that GTN's alleged rate increase cannot be relied upon as a basis for decision-making the instant proceeding.69
GTN argues that Sunstone will provide superior opportunities to obtain revenues from capacity release. Unlike Ruby, Sunstone will serve the Pacific Northwest, not just California. Thus, Sunstone would allow PG&E to release capacity to shippers serving either the Pacific Northwest or California markets.
On the other hand, if the Ruby Pipeline is built, GTN argues that PG&E's revenue from the release of its remaining GTN capacity will dramatically decrease, perhaps to zero, because there will be more capacity on GTN and Ruby than needed to serve the market at Malin.
There was no response to GTN's argument from other parties.
We are not persuaded by GTN's argument. GTN did not provide historical data on capacity released by PG&E or a projection of capacity that PG&E might release in the future. Without this data, GTN has not demonstrated that the issue of capacity release revenues is relevant.
Furthermore, the record suggests that PG&E will release little, if any, of the capacity it holds on a pipeline to the Rocky Mountains because PG&E projects that gas from the Rockies will cost less than gas from the WCSB.70 If this projection materializes, PG&E will need to retain its capacity on a Rockies pipeline to transport the cheaper gas, regardless of whether such gas is transported by Ruby or Sunstone.
GTN also admits that it currently has substantial unused capacity that it cannot sell at any price.71 If GTN cannot sell its own unused capacity, then it follows that there is currently no market for GTN capacity released by PG&E. Consequently, the addition of Ruby should not change the status quo; it appears there will be little or no market for GTN capacity released by PG&E either before or after the arrival of the Ruby Pipeline.
67 Exhibit Ruby-24, pp. 8 - 14; and Exhibit PG&E-6, Ch. 1, pp. 1-12 to 1-15. GTN and all other parties elected to waive cross examination of Ruby's witness on this matter.
68 GTN agrees that FERC requires interstate pipelines to share the risk of unsubscribed capacity. (Exhibit GTN-46, pp. 15 - 16.)
69 Even if GTN does raise its rate by 21.4¢, PG&E provided evidence that the Ruby Pipeline would still be cost effective. (Exhibit PG&E-6, Ch. 5, pp. 5-9 to 5-11.)
70 Exhibits PG&E-3, Chapters 2 and 6, and PG&E-6, Chapter 3.
71 GTN Reply Brief, p. 22.
