Reid
Reid states that PG&E's Electric Fuels Department independently derived its need for Ruby transportation capacity. Reid adds that he served on PG&E's Procurement Review Group from 2002 until March, 2008, and is familiar with the natural gas capacity needs of PG&E's Electric Fuels Department.
GTN argues that D.91-11-025 and D.06-12-029 prohibit PG&E's Core Gas Supply and Electric Fuels Departments from jointly negotiating for capacity on the Ruby Pipeline. We find that neither decision supports GTN's contention.
GTN cites D.91-11-025, Appendix B, Rule VI.G., which states as follows:
PG&E's electric department shall purchase gas supplies separately from PG&E's gas department except that PG&E's gas department may sell gas, under contracts existing as of September 1, 1991, to PG&E's electric department if such sales are required to avoid contract penalties.
The above provision in D.91-11-025 prohibits Core Gas Supply from selling gas to Electric Fuels except in limited circumstances. That prohibition is not relevant to the situation at hand because the two Departments are not doing business with one another. As PG&E witness Roy Kuga testified:
Each [Department] will have its own, separate firm transportation agreement with Ruby. These agreements will be administered independently by each organization. All scheduling, capacity release, invoicing and settlement will be handled separately. (Exhibit PG&E-6, p. 1-11.)
GTN also cites D.06-12-029, Appendix A-1, Rule V.D., which states:
Joint Purchases: To the extent not precluded by any other Rule, the utilities and their affiliates may make joint purchases of good and services, but not those associated with the traditional utility merchant function. For purpose of these Rules, to the extent that a utility is engaged in the marketing of the commodity of electricity or natural gas to customers, as opposed to the marketing of transmission and distribution services, it is engaging in merchant functions. Examples of permissible joint purchases include joint purchases of office supplies and telephone services. Examples of joint purchases not permitted include gas and electric purchasing for resale, purchasing of gas transportation and storage capacity, purchasing of electric transmission, systems operations, and marketing. The utility must insure that all joint purchases are priced, reported, and conducted in a manner that permits clear identification of the utility and affiliate portions of such purchases, and in accordance with applicable Commission allocation and reporting rules.
The above provision in D.06-12-029 applies to joint purchases by utilities and affiliated companies. PG&E's Core Gas Supply and Electric Fuels Departments are not affiliated companies; they are both part of the same utility. Thus, the above provision in D.06-12-029 does not prohibit Core Gas Supply and Electric Fuels from jointly negotiating for capacity on the Ruby Pipeline.
Other factors reinforce our conclusion that PG&E's negotiations did not violate any Commission decision or policy. PG&E argues persuasively that it maintained a strict separation between Core Gas Supply and Electric Fuels during negotiations with Ruby LLC. The two Departments are in separate buildings and have separate personnel. Each Department independently determined that it needed Ruby capacity to diversify its portfolio - by pipeline and supply basin - for reliability, price stability, and lower costs. Also, each Department separately derived the amount of Ruby capacity that it needed.90
During the course of negotiations, Core Gas Supply negotiated with Ruby LLC exclusively, without the presence of Electric Fuels employees, on the proposed terms and conditions that are unique to Core Gas Supply, such as contract quantities. Likewise, Electric Fuels conducted its own independent negotiations with Ruby LLC, without the presence of Core Gas Supply employees, on the proposed terms and conditions unique to Electric Fuels. Negotiations on provisions common to both Core Gas Supply and Electric Fuels, such as the anchor shipper rate, receipt and delivery points, and compressor fuel rate, were conducted with employees from both Departments under the direction of Roy Kuga, the PG&E officer in charge of both Departments.91
PG&E used a similar process in 2007 to negotiate new transportation agreements on the GTN pipeline for Core Gas Supply and Electric Fuels.92 The result was a settlement agreement that included separate capacity commitments for Core Gas Supply and the Electric Fuels. The parties to the settlement included PG&E, this Commission, and GTN. FERC approved the settlement in 2008.93 GTN did not express any concerns during the settlement negotiations about the joint involvement of PG&E's Core Gas Supply and Electric Fuels Departments.94 It is disingenuous for GTN to now argue that it was improper for the Core Gas Supply and Electric Fuels Departments to negotiate simultaneously with Ruby LLC when GTN itself negotiated with these two Departments simultaneously in 2007.
We are not persuaded by GTN's argument that Core Gas Supply and Electric Fuels shared information improperly during negotiations with Ruby. One instance cited by GTN concerned PG&E's designating a Core Gas Supply employee as Ruby's point of contact. This employee was responsible for exchanging drafts of the Precedent Agreement with Ruby LLC that contained proposed terms for both Core Gas Supply and Electric Fuels. GTN believes this proves that Core Gas Supply was negotiating on behalf of Electric Fuels. We disagree. As explained previously, the record shows that Core Gas Supply and Electric Fuels negotiated separately.95 There is no evidence that this particular Core Gas Supply employee negotiated for Electric Fuels.96 As a matter of convenience, PG&E responded to Ruby LLC during the negotiations with integrated comments from both Core Gas Supply and Electric Fuels. No Commission policy was violated by the fact that PG&E designated a Core Gas Supply employee to serve as a single point of contact for Ruby LLC.
GTN also alleges that an Electric Fuels employee sent an e-mail to Core Gas Supply97 that contained "Electric Fuels' internal market-sensitive long-term forward price curves.98" However, PG&E represents that the forward-price curves were available to both Departments already. According to PG&E, it is the responsibility of another PG&E organization - the Market Risk Management Department - to forecast the price of natural gas and to share this information company wide. It was information prepared by this Department that was contained in the e-mail.99 Based on PG&E's representation, we find that GTN has not substantiated its allegation that the e-mail in question shows there was an improper sharing of information between Electric Fuels and Core Gas Supply.
90 Exhibit PG&E-6, pp. 1-10 and 1-11.
91 Exhibit PG&E-6, pp. 1-8 and 1-9; 3 TR 320: 18 - 321: 5 (PG&E/Clare); and 4 TR 370: 20 - 28 (PG&E/Kowalewski).
92 Exhibit PG&E-6, p. 1-11; and 1 TR 105: 7-14.
93 122 FERC 61,102 at ¶ 13 (January 7, 2008).
94 Exhibit PG&E-6, p. 1-12.
95 Exhibit PG&E-6, pp. 1-8 through 1-11.
96 3 TR 313 - 314, and 320:18 - 321:5 (PG&E/Clare).
97 The e-mail is contained in Exhibit GTN-23.
98 GTN Opening Brief, p. 40.
99 PG&E Reply Brief, pp. 8 - 9.
