11. Assignment of the Proceeding
Timothy Alan Simon is the assigned Commissioner for A.07-12-021 and Timothy Kenney is the assigned ALJ.
1. PG&E currently obtains more than half of its natural gas from the WCSB. The amount of gas available for export from the WCSB is declining due to falling production and rising Canadian demand.
2. PG&E has a need to diversify away from its heavy reliance on declining WCSB gas supplies. PG&E's proposed gas transportation arrangements on the Ruby Pipeline and PG&E's Redwood path that are described in A.07-12-021 provide a reasonable and cost-effective means for doing so.
3. It is the Commission's policy for PG&E to have a diverse portfolio of interstate pipeline capacity across multiple supply regions to ensure adequate and reliable supplies. PG&E's proposed capacity on the Ruby Pipeline will help to achieve the Commission's policy goal.
4. PG&E's current portfolio of interstate pipeline capacity for Electric Fuels represents only a fraction of PG&E's forecasted average daily demand of the gas that PG&E will be required to supply for gas-fired generation during the period of 2011 through 2026. Even with the proposed Ruby capacity, PG&E's interstate pipeline holdings will represent less than half of forecasted average daily demand and less than a quarter of peak demand through 2026.
5. It is the Commission's policy for PG&E to obtain firm interstate gas pipeline capacity rights to help ensure the reliability of gas-fired generation. PG&E's proposed capacity on the Ruby Pipeline will help to achieve the Commission's policy goal.
6. Ruby will deliver Rocky Mountain gas directly to Malin where it will compete with gas delivered from the WCSB by GTN. This will create transportation-on-transportation and gas-on-gas competition at Malin. This competition should result in lower costs for California over the long-run.
7. The Ruby Precedent Agreement provides PG&E with favorable rates, terms, and conditions for accessing Rocky Mountains gas supplies that have not been matched by other pipelines.
8. PG&E's Electric Fuels Department currently does not have firm capacity on PG&E's intrastate gas transportation system. The firm gas transportation arrangements on the Redwood Path requested by PG&E will provide an important measure of reliability for the Electric Fuels Department's gas supply.
9. PG&E currently has one tariff for firm on-system deliveries (G-AFT), and a second tariff for firm off-system deliveries (G-AFTOFF). PG&E does not have a tariff that clearly states a shipper may use its capacity on the PG&E gas transmission system to make both firm on-system and firm off-system deliveries.
10. PG&E requests approval of the following non-standard conditions of service on the Redwood Path for Electric Fuels: (i) a start date tied to the in-service date of the Ruby Pipeline, and (ii) termination rights for both the Electric Fuels and the CGT Departments in the event the Ruby Pipeline does not progress in a timely manner. These non-standard conditions serve a legitimate purpose, and there is no evidence these conditions are detrimental to PG&E's ratepayers. The non-standard conditions do not discriminate against others because PG&E will offer them to other similarly situated shippers.
11. Since 1998, PG&E's CPIM has been modified periodically to conform to market and regulatory changes. The CPIM modifications requested by PG&E to accommodate Ruby Pipeline costs and Rocky Mountain supplies are of a similar, conforming nature.
12. The Ruby Pipeline will be constructed entirely outside of California. There is no evidence in the record of this proceeding that Ruby may cause significant environmental impacts on California.
13. PG&E provided competitors with a reasonable opportunity to meet or beat the Ruby deal.
14. PG&E and Ruby LLC have highlighted several possible flaws in GTN's calculation of the $0.214 rate increase that GTN claims it will impose if the Ruby Pipeline is built, which raises legitimate doubts about GTN's calculation.
15. GTN has not demonstrated that PG&E's ability to sell released capacity on GTN, Ruby, or other pipelines should be a factor in deciding whether PG&E should be authorized to acquire Ruby capacity.
16. It is speculative whether GTN will redeploy, idle, or abandon a portion of its pipeline facilities serving California if Ruby is built. The fact that GTN says it might take these actions does not justify a rejection of PG&E's application.
17. The Ruby Pipeline is a commercially viable project.
18. The costs incurred to construct the Ruby Pipeline do not affect PG&E directly because PG&E has a fixed, 15-year rate that will not exceed $0.68/Dth.
19. There is no evidence that PG&E Corporation had any influence on PG&E's negotiations with Ruby LLC.
20. The most-favored-nation clause in the Ruby Precedent Agreement ensures that PG&E receives the best possible deal for Ruby capacity among shippers who subscribe to capacity for a term of one to 15 years.
21. There was a conflict of interest between PG&E's customers and PG&E's shareholders when PG&E Corporation was offered, and then obtained, an option to acquire an ownership stake in the Ruby Pipeline while PG&E was negotiating with Ruby LLC. There is no evidence that this conflict of interest harmed ratepayers or Ruby's competitors.
22. PG&E maintained a reasonable level of separation between Core Gas Supply and Electric Fuels during negotiations with Ruby LLC.
23. There is no evidence of improper sharing of information between Core Gas Supply and Electric Fuels.
1. PG&E's application should be approved pursuant to Pub. Util. Code §§ 701, 702, and 2821, subject to the conditions set forth in the following Order. As required by Pub. Util. Code §§ 451 and 454, the rates and charges that result from granting PG&E's application are just and reasonable.
2. PG&E's Electric Fuels Department should use Tariff Schedule G-AFT for firm on-system deliveries on the Redwood Path. If Electric Fuels seeks to make off-system deliveries from time-to-time, it should use the provision in G-AFT that specifies the procedures for making off-system deliveries. Like all shippers, Electric Fuels may use any available current or future tariff that suits its needs. Before switching to another tariff, PG&E should obtain Commission approval (or pre-approval) to the extent required by the Commission's rules at that time. If no procedures are in place for obtaining such approval (or pre-approval), PG&E should file an advice letter pursuant to GO 95-B, Rule 3.6.
3. The rates, terms, and conditions of service on the Redwood Path for PG&E's Electric Fuels Department that are approved by today's decision are fair, reasonable, and nondiscriminatory because they will be governed by a Commission-approved tariff.
4. PG&E's proposed non-standard conditions of service on the Redwood Path for Electric Fuels should be approved. To avoid undue preferential treatment, PG&E should offer these non-standard conditions to similarly situated shippers.
5. PG&E's request to exclude Ruby-related transportation arrangements on the Redwood Path from the 400 MDth/d that is reserved on the Redwood Path by the Gas Accord for long-term firm capacity implicates the Gas Accord and, as such, should be addressed in PG&E's next Gas Accord proceeding.
6. PG&E should be authorized to recover from its retail customers the costs it incurs to transport gas on the Ruby Pipeline and PG&E's Redwood Path pursuant to the transportation arrangements approved by today's decision.
7. The transportation benchmark component of the CPIM should reflect the amount that PG&E is obligated to pay under the Precedent Agreement.
8. CEQA does not apply to projects located outside of California, such as the Ruby Pipeline, unless there are emissions or discharges that could have a significant impact on California. There is no evidence in this proceeding that the Ruby Pipeline Project may cause significant environmental impacts on California.
9. The process used by PG&E to procure capacity on the Ruby Pipeline was reasonable under the circumstances and generally complied with applicable Commission precedent.
10. A central tenet of the Commission's let-the-market-decide policy is that the Commission will support any interstate pipeline project that satisfies the criteria set forth in D.90-02-016. The Ruby Pipeline satisfies these criteria.
11. D.04-09-022 authorized core gas utilities to request pre-approval for interstate pipeline capacity and established procedures for doing so. D.07-12-052 authorized electric utilities to request pre-approval for interstate pipeline capacity and established procedures for doing so. PG&E has followed those procedures.
12. GTN's alleged need to increase its rates by $0.214/Dth if Ruby is built is too speculative to be relied upon for decision-making the instant proceeding.
13. The reasonableness of Ruby's estimated pipeline construction costs is relevant to this proceeding only to the extent it raises doubts about Ruby's ability to attract sufficient capacity commitments to go forward with the project. Because sufficient capacity commitments have materialized, there is no need for the Commission to consider the reasonableness of Ruby's cost estimates.
14. GTN has not demonstrated that PG&E's negotiations with Ruby LLC or the proposed Ruby transportation arrangements violate FERC rules.
15. There is no merit to GTN's allegation that it was denied due process. The ALJ rulings about which GTN complains were reasonable.
16. The following Order should be effective immediately so the Ruby Pipeline Project may proceed in a timely manner.
IT IS ORDERED that:
1. Application 07-12-021 filed by Pacific Gas and Electric Company (PG&E) is granted, subject to the conditions set forth in the following Ordering Paragraphs.
2. PG&E is authorized to recover from its core gas customers and bundled electric service customers the costs it incurs to transport gas on the Ruby Pipeline and PG&E's Redwood Path pursuant to the transportation arrangements approved by this Order.
3. The authority granted by this Order is subject to the following conditions:
i. PG&E shall file an executed copy of each Firm Transportation Service Agreement (FTSA) between PG&E and Ruby Pipeline, LLC (Ruby LLC) with the Commission's Energy Division pursuant to General Order (GO) 96-B, Sections 3.9 and 6.1, no later than 30 days after the FTSAs are executed. This same requirement shall apply to any subsequent modifications to the FTSAs.
ii. PG&E shall file one or more advice letters to obtain approval for the interconnection, operating, and balancing (IOB) agreements between PG&E and Ruby LLC. PG&E shall file the advice letter(s) at least six months before the expected in-service date of the Ruby Pipeline. The advice letter(s) shall be effective pending disposition by the Commission's Energy Division pursuant to GO 96-B, Rules 3.6, 7.5.3, and 8.2.3. PG&E shall use this same advice letter procedure to obtain approval for any subsequent modifications to the IOB agreements.
iii. Electric Fuels shall use Tariff Schedule G-AFT for firm on-system deliveries on the Redwood Path. If Electric Fuels seeks to make off-system deliveries from time-to-time, it shall use the provision in G-AFT that specifies the procedures for making off-system deliveries. Like all shippers, Electric Fuels may use other current and future tariffs for proper purposes. Before switching to another tariff, PG&E shall obtain Commission approval (or pre-approval) to the extent required by the Commission's rules at that time. If no procedures are in place for obtaining such approval (or pre-approval), PG&E shall file an advice letter pursuant to GO 95-B, Rule 3.6.
iv. The amount of Ruby Pipeline costs that PG&E may recover in retail rates for core gas customers shall be limited to the rates and charges that PG&E pays under the Precedent Agreement to transport 250 thousand dekatherms per day (MDth/d). PG&E may not recover from core gas customers any costs for capacity reserved on the Ruby Pipeline and Redwood Path for Electric Fuels. This prohibition does not apply to short-term capacity acquired by Core Gas Supply through arms-length capacity brokering transactions or to capacity diverted to serve core customers.
v. The amount of Ruby Pipeline costs that PG&E may recover in retail rates for bundled electric service customers shall be limited to (i) the rates and charges that PG&E pays under the Precedent Agreement to transport 250 MDth/d for an initial four-month period followed by 125 MDth/d for a 15-year period, and (ii) tariffed rates and charges that the Electric Fuels pays for matching downstream capacity on the Redwood Path. PG&E may not recover from bundled electric service customers any costs associated with capacity reserved on the Ruby Pipeline for Core Gas Supply. This prohibition does not apply to short-term capacity acquired through arms-length capacity brokering transactions.
vi. The amount that PG&E may recover in retail rates for Ruby capacity shall be the lower of (i) $0.68 Dth/d, (ii) the Initial Recourse Rate less 5%, or (iii) any lower rate paid by similarly situated shippers. Whenever PG&E seeks Commission approval to recover Ruby Pipeline costs, PG&E shall certify that it is paying the lowest rate available under the Precedent Agreement. This certification may take the form of (a) a sworn declaration signed by an officer of PG&E or Ruby under penalty of perjury, or (b) any other form deemed acceptable by the Commission.
vii. The amount that PG&E may recover in retail rates for Ruby fuel surcharges and other surcharges is limited to the amounts paid pursuant to Section 3(b)(iii) of the Precedent Agreement.
viii. PG&E shall obtain prior Commission authorization before exercising, or not exercising, its right under the Precedent Agreement to annually reduce its Ruby capacity by 20% increments beginning in Year 11 of the Agreement. To that end, PG&E's Core Gas Supply and Electric Fuels Departments shall each use the procedures the Commission has in place at that time to obtain Commission approval (including pre-approval) to either keep or release the step-down capacity. If no procedures are in place, PG&E shall file an application at least one year prior to the first step down to obtain authority to either keep or release the step-down capacity. The application shall include a proposal for Commission review and approval of any subsequent decisions by PG&E to either retain or release step-down capacity under the Precedent Agreement.
ix. PG&E shall obtain prior Commission authorization before exercising, or not exercising, its evergreen right to annually renew the Ruby Pipeline transportation arrangements when these arrangements expire after 15 years. To that end, PG&E's Core Gas Supply and Electric Fuels Departments shall each use the procedures the Commission has in place at that time to obtain Commission approval (including pre-approval) to either extend the transportation arrangements or let them lapse. If no procedures are in place, PG&E shall file an application at least one year prior to the expiration of the initial 15-year term of the transportation arrangements to obtain authority to either extend the arrangements for one year or let them expire. The application shall include a proposal for Commission review and approval of any subsequent decision(s) by PG&E to annually extend or terminate the transportation arrangements under the Precedent Agreement.
x. During Years 11 through 25 of the Precedent Agreement, PG&E may recover in retail rates for bundled electric service the costs for Electric Fuels' Redwood Path arrangements only to the extent the Commission has authorized recovery of matching upstream capacity for Electric Fuels on the Ruby Pipeline.
xi. The transportation benchmark component of the Core Price Incentive Mechanism shall reflect the actual transportation rates that PG&E pays under the Precedent Agreement, which will be $0.68/Dth or less, plus tariffed charges for (a) fuel and (b) lost & unaccounted for gas to the extent these charges are allowed by the Precedent Agreement.
xii. PG&E shall provide prompt responses to Commission requests for information regarding outages on the Ruby Pipeline.
4. PG&E may raise in its next Gas Accord proceeding the issue of whether to exclude Ruby Pipeline-related transportation arrangements on the Redwood Path from the 400 MDth/d that is reserved on the Redwood Path by the Gas Accord for long-term firm capacity.
5. Application 07-12-021 is closed.
This Order is effective today.
Dated November 6, 2008, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
TIMOTHY ALAN SIMON
Commissioners
James Weil |
Ralph R. Nevis |
Donald English |
David L.. Huard |
Christopher Hilen |
(END OF APPENDIX)
