ALJ/TIM/hkr Date of Issuance 11/7/2008
Decision 08-11-032 November 6, 2008
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Pacific Gas and Electric Company for Authorization to Enter into Long-Term Natural Gas Transportation Arrangements with Ruby Pipeline, for Cost Recovery in PG&E's Gas and Electric Rates and Nonbypassable Surcharges, and for Approval of Affiliate Transaction. (U39G and U39E) |
Application 07-12-021 (Filed December 21, 2007) |
(See Appendix for List of Appearances.)
DECISION APPROVING GAS TRANSPORTATION ARRANGEMENTS
DECISION APPROVING GAS TRANSPORTATION ARRANGEMENTS 1
1. Summary of Decision 2
2. Summary of A.07-12-021 4
3. Procedural Background 7
4. The Pipeline Projects 9
5. Summary of the Active Parties' Positions 12
6. Jurisdiction and Standard of Review 13
7. Issues 13
7.1. Access to Rocky Mountain Gas Supplies 13
7.1.1. Position of the Parties 13
7.1.2. Discussion 15
7.2. Costs and Benefits for Core Gas Supply 17
7.2.1. Position of the Parties 18
7.2.2. Discussion 19
7.3. Costs and Benefits for Electric Fuels 23
7.3.1. Position of the Parties 23
7.3.2. Discussion 25
7.4. Alternatives 27
7.4.1. Position of the Parties 29
7.4.2. Discussion 31
7.5. Capacity on PG&E's Redwood Path 35
7.5.1. Position of the Parties 35
7.5.2. Discussion 37
7.6. Recovery in Retail Rates 40
7.6.1. Position of the Parties 40
7.6.2. Discussion 41
7.7. Core Procurement Incentive Mechanism 46
7.7.1. Position of the Parties 46
7.7.2. Discussion 48
7.8. Environmental Considerations 49
7.8.1. Position of the Parties 50
7.8.2. Discussion 52
7.9. Other Issues Raised by the Parties 54
7.9.1. Selection Process 54
7.9.2. Let the Market Decide 64
7.9.3. Higher Costs on the GTN Pipeline 68
7.9.4. Capacity Release Revenues 72
7.9.5. Redeployment of GTN Pipeline Facilities 73
7.9.6. Commercial Viability 75
7.9.7. Compliance with Affiliate Transaction Rules 78
7.9.8. Revisions to Affiliate Transaction Rules 84
7.9.9. Separation of Procurement Functions 89
7.9.10. FERC Policies 94
7.9.11. Due Process 96
7.9.12. U.S. Dept. of Transportation Regulations 107
8. Conclusion and Implementation 107
9. Categorization and Need for Hearings 111
10. Comments on the Proposed Decision 111
11. Assignment of the Proceeding 111
Findings of Fact 111
Conclusions of Law 115
ORDER 117
Appendix: Appearances
1. Summary of Decision
This decision grants the application filed by Pacific Gas and Electric Company (PG&E) for authority to contract for long-term capacity on the proposed Ruby Pipeline. If built, the Ruby Pipeline will transport gas from Opal, Wyoming to Malin, Oregon where it will interconnect with PG&E's system. The key terms of PG&E's contract with Ruby Pipeline, LLC are as follows:
· PG&E will acquire firm pipeline capacity of 375 thousand dekatherms per day (MDth/d) for a 15-year period beginning November 1, 2011. Of this amount, 250 MDth/d is for PG&E's Core Gas Supply Department and 125 MDth/d is for PG&E's Electric Fuels Department (Electric Fuels).
· PG&E will acquire 250 MDth/d for Electric Fuels for an initial four-month period of July 1, 2011 through October 31, 2011.
· PG&E will pay an anchor-shipper rate equal to the lower of $0.68/Dth or 5% lower than the Initial Recourse Rate. Assuming PG&E pays $0.68/Dth, its annual cost for 375 MDth/d of capacity will be $93.1 million. PG&E will also pay a fuel charge equal to approximately 1.1% of the actual volume shipped.
· PG&E has the right to receive any lower rate that Ruby Pipeline, LLC, provides to another similarly-situated shipper.
· PG&E may annually reduce its Ruby Pipeline capacity by 20% increments beginning in Year 11 of the initial 15-year term.
· At the expiration of the initial 15-year term, PG&E may annually renew, for a one-year term, all or part of the contracted capacity. PG&E's right to annually renew the contracted capacity expires after 10 years (i.e., after 10 one-year renewals).
PG&E also requests authority for Electric Fuels to obtain matching downstream capacity on PG&E's intrastate pipeline known as the Redwood Path. Thus, PG&E seeks authority for Electric Fuels to acquire 250 MDth/d of firm capacity on the Redwood Path for a four-month period beginning July 1, 2011, and 125 MDth/d for a 15-year period beginning November 1, 2011. PG&E's current tariffed rate for firm service on the Redwood Path is $8.9095/Dth/month. This equates to an annual cost of $13.4 million for Electric Fuels' 125 MDth/d of capacity on the Redwood Path, plus a usage rate of $0.0070/Dth. PG&E's Core Gas Supply Department already has matching capacity on the Redwood Path.
The proposed Ruby Pipeline transportation arrangements will provide PG&E with access to prolific and growing gas supplies in the Rocky Mountains. Today's decision finds that it is in the public interest to grant PG&E's application because (1) PG&E has a need to diversify away from its heavy reliance on declining Canadian gas supplies, and (2) the proposed Ruby Pipeline transportation arrangements provide a reasonable and cost-effective means for doing so. PG&E is authorized to recover from its core gas customers and bundled electric service customers the costs PG&E incurs to transport gas on the Ruby Pipeline and Redwood Path pursuant to the gas transportation arrangements authorized by today's decision.
The authority granted by today's decision is subject to the following conditions. First, PG&E shall obtain Commission authorization before exercising, or not exercising, its right to annually reduce its Ruby capacity by 20% increments beginning in Year 11 of the Ruby contract. PG&E shall likewise obtain Commission authorization before exercising, or not exercising, its right to annually renew the Ruby Pipeline transportation arrangements after the initial 15-year term of the Ruby contract.
Second, the transportation benchmark component of PG&E's Core Procurement Incentive Mechanism shall reflect the actual transportation rates that PG&E pays under its contract with Ruby LLC.
Additional conditions are listed in the Ordering Paragraphs of today's decision.
