9. Comments on Draft Decision
The alternate proposed decision of Commissioner Lynch was mailed to the parties in accordance with Pub. Util. Code § 311(d) and Rule 77.1 of the Rules of Practice and Procedure. Comments were received on May 9, 2002 and reply comments were received on May 14, 2002. Comments to the alternate proposed decision are reflected in the body of this order.
1. In the 33 out of the 42 months prior to November 2000, SDG&E's prices were less than SoCalGas'.
2. At the time this application was filed, California border prices were many times higher than the basin plus full interstate transportation rate.
3. The vertical market power concerns raised in the context of the Pacific Enterprises/Enova merger are relevant to the consideration of SoCalGas' and SDG&E's core portfolios.
4. Applicants' tolling agreement proposed effectively re-introduces the electricity generation element that we ordered removed in D.98-03-073.
5. The addition of SDG&E's procurement to SoCalGas, the proposed consolidated portfolios involvement in tolling agreements, and opportunity to add incremental whole load to the consolidated portfolio add up to a significant increase in both scale and scope of SoCalGas' existing procurement operations.
6. Consolidating the utilities' core portfolios would eliminate a significant participant from the trading market at the California border.
7. Consolidating the utilities' core portfolios would expand the assets available for SoCalGas to use in generating additional revenues by physical gas transactions, capacity transactions, derivatives and hub transactions.
8. Either utility could acquire the benefit of supply diversity absent consolidation of the utilities' core procurement departments.
9. Applicants have not quantified the benefits of better management, training, and back-up.
10. The benchmark incentive mechanisms governing the utilities' respective gas purchases already provide streamlined, efficient regulation.
11. The projected $1 million in annual gas procurement overhead savings is negligible in the context of the utilities' overall portfolios.
12. On November 1, 2001, SoCalGas recovered 160 MMcfd of El Paso capacity; on January 1, 2002, it recovered an additional 50 MMcfd; on March 1, 2003, to comply with existing contracts, SoCalGas will transfer to third parties 100 MMcfd; on January 1, 2005, SoCalGas will recover 30 MMcfd of capacity. The amount of capacity that reverts to SoCalGas between November 1, 2001 and August 31, 2006 when the SoCalGas - El Paso contracts expire is never more than 210 MMcfd and after March 1, 2003, significantly less.
13. SDG&E's interstate capacity holdings are significantly less than its average daily core load.
14. It is appropriate to adopt uniform rules for election of core transportation and procurement service by noncore customers of each of the two utilities.
15. SoCalGas and SDG&E are not required to accept elections by noncore customers for core transportation service if existing utility intrastate capacity is not sufficient, to prevent service to traditional core customers becoming degraded.
16. Noncore customers who were already receiving core subscription service before January 1, 2001, are allowed to switch to bundled core transportation and utility procurement service on the effective date of this decision, if they are still on core subscription service as of that date, without having to pay the cross-over procurement rate.
1. Further consideration and a final determination regarding the SoCalGas and SDG&E core procurement consolidation will be addressed at a later date pending the outcome in D.02-06-063 on the California 2000/2001 border price spikes.
2. It is reasonable to consider in a separate proceeding directing SoCalGas to first make available the interstate pipeline capacity that reverts back to its control, subject to the Federal Energy Regulatory Commission's regulations on releasing capacity, to its wholesale customers and other gas utilities that procure gas for core customers.
3. It is reasonable for SoCalGas and SDG&E to implement revised uniform rules for their noncore customers wishing to obtain core service from them.
4. A five-year customer commitment to procurement service is an adequate period to prevent customer switching and to facilitate utility asset planning.
5. It is reasonable for SoCalGas and SDG&E to implement revised uniform rules for large core customers who wish to obtain utility procurement service after having first elected transportation-only service.
IT IS ORDERED that:
1. The request of Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E) to consolidate their core gas procurement portfolios is deferred pending the outcome of R.02-06-063.
2. SoCalGas and SDG&E shall not take any actions to consolidate their core gas procurement portfolios or operations until the Commission has taken further action.
3. Electric generation, refinery, and enhanced oil recovery (EOR) customers of either utility, any of whom consume over 250,000 therms per year, may not choose core transportation service or bundled core transportation and utility procurement service.
4. Other customers with noncore status, after expiration of any firm contracts they already have with their utility, have the option to switch to core transportation-only service or bundled core transportation and utility procurement service from SDG&E or SoCalGas, as appropriate. Noncore firm service customers have a one-time option to cancel their existing firm service contract in order to elect core service, provided the election occurs within three months of the effective date of the new service.
5. Noncore customers switching to bundled core transportation service and utility procurement service are required to pay a cross-over procurement rate for the first 12 months. The cross-over rate is the higher of a) the posted monthly core procurement rate (which will include intrastate backbone costs) or, b) the GCIM monthly benchmark for California border purchases plus the per-unit cost of intrastate backbone costs included in the posted monthly procurement rate.
6. Noncore customers who elect bundled core transportation and utility procurement service, shall be required to pay the cross-over rate for a period not to exceed 12 months after they commenced core subscription service from SDG&E.
7. Noncore customers electing transportation-only service or bundled transportation and utility procurement service are required to make a five-year commitment to that service.
8. Core customers with annual consumption over 50,000 therms who want to switch from a CAT marketer to utility procurement service may do so. These customers are required for the first 12 months of utility procurement service to pay the cross-over rate. A core customer consuming over 50,000 therms per year who returns to utility procurement service because his CAT left California does not have to pay the cross-over rate. Such a customer has 90 days to find a different CAT marketer or be a committed to utility procurement service for a full 12 months. However, if the customer chose a different CAT marketer within 90 days, the customer will be charged the cross-over rate for the procurement service it received from the utility within those 90 days.
9. This is an Interim Order.
This order is effective today.
Dated August 22, 2002, at San Francisco, California.
LORETTA M. LYNCH President |
HENRY M. DUQUE |
CARL W. WOOD |
GEOFFREY F. BROWN |
MICHAEL R. PEEVEY |
ATTACHMENT A
KEITH R. MCCREA MICHAEL BRIGGS
ATTORNEY AT LAW RELIANT ENERGY
SUTHERLAND, ASBILL & BRENNAN LLP 801 PENNSYLVANIA AVENUE, N.W.
1275 PENNSYLVANIA AVENUE, NW WASHINGTON, DC 20004-2604
WASHINGTON, DC 20004-2415
ALEX GOLDBERG KIRBY BOSLEY
WILLIAMS COMPANIES, INC. RELIANT ENERGY
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TULSA, OK 74172
GILLIAN WRIGHT R. VAN DER LEEDEN
SEMPRA ENERGY ATTORNEY AT LAW
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LOS ANGELES, CA 90013
NORMAN A. PEDERSEN ROBERT L. PETTINATO
ATTORNEY AT LAW LOS ANGELES DEPARTMENT OF WATER & POWER
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PRESIDENT CITY OF PASADENA
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ROGER T. PELOTE JOHN BURKHOLDER
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THE UTILITY REFORM NETWORK CALIFORNIA PUBLIC UTILITIES COMMISSION
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SARA STECK MYERS MICHAEL ROCHMAN
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LULU WEINZIMER ROBERT B. WEISENMILLER, PH.D.
CALIFORNIA ENERGY MARKETS MRW & ASSOCIATES, INC.
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MARIA E. STEVENS JACQUELINE GREIG
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FERNANDO DE LEON
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(END OF ATTACHMENT A)
