Discussion

SDG&E's AL 1210-G raised a variety of questions and issues that require further investigation by the Commission. Notwithstanding SDG&E's withdrawal of AL 1210-G, we agree with the protestants that an investigation into the adequacy of SoCalGas' and SDG&E's gas transmission systems is in order. It will be necessary to include SoCalGas in this investigation because SoCalGas provides transmission service to the SDG&E territory.

The Commission will examine the adequacy of the SoCalGas' and SDG&E's gas transmission systems to serve the present and future gas requirements of the SDG&E's core and noncore customers. We are concerned because the existing South Bay and Encina power plants are not new facilities, and SDG&E has been contemplating service to the Rosarito facility since the early 1990's. SDG&E began construction of a phased expansion of its gas transportation system in the 1990's, which has been commonly referred to as Project 2000. The Office of Ratepayer Advocates states that the Commission has provided for funding of this project in SDG&E's general rate case and related cost of service proceedings. We are concerned that the decisions to add load on SoCalGas' and SDG&E's system may have undermined SDG&E's ability to provide reliable service to its customers.

We will also require SoCalGas and SDG&E to show that service to the SDG&E affiliate, Gasoducto Rosarito (GR), is not negatively affecting the ability of SDG&E's gas transportation system to provide service to existing core and noncore customers. In Application 98-07-005, SoCalGas and SDG&E requested Commission approval of a special gas transportation tariff to provide firm service to the Commission Federal de Electricidad's Rosarito Power Plant (Rosarito) in the state of Baja California Norte, Mexico and to a combined cycle plant located south of Rosarito (the La Jovita plant). The shippers that would have received service under the proposed tariff were two Sempra affiliates, Sempra Energy Mexico for the La Jovita combined cycle plant and GR for Rosarito.¹ When SDG&E and SoCalGas submitted their application, they did not disclose any uncertainty regarding the adequacy of the system to meet the requirements of existing customers in addition to the new, incremental requirements of their affiliates. Now it appears, from the events subsequent to the start up of the Rosarito plant in late June 2000, that capacity on the SoCalGas' and/or SDG&E's transmission system is insufficient.

The Commission will also review SDG&E's August 2000 response to capacity constraints. According to one protestant, SDG&E encouraged electric generators and other noncore customers to sign a two-year firm commitment in the spring of 2000 so that they could avoid curtailment problems. It is unclear why SDG&E did not realize that converting these customers to firm service would decrease system flexibility, consequently making all other noncore customers more susceptible to curtailments. This investigation, therefore, will include a review of SDG&E's planning and decision-making processes.

We will require SDG&E to thoroughly examine its Gas Tariff Rule 14 (curtailment rules) to determine whether any modifications are necessary and, if so, to propose such modifications. SDG&E's AL 1210-G requested a temporary change in the curtailment rules, to apply during the summer peak electricity usage, until November 1, 2000. SDG&E shall address whether the gas transmission system capacity constraints are not just as serious during the winter months and future summers. High gas use for heating purposes during a period of cold weather in the winter months could strain the capacity of SDG&E's gas transmission system as much as peak summer electricity use. It is not clear to us that the likelihood for future curtailments will be significantly reduced given the ongoing demand on a firm basis by Encina, South Bay and the Rosarito Power Plants. Additionally, SDG&E shall review the current Rule 14 for consistency with Public Utilities Code Sections 2771 and 2772. Section 2771 establishes priorities among the types of customers of gas and electric corporations. Section 2772 provides for a determination of customers and uses of energy, in a descending order of priority, which provides the most important public benefits and serves the greatest public need. The current tariffs may not have contemplated the sale of SDG&E's electric generation facilities and a change from the prior interruptible status elected by SDG&E when it operated the facilities.

SoCalGas and SDG&E may need additional capacity on their gas transmission systems in the near term to avoid future curtailments. Sempra, SoCalGas, and SDG&E will be required to show how much additional capacity will be needed and when. Respondents shall describe the lines that may need to be expanded, and the plans for making such expansions, including in-service dates. Contingencies, such as larger than expected demand, shall also be addressed.

The Commission will investigate the relationship, if any, of the planning of SoCalGas' and SDG&E's gas transportation system to the recent proposal of Sempra to enter into a joint venture to build a $230 million natural gas pipeline, currently being called the North Baja Pipeline, from the California/Arizona border through southeastern California to the pipeline interconnection which serves the Rosarito facility. The Year 2000 California Gas Report shows a sharp decrease in gas transportation service to electric generation load by SDG&E beginning in the year 2003 and further declining in the year 2004. The Commission will investigate whether the North Baja Pipeline project impacted the pipeline design for the Project 2000 expansion or the need for other system expansions or enhancements. We will also review what incentives exist, if any, for respondents to support the North Baja Pipeline over SoCalGas' or SDG&E's capacity additions.

Because the examination of SDG&E's gas supply will require in-depth analysis and review, and therefore take some period of time to complete, we direct SDG&E to evaluate the need for any immediate actions on its part. To the extent such actions require approval by this Commission, we direct SDG&E to put forth such proposals promptly, and to seek expedited consideration. We specifically direct SDG&E to determine whether an interim, interruptible gas program, which would provide cost incentives to those customers voluntarily electing interruptible service, would be useful for the coming winter months, and, if so, to file such a request.

We will serve this Order Instituting Investigation (OII) on the parties on the service lists of the Energy Division's draft resolution G-3297, and SoCalGas' and SDG&E's recent BCAP A.98-10-012 et al.