ALJ/JSW/DKF/avs Mailed 9/10/2004
Decision 04-09-022 September 2, 2004
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking to Establish Policies and Rules to Ensure Reliable, Long-Term Supplies of Natural Gas to California. |
Rulemaking 04-01-025 (Filed January 22, 2004) |
TABLE OF CONTENTS
TITLE PAGE
1.1. Interstate Pipeline Capacity Contracts 22
1.3. Interstate Pipeline Access 55
2. Purpose of the Rulemaking 55
5. Comments and Reply Comments 1111
6. Interstate Pipeline Capacity Contract Procedures 1212
6.5. Discussion - Supply Diversity 1919
6.6. Discussion - Need for Contract Approval Procedures 2121
6.7. Discussion - Pre-Approved Capacity
Range/Authorized Capacity Commitment 2424
6.8. Discussion - Expedited Capacity Advice Letters 2626
6.9. Discussion - Approval by Other Parties for Expedited Processes 2727
6.10. Discussion - Capacity Planning Range 2828
6.11. Discussion - Storage Issues 3636
6.12. Discussion - Pre-Approval of LNG Contracts 4040
TITLE PAGE
7.2. SoCalGas and SDG&E Proposals 4848
7.3. Discussion - LNG Access Issues 6363
7.4. Discussion - Ratemaking for Infrastructure Improvements 6666
7.5 Discussion - Transmission System Integration 6868
7.6. Discussion - SoCalGas' Peaking Rate 7070
7.7. Discussion - Kramer Junction 7272
7.8. Discussion - Firm Access Rights 7474
7.9. Discussion - Off-System Deliveries 7676
7.10. Discussion - Interconnection Policy 7777
7.11. Discussion - LNG Supplemental Issues 7878
ATTACHMENT A North Desert Transmission Zone (NDTZ)
Receipt Point Capacity Allocation Methodology
1. Summary
This decision addresses the Phase I proposals of Southern California Gas Company (SoCalGas), San Diego Gas & Electric Company (SDG&E), Pacific Gas & Electric Company (PG&E) and Southwest Gas Company (Southwest). These proposals were filed in accordance with this Order Instituting Rulemaking (OIR) and address interstate pipeline capacity contracts, liquefied natural gas (LNG) access, and interstate pipeline access.
The OIR was opened to ensure that California does not face a natural gas shortage in the future. Through the OIR and today's decision, we further the stated goal of the Energy Action Plan to:1
"Ensure that adequate, reliable, and reasonably-priced electrical power and natural gas supplies, including prudent reserves, are achieved and provided through policies, strategies, and actions that are cost-effective and environmentally sound for California's consumers and taxpayers." (Energy Action Plan, p. 2.)
The policies adopted in today's decision, which are summarized below, is part of the state's overall effort to implement and to fulfill the Energy Action Plan's goal.
1.1. Interstate Pipeline Capacity Contracts
Diversified interstate pipeline capacity portfolios, with staggered terms, maximize opportunities to benefit core customers with enhanced supply reliability and gas price stability. Subject to the Commission review process discussed below, we grant the utilities authority to negotiate reduced amounts of capacity and to terminate the expiring contracts with El Paso Natural Gas Company (El Paso), Transwestern Pipeline Company (Transwestern), and Gas Transmission Northwest Corporation (GTNC) in conjunction with preserving the utilities' rights of first refusal for firm capacity on these interstate pipelines.
A flexible, expeditious interstate pipeline capacity approval process will provide utilities with the opportunity to acquire core capacity in the most efficient and cost effective manner. This decision adopts capacity contract approval procedures that are modified from those proposed by the utilities to satisfy our, as well as other parties' concerns regarding regulatory oversight, including the need for formal Commission approval, the capacity planning range, the consultation/agreement process, and the degree of review in pre-approving LNG contracts.
Competition from independent storage should provide long-term economic benefits to core customers. PG&E is ordered to file an application, within six months of this decision, to address how much, and by what process, incremental gas storage needs for the core should be put out to bid, as well as implementation issues that need to be addressed before the provisioning of core storage is opened to independent storage providers.
1.2. LNG Access
New gas supplies should have the opportunity to interconnect with the utility system and should be allowed to compete on an equal footing with existing supplies. PG&E, SoCalGas and SDG&E are ordered to submit, for Commission approval, non-discriminatory open access tariffs for new sources of supply.
SoCalGas and SDG&E are allowed to establish receipt points, as needed, at Otay Mesa, Salt Works Station, Center Road Station, or at other receipt points that may be needed to access regasified LNG. SDG&E and SoCalGas are authorized to establish the Otay Mesa receipt point as a joint receipt point into both of their systems, and the interim transportation rate for a shipper delivering gas through Otay Mesa shall consist of the shipper's transportation rate on its local utility, i.e., either the applicable SDG&E or SoCalGas tariff rate.
Regarding ratemaking for LNG access, it is presumed that LNG suppliers will pay the actual system infrastructure costs associated with their projects. However, requests for rolled-in, or any alternative ratemaking treatment, will be allowed through the application process and addressed on a case-by-case basis. LNG suppliers will also be responsible for the costs to interconnect with the utilities' pipelines.
Due to the complexities and ratemaking implications, we will address the SoCalGas and SDG&E requests to implement its transmission system integration and firm access rights proposals in a separate application to be filed within three months of this decision.
We will initiate a process in Phase II of this proceeding to consider the adoption of standardized operational balancing agreements to connect all new upstream gas pipelines that interconnect with the pipelines of SDG&E and SoCalGas, and to address the concerns raised by the parties regarding the use of a standardized operational balancing agreement.
There are a number of issues concerning LNG gas interchangeability and gas quality specifications in general. In the near future, we will be conducting a technical workshop in coordination with other state agencies regarding the gas quality specifications.
1.3. Interstate Pipeline Access
Regarding the interconnect at Kramer Junction, some of the parties recommend that the capacity allocation method be changed, and that the distinction giving primary preference to gas flows from El Paso and Transwestern be eliminated. Today's decision does not eliminate this preference because the core customers of SoCalGas may be adversely affected. However, SoCalGas' updated proposal to allocate receipt point capacity based on the physical capacities and expected flows of SoCalGas' North Desert Transmission Zone, while preserving core supplies, is adopted.
Any further consideration of SoCalGas' peaking rate should be addressed in the Biennial Cost Allocation Proceeding (BCAP) of SoCalGas or in SoCalGas' system integration/firm access rights application.
1 The Energy Action Plan is a joint effort by this Commission, the California Energy Commission, and the Consumer Power and Conservation Financing Authority. These three state agencies are cooperating to guide the development of California's energy future.
