II. Background

The petitioners requested that the Commission take immediate action, or in the alternative, that the Commission shorten the time for the filing of responses to the petition for modification to five days. An Administrative Law

Judge's (ALJ) ruling was issued on January 19, 2001, shortening the time for parties to file responses to the petition.

Responses or protests opposing the proposed modifications were filed by the California Industrial Group (CIG) and the California Manufacturers and Technology Association (CMTA), Calpine Corporation (Calpine), Coral Energy Resources, L.P. (Coral), Enron North America Corp. and Enron Energy Services, Inc. (collectively "Enron"), Nabisco Brands, Inc. (Nabisco), PanCanadian Energy Services (PCES), and Northern California Generation Coalition (NCGC). Pacific Gas and Electric Company (PG&E), the City and County of San Francisco, the City of Palo Alto, and the School Project for Utility Rate Reduction (SPURR) filed responses which supported the petition in whole or in part. Duke Energy North America's response, as well as NCGC, requests that electric generators be exempt from any diversions during the ongoing crisis.

ORA/TURN filed a reply to the responses on January 30, 2001.

Due to the need to take immediate action, the Commission provided notice in its agenda that action would be taken on this item at the regularly scheduled February 8, 2001 Commission meeting. At the February 8, 2001 meeting, this item was held over to the Commission's continuation meeting on February 15, 2001.

Gas curtailment and constraint conditions are described in PG&E's Gas Rule 14. This rule was originally developed in the PG&E Gas Accord, which was approved by the Commission in D.97-08-055. The specific tariff language was subsequently approved in Resolution G-3288, which became effective on March 1, 1998.

Under Rule 14-E., PG&E can issue an Operational Flow Order (OFO) to protect the integrity of its pipeline system. The OFO can be implemented on a system-wide, local, or customer-specific basis. PG&E "will issue an OFO for a Gas Day if, on the day prior to this Gas Day, PG&E's forecast of pipeline inventory for the Gas Day is either below the Lower Pipeline Inventory Limit or above the Upper Pipeline Inventory Limit." When PG&E issues the OFO, "Balancing Agents" are required to balance the supply and demand on a daily basis within a specified tolerance band. If the Balancing Agent fails to stay within the tolerance bank, the agent is subject to non-compliance charges. The noncompliance charge varies depending on the tolerance band. (PG&E Gas Rule 14-E.)

An Emergency Flow Order (EFO) may be called by PG&E "when a forecast or an actual supply and/or capacity shortage threatens deliveries to End-Use Customers." During an EFO period, gas usage by end-use customers must be less than or equal to the gas it nominated for that day. That is, the supply must be equal to or greater than the usage. Noncompliance with the EFO results in a charge of $50 per decatherm (Dth), which is paid to PG&E. (PG&E Gas Rule 14-F.)

PG&E may also divert gas from its noncore end-use customers to serve core customers if conditions exist where the "supply is insufficient to meet demand and deliveries to Core End-Use customers are threatened." If an involuntary diversion occurs in conjunction with an EFO, the transmission service customers, whose gas supply is involuntarily diverted, receives an involuntary diversion credit depending on whether the customer receives firm or as-available transmission service. Firm transmission customers receive a credit of $50 per Dth of gas diverted.² As-available transmission customers receive a diversion credit based on the market price for the gas on the day the diversion occurred.³ (Rule 14-G.3.)