I. INTRODUCTION
In this Order we dispose of the application for rehearing of Decision
(D.) 06-12-031 ("Decision") filed by the Southern California Generation Coalition ("SCGC"). Decision 06-12-031 flows from our ongoing efforts to assess the market and regulatory framework of California's natural gas industry and to reform the market structure. This proceeding originated with a 1998 Commission initiated rulemaking,1 and resulted in a series of prior decisions including D.04-09-0222 which among other things ordered Southern California Gas Company ("SoCalGas") and San Diego Gas & Electric Company ("SDG&E") to file an application regarding their system integration and Firm Access Rights ("FAR") proposals.3
D.06-12-031 addresses the Phase II issues regarding a system of FAR for SoCalGas and SDG&E (collectively, the "utilities"). The FAR system adopted by the Decision is based on the utilities' FAR proposal, in conjunction with elements of proposals sponsored by other parties, as modified.4 Our Decision also approves proposals for an off-system delivery service to Pacific Gas & Electric Company ("PG&E"), a gas pooling service, and retention of SoCalGas' peaking rate tariff (not including multi-unit generation).
In summary, the adopted FAR system will use a three-step open season (bid) process to allocate firm access rights to capacity at various receipt points on the SoCalGas and SDG&E integrated transmission system.5 Market participants such as end-users, gas suppliers, and gas marketers will be eligible to bid and hold FAR. The system is intended to eliminate unpredictable pro-rationing that occurs under the current allocation system which is tied to upstream interstate pipeline priority rights and Federal Energy Regulatory Commission ("FERC") jurisdictional control. FAR holders will have assurance their gas is transported onto and over the utilities' transmission systems to the following potential delivery points:6 (1) an end-user pursuant to an end-user's local transportation agreement; (2) a citygate pool account; (3) a storage account; and (4) a contracted marketer or core aggregator transportation account.7 Any firm receipt point capacity not committed under FAR will continue to be available under the current allocation system which is on an interruptible basis. The Decision adopts a FAR reservation charge of 5 cents per decatherm ("Dth") per day.
A timely application for rehearing was filed by SCGC challenging
D.06-12-031 on the grounds that: (a) adoption of a FAR reservation charge is outside the Commission's jurisdiction; (b) there is no rational basis and/or record to support adoption of FAR, set-asides, and various aspects of the open season bid process; (c) there is no evidence to support the adopted reservation charge; (d) the Decision improperly prejudges issues in SoCalGas's next Biennial Cost Allocation Proceeding ("BCAP"); and (e) the Decision conflicts with California's greenhouse gas ("GHG") emissions policy.
Responses to SCGC's application for rehearing were filed by Sempra LNG, California Manufacturers & Technology Association ("CMTA"), Indicated Producers8 ("IP"), and SDG&E and SoCalGas (jointly).
We have carefully considered the arguments raised in the application for rehearing and are of the opinion that two minor modifications, as described herein, are warranted to clarify our intention regarding: (a) certain issues to be considered in SoCalGas' next BCAP; and (b) our reasoning regarding Step 2 of the open season. However, good cause has not been shown to grant rehearing. Accordingly, rehearing of D.06-12-031, as modified, is denied.
1 Order Instituting Rulemaking (R.) 98-01-011.
2 See Order Instituting Rulemaking to Establish Policies and Rules to Ensure Reliable, Long-Term Supplies of Natural Gas to California [D.04-09-022] (2004) __ Cal.P.U.C.3d __, 2004 Cal. PUC LEXIS 522.
3 Other relevant Commission decisions are discussed in D.06-12-031, at pp. 3-8 and include Re Assessment and Revision of the Regulatory Structure Governing California's Natural Gas Industry [D.99-07-015] (1999) 1 Cal.P.U.C.3d 465 [identifying promising options for changes to the regulatory and market structure]; and Investigation on the Commission's Own Motion to Consider the Costs and Benefits of Various Promising Revisions to the Regulatory and Market Structure Governing California's Natural Gas Industry and to Report to the California Legislature on the Commission's Findings [D.01-12-018] (2001) __ Cal.P.U.C. 3d __, 2001 Cal. PUC LEXIS 1137 [adopting a modified Comprehensive Gas OII Settlement Agreement to modify the regulation and market structure for transportation and storage of natural gas on the Southern California Gas Company and San Diego Gas & Electric Company systems].
4 Four proposals were submitted to change the current gas market structure for SoCalGas and SDG&E: (1) the utilities' FAR proposal; (2) the unbundled FAR proposal of Watson Cogeneration Company, Indicated Producers, California Cogeneration Council, and California Manufacturers and Technology Association; (3) the Joint Proposal of BHP Billiton LNG International Inc., Coral Energy Resources, L.P., SES Terminal LLC, Sempra LNG, Woodside Natural Gas Inc., and The Utility Reform Network; and (4) the Division of Ratepayer Advocates proposal.
5 The SoCalGas and SDG&E integrated transmission system is comprised of five zones: (1) Southern; (2) Northern; (3) Wheeler; (4) Line 85; and (5) Coastal.
6 In contrast, under the current system upstream gas shippers and end-use customers have no guarantee their gas will flow through the receipt points. As a result of differing allocation processes and rules, access to the systems is only available on an interruptible, rather than firm basis. This problem is exacerbated by capacity constraints on the SoCalGas system. (See D.06-12-031, at pp. 10-11.)
7 See Exh. 15, Schedule No. G-RPA, Delivery Points.
8 Indicated Producers for the purpose of this proceeding, is an ad hoc coalition including Aera Energy LLC, BP Energy Company, BP America Inc. (including Atlantic Richfield Company), ConocoPhillips Company, Chevron U.S.A. Inc., Midway Sunset Cogeneration Company (an affiliate of Aera Energy), and Occidental Energy Marketing Inc.
