V. Public Review and Comment
The proposed decision of the ALJ in this matter 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 filed on ____________________, and reply comments were filed on ________________.
1. On June 19, 2000, SoCalGas filed the instant Application, in compliance with D.00-04-060, Ordering Paragraph 6, to establish a peaking rate to replace the RLS tariff.
2. A peaking rate is the tariff charged to a noncore customer who uses an interstate pipeline for baseload service, and returns to the SoCalGas system for peakload service.
3. A peaking rate should allow SoCalGas to mitigate any revenue loss from a partial pipeline bypass, so that core customers and shareholders do not bear the cost of competition from interstate pipelines, yet not be a deterrent to economic bypass.
4. D.00-04-060 stated that the peaking rate should not be the equivalent of the RLS tariff, and should close the regulatory gap between FERC rate structures for interstate pipelines and this Commission's rate structure for SoCalGas' system.
5. The interstate pipelines are regulated by FERC.
6. Under this Commission's regulations, SoCalGas is obligated to provide service at tariffed rates.
7. Because of the regulatory gap between the rate structures set by FERC and this Commission, noncore customers had an incentive to bypass the SoCalGas system, leaving the core customers paying the tab for stranded capacity.
8. To correct this gap, the Commission instituted the RLS tariff in D.95-07-046. Before establishing this tariff, SoCalGas had been charging an all-volumetric rate structure that did not accurately reflect the utility's cost to provide peaking service to customers that took partial service from a competing pipeline.
9. The RLS tariff, while allowing SoCalGas to mitigate any revenue loss it might suffer due to partial pipeline bypass, effectively discouraged new pipeline competition in SoCalGas' service territory.
10. There is no market, as such, for peaking rates. There is no other pipeline offering a peaking rate in competition with SoCalGas.
11. SoCalGas' revenue cap has little to do with marginal cost or economic bypass and much to do with keeping the customer cost the same even though the competitive pipeline offers a lower rate and the utility marginal cost is lower.
12. It is evident that SoCalGas' proposed market-based rate would provide customers with an incentive to bypass the SoCalGas system altogether and could, in certain situations, prove to be more punitive than the RLS tariff.
13. Daily balancing requires the customer to manage its own gas supply in a manner that does not adversely affect other customers on the system.
14. All the interstate pipelines serving SoCalGas' market have daily balancing requirements, and some even have tighter provisions.
15. Under current natural gas market conditions, where the price of gas is very high, more relaxed balancing provisions might encourage the peaking customers to use SoCalGas' balancing as a price arbitrage tool which would impose additional burdens on captive customers.
16. The customer charge is designed to collect the total cost of the customer-related facilities through a monthly demand charge.
17. The customer demand component of the rate should be equivalent to the currently authorized end-use customer rate for the specific customer class (e.g., electric generation, industrial, etc.)
18. The customer demand component of the rate should be computed monthly based on the higher of either the current monthly usage or the highest monthly usage over the prior 12-month period.
19. The customers of public utility companies are required to pay the surcharge as a separate line item on their bills effective July 1, 2001. Prior to July 1, 2001, the customers will continue to pay the costs of public purpose programs included in their volumetric transportation rates.
20. The philosophy behind a peaking tariff is that it should collect the demand imposed by the customers at the time of the system peak.
21. For reliability purposes, the gas utility designs its transmission and distribution system to meet the demands placed upon it on an abnormal peak day.
22. In designing customer class rates, the utility's costs are allocated to various customer classes based upon marginal cost allocators based on coincident peak demand.
23. A peaking rate should impose upon the customer who uses the service the extra burden for using the system for peak demand.
24. To design a tariff based upon the customer class noncoincident demand makes little sense, since the customer class peak demand may not impose any additional demands on the system if it occurs at a time when the system demand is not at its peak.
25. The aim of the peaking tariff should be to assess a charge that results in a significant premium over the systemwide default in order to discourage noncore customers from exploiting the utility system at peak times while using interstate pipelines for base load requirements.
26. If we were to use the noncoincident peak demand of the noncore class in the denominator, it is likely that we will arrive at a rate that is lower than the default rate based on the average demand. Such an outcome could prove to be so onerous that it might in fact promote bypass of SoCalGas' system by electric generators and could discourage development of new generation facilities.
1. It is reasonable to establish a cost-based peaking rate, as described herein, that encourages economic bypass, and discourages uneconomic bypass, of the SoCalGas' transmission and distribution system.
2. There is no competitive market for peaking rates, so a market-based rate is not supported by sound economic theory.
3. The cost-based rate is consistent with Commission precedent and history and is grounded in sound economic theory.
4. This order should be effective today to allow the new tariff to be implemented expeditiously.
5. We find that cost-based pricing mechanism proposed by SoCalGas, with the modifications suggested by ORA, are consistent with our policy of promoting economic bypass.
6. Under the provisions of AB 1002, customers of interstate pipelines are mandated to pay a volumetric public purpose program surcharge to the Board of Equalization.
7. The surcharge will be based on the public purpose program surcharge rates adopted by the Commission in Resolution G-3303 and will only apply to the customer's volumes served by SoCalGas.
8. The customer will pay the public purpose program charges on the volumes served by an interstate pipeline to the Board of Equalization.
IT IS ORDERED that:
1. The cost-based peaking rate set forth herein is adopted.
2. Within 10 days of the issuance of this order, Southern California Gas Company (SoCalGas) shall submit an Advice Letter to the Energy Division, requesting a cost-based peaking rate that is in conformity with this order.
3. The cost-based peaking tariff shall include the following components: a customer charge computed monthly based on the higher of either the current monthly usage or the highest monthly usage over the prior 12-month period; a Public Purpose Program (PPP) charge based on the PPP rates adopted by the Commission in Resolution G-3303; a reservation charge for transportation using the noncore coincident peak demand for the calculation of the demand charge; and an Interstate Transition Cost Surcharge (ITCS) charge collected as a separate volumetric rate, to be applied to the actual, recorded, monthly throughput.
4. The peaking tariff shall: (a) be a systemwide rate; (b) customers shall balance their nominations and burns daily; (c) partial bypass customers shall not be eligible for SIC credit; and (d) the tariff shall apply on a facility-by-facility basis.
5. The cost-based peaking tariff shall be subject to review in the next SoCalGas Biannual Cost Allocation Proceeding.
6. This proceeding is closed.
This order is effective today.
Dated , at San Francisco, California.
APPENDIX A
Page 1
List of Appearances
Interested Parties: Alcantar & Elsesser, LLP, by Michael Alcantar, Attorney at Law, for Cogeneration Association of California; Tom Beach, Crossborder Energy, for PG&E National Energy Group; Kirby Bosley and Michael Briggs, for Reliant Energy; Matthew V. Brady & Associates, by Matthew V. Brady, Attorney at Law, for the Department of General Services; Sharon Cohen, Sempra Energy, for Gasoducto Rosarito; Goodin, MacBride, Squeri, Ritchie & Day, by Brian T. Cragg, for Cabrillo I, LLC and Cabrillo II, LLC; Terry Dutton, County of San Diego, for San Diego County Air Pollution Control District; Alcantar & Elsesser, LLP, by Evelyn Kahl Elsesser, Attorney at Law, for Chevron USA, Amoco Energy Trading, Burlington Resources, Texaco & Aera Energy; Energy Law Group, LLP, by Diane I. Fellman, Attorney at Law, for NRG Energy, Inc.; Alex Goldberg, for Williams Companies, Inc.; Patrick L. Gileau, Attorney at Law, for CPUC Office of Ratepayer Advocates; Morrison & Foerster, LLP, by Peter W. Hanschen, Attorney at Law, for PG&E National Energy Group; Marcel Hawiger, Attorney at Law, for The Utility Reform Network; Bruno Jeider, for the City of Burbank; White & Case, LLP, by Joseph M. Karp, Attorney at Law, for California Cogenerators Council; Ellison, Schneider & Harris, by Douglas K. Kerner, Attorney at Law, for Duke Energy North American; Eric Klinkner, for the City of Pasadena; Luce, Forward, Hamilton & Scripps, LLP; by John W. Leslie, Attorney at Law, for Coral Energy Resources; Steven G. Lins, for the City of Glendale; Sutherland, Asbill & Brennan, LLC, by Keith McCrea, Attorney at Law, for California Manufacturers & Technology Association and California Industrial Group; Sara Steck Myers, Attorney at Law, for the City of San Diego; Ronald G. Oechsler, for Navigant Consulting Inc.; Frederick M. Ortlieb, Deputy City Attorney, for the City of San Diego; Jones, Day, Reavis & Pogue, by Norman A. Pedersen, Attorney at Law, for Southern California Generation
APPENDIX A
Page 2
Coalition; Roger T. Pelote, for Williams Energy Services; Robert L. Pettinato, for the Los Angeles Department of Water and Power; Patrick J. Power, Attorney at Law, for the City of Long Beach; Michael Shames, Attorney at Law, for Utility Consumers' Action Network; John Steffen, for the Imperial Irrigation District; and Catherine E. Yap, for Barkovich & Yap, Inc.
Intervenors: Craig Chancellor, Davis, Wright, Tremaine, LLP, by Lindsay How-Downing, Attorney at Law, for Calpine Corporation; Davis, Wright, Tremaine, LLP, by Edward W. O'Neill, Attorney at Law, for El Paso Natural Gas Company; and Michael R. Thorp, Sempra Energy, for San Diego Gas & Electric Company and Southern California Gas Company.
State Service: Joyce Alfton and Richard A. Myers, for the Energy Division; Jacqueline Greig and Robert M. Pocta, for The Office of Ratepayer Advocates; and Scott Tomashefsky and Bill Wood, for the California Energy Commission.
(END OF APPENDIX A)
