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Enron Mail |
18 INSIDE FERC-August 13, 2001
?2001 The McGraw-Hill Companies, Inc. Reproduction forbidden without permission. BLAMING EACH OTHER, EL PASO SHIPPERS CALL FOR ALLOCATION OVERHAUL Contract demand shippers last week argued anew that insufficient physical capacity exists on the El Paso Natural Gas Co. system and that full-requirement shippers often are to blame for system disruptions on peak days. In comments, various El Paso shippers called on FERC to address their concerns and many suggested that the commission should pull together separate but related El Paso proceedings. For its part, El Paso rebutted a July 17 complaint (RP01-486) by a group of mostly full-requirements shippers located east of California. The EOC shippers alleged that El Paso was neglecting its responsibili-ties to existing shippers while concentrating on drumming up new business without needed system upgrades or expansions. The shipper group claimed that a 10-year rate freeze running through 2005 gives El Paso no incentive to improve its system to maintain service quality (IF, 23 July, 3). The complaint "is without foundation in fact, law or policy," El Paso insisted in an Aug. 6 answer. The pipeline "has consistently maintained" facilities or built new capacity "whenever it has been economically justifiable" under the 1995 settlement. In the meantime, a large and unexpected increase in full-require-ments load has triggered use of a capacity-allocation scheme, which also was agreed to by parties in the settlement, El Paso told FERC. Frustration with the capacity-allocation methodology was expressed by CD shippers in response to the complaint. In representative comments, the Indicated Shippers agreed with the EOC shippers that a "chronic" shortage of capacity exists on El Paso but did not accept the EOC group's version of events that led to the problem or its proposed solution. The EOC group asked FERC to direct El Paso to add facilities and dedicate all of the 230,000 Mcf/day of capacity from an ongoing conversion project to existing firm contractual obligations. The Indicated Shippers derided the term "existing firm obligations" as vague enough to cover new power plants and referred to the controversy surrounding El Paso's Redhawk project, which FERC recently agreed can be built under automatic blanket authorization to serve two power plants in Maricopa County, Ariz. To bring certainty to the El Paso system, all shipper rights must be better defined, the Indicated Shippers demanded in calling for all full-requirements contracts to be converted to contract demand contracts, echoing a similar assertion made in a July 13 complaint by a group of CD shippers (RP01-484). Otherwise, full-requirements shippers will enjoy unlimited use of capacity at the expense of other customers, the Indicated Shippers continued. "The absurdity of the claim is demonstrated by analogy to a request that an airplane be built to carry all customers who might request service on a particular day, without requiring the customers to make a reservation," they said. The "entire ability" of El Paso to handle increased volumes systemwide was questioned earlier this summer by Commissioner Pat Wood III in a June 27 discussion prior to the Redhawk vote (IF, 2 July, 4). El Paso was directed to relate in its order 637 proceeding (RP00-336) how well upstream capacity can handle new load on the system. El Paso committed in a July 9 letter to serve full-requirements customers "while satisfying" obligations to California customers. On days of short supply, shippers using primary points are scheduled ahead of those using alternate points and interruptible shippers, El Paso went on to say. If firm shippers using primary points exceed available capacity, then volumes are allocated on a pro-rata basis. El Paso also reiterated its plans to use the capacity from the conversion of the All American Pipeline L.P. to serve existing customers. Beyond requesting the information in the order 637 proceeding, FERC should take another step to consider "the totality of circumstances on the El Paso system" and reopen the pipeline's rates under section 5 of the Natural Gas Act, Southern California Edison Co. asserted. The increased load by full-requirements shippers caused problems in flowing contracted quantities on El Paso, SoCal Ed contended. Full-requirements and contract demand shippers pay for service differently, SoCal Ed continued. While CD shippers pay demand charges for all their volumes, full-requirements shippers pay charges based on total billing determinants of 766,659 Dt/day. When FR customers use more than that, El Paso is unable to honor firm commitments and the customers "enjoy a free ride at the expense of California consumers," the.utility complained. Oneok Energy Marketing and Trading Co. L.P. registered a similar concern, contending that the pro-rata allocation methodology favors FR customers. "Full-requirements shippers can game the system by nominating volumes far in excess of their actual needs, and thus receive disproportionate volumes in the pro-rata allocation scheme" that El Paso uses, Oneok said. Given that the related complaints deal with the same issue, Pacific Gas and Electric Co., Enron Corp. and El Paso asked FERC to consolidate the cases. The cases should be addressed in one hearing where "numerous allegations of contested fact" could be investigated, El Paso submitted. But neither shipper group is right, the pipeline maintained. It insisted that it adheres to the letter of its contracts, tariff and two settlements to meet obligations to customers. Because unanticipated growth in full-requirements demand has caused use of the capacity allocation procedures, El Paso would like to establish a new systemwide allocation methodology in the order 637 proceeding, it told FERC. "In anticipation that this escalating usage under the FR contracts will come under commission scrutiny, the [EOC] shippers apparently chose to make a pre-emptive strike," El Paso said. FERC should consider whether there is a "reasonably proportionate limitation implied" in El Paso's FR contracts, the pipeline continued. Full-requirements shippers cannot demand more and more volumes without paying for it, El Paso held. "It is ludicrous for the [EOC] shippers to suggest that it is economically justifiable for [El Paso] to construct expensive mainline facilities, costing hundreds of millions of dollars, to serve ever-increasing FR loads at [EL Paso's] commodity rates," El Paso argued. Besides, the commission has no authority to force a pipeline to expand under the circumstances at hand, El Paso continued. Under NGA section 7(a), FERC's ability to order a physical connection to a pipeline is limited to service for local distribution, El Paso noted. Any decision about other pipeline facilities must be left to stockholders and directors of the companies, it concluded.
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