Message-ID: <19222751.1075844043583.JavaMail.evans@thyme>
Date: Mon, 27 Nov 2000 01:20:00 -0800 (PST)
From: jeffery.fawcett@enron.com
To: steven.harris@enron.com, kevin.hyatt@enron.com
Subject: Bad Proposed Decision
Cc: tk.lohman@enron.com, christine.stokes@enron.com, michelle.lokay@enron.com, 
	lorraine.lindberg@enron.com, susan.scott@enron.com
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Attached below is the CPUC's proposed decision in the Gas Industry=20
Restructuring proceeding.  Essentially, it adopts the Interim Proposal with=
 a=20
few modifications.  The CPUC states that they are taking a "cautious"=20
approach to deregulation in light of recent market events in both electrici=
ty=20
and gas, and therefore, rejected the more robust reforms outlined in the=20
Comprehensive Settlement.  The CS was offered by SoCal Gas and supported by=
=20
many of the settlement parties, including Enron and Transwestern.

The good news is that, with respect to Hector Road, the maximum volume at=
=20
Hector is limited to 50 MMcf/d, similar to the proposal made by the=20
Comprehensive Settlement.  I've included the section from the PD that deals=
=20
with this issue for your convenience.  The full document is also attached.

excerpt at at page 50 regarding Hector Road:

(1) Receipt Points/ Intrastate Transmission
As we have already discussed above, we now judge that intrastate transmissi=
on=20
unbundling is not wise at this time for the SoCalGas system.  However,=20
SoCalGas=01, intrastate transmission system can still be made more accessib=
le=20
and understandable to its users.
In R. 98-01-011, the record reflects dissatisfaction among customers and=20
shippers with the lack of clarity on how SoCalGas schedules gas shipments=
=20
through its windowing system, and SoCalGas=01, sole use of the Hector Road=
=20
interconnection as a receipt point. (Exh. 8 in R. 98-01-011, pp. 29-31=20
(Southern California Edison Company Market Conditions Report), (Panel Heari=
ng=20
Testimony of  Mr. Paul Carpenter, Southern California Edison, Tr. pp.=20
931-932, Jan 25, 1999).) Our decision in D. 99-07-015 directed investigatio=
n=20
into using the Hector Road interconnection, even on an interim basis, and t=
he=20
publication of SoCalGas=01, windowing criteria in tariffs.  SoCalGas filed=
=20
Advice Letter 2837, which detailed its process of basing a maximum amount o=
f=20
gas scheduled for shipment through a receipt point on the prior day=01,s=20
nominations, except at the first of the month.  Early in the instant=20
proceeding, the ALJ held in abeyance active consideration of the windowing=
=20
procedure tariff SoCalGas filed, pending the resolution we reach today. =20
(Prehearing Conference of September 1, 1999, p. 34.)
We are approving on an interim basis the replacement of the current windowi=
ng=20
process with a system under which SoCalGas will establish receipt point=20
capacities, subject to daily revision, on the basis of the physical maximum=
s=20
for each receipt point under the operating conditions expected for that day=
. =20
Customers and shippers will know the daily maximums because they will be=20
posted on SoCalGas=01, GasSelect system daily prior to the nomination=20
deadlines.  If, in the aggregate, customers nominate more than the physical=
=20
capacity at any receipt point, gas will be scheduled based on the upstream=
=20
pipeline=01,s capacity rights system.  For Wheeler Ridge, at which more tha=
n one=20
upstream pipeline delivers gas, the maximum daily physical capacity would b=
e=20
allocated between upstream sources pro rata on the basis of the prior day=
=01,s=20
scheduled deliveries from each source.
This system eliminates the mystery in how pro-rations are made, provides=20
continuity in capacity rights between the interstate and intrastate systems=
=20
and provides flexibility for customers in nominating at the most=20
cost-effective receipt point on any given day.  We recognize that it does n=
ot=20
provide for long-term planning, but the alternative under the CS of paid-fo=
r=20
firm receipt point rights for the term of the settlement has the disadvanta=
ge=20
of locking customers into a receipt point that may lose value over the term=
. =20
In this period of gas price volatility, we believe that the more flexible=
=20
plan is the right one.
Thus, we direct SoCalGas to withdraw Advice Letter 2837 and file a new advi=
ce=20
letter within 10 business days implementing the proposed receipt point=20
physical capacity system.  This may be the same as the exemplary tariff fil=
ed=20
with the IS or updated as necessary pursuant to subsequent proceedings.  Th=
is=20
tariff revision will be effective within 30 days after the filing unless=20
rejected by the Energy Division.
In R.98-01-011, PG&E and Edison particularly complained about the=20
restrictions at Wheeler Ridge. (Exh. 15 in R. 98-01-11, pp. 7-9 (PG&E=20
Rebuttal to Market Conditions Report), and Exh.8 in R. 98-01-011, pp. 29-31=
,=20
(Southern California Edison, Market Conditions Report).) One response in th=
e=20
IS to these complaints is the establishment of a formal receipt point at=20
Hector Road for all customers, subject to Wheeler Ridge access fees and=20
surcharges.  Its capacity will be 50 MMcfd or greater as long as there are=
=20
nominations of that volume and Mojave Pipeline Company delivers that much i=
n=20
response to those nominations.  This provision should allow greater=20
flexibility for shippers and customers as well as leveling the playing fiel=
d=20
between SoCalGas and others at this interconnection.  We will support=20
SoCalGas=01, application to the Federal Energy Regulatory Commission for=20
approval of Hector Road as a formal delivery point by Mojave.
El Paso Natural Gas Company objected strongly to the provision in the IS fo=
r=20
automatically expanding of Wheeler Ridge capacity  While this was not an=20
option specifically mentioned in D.99-07-015, we do not choose to stand on=
=20
that technicality to exclude it from consideration here.  Once a proceeding=
=20
is open to settlement, the dynamics of settlement talks may bring in matter=
s=20
outside the delineated scope, as they have done here with regard to Wheeler=
=20
Ridge expansion and, for instance, pooling.  Both proposals respond to=20
concerns raised in R.98-01-011, (see citations in text above as well as Pan=
el=20
Hearing Testimony of Mr. Benjamin C. Campbell, PG&E, Tr. pp. 267-268, Jan 1=
9,=20
1999)) and neither was specifically excluded from further consideration in=
=20
D.99-07-015.  We therefore view them as within the scope of this proceeding=
. =20
To the extent that other receipt points are also viewed as constrained, we=
=20
welcome evidence to that effect in a future proceeding, as well as proposal=
s=20
for criteria to determine when expansion should be applied for.  by 100MMcf=
d=20
if a certain number of curtailments occurred, and for automatically allowin=
g=20
the expenses of that expansion to be rolled into rates.  We do not wish to=
=20
approve automatic rate increases for all ratepayers for a facility for whic=
h=20
only some may have use, but we believe that developing criteria for expansi=
on=20
of receipt points is useful.  Hector Road may not entirely alleviate the=20
problem of constraints on northern gas flowing to the south.
Therefore, we approve that portion of Section III of the IS that sets forth=
=20
criteria for expansion, but provide that upon the meeting of that criteria,=
=20
SoCalGas shall submit an application for an expansion of the receipt point=
=20
capacity.  That application shall be processed in the regular way, with the=
=20
issues of need in the context of the entire system and foreseeable market=
=20
conditions considered.  Moreover,  rolled-in or incremental rates, allocati=
on=20
of cost among classes and consequent rate design will remain open for=20
decision in that proceeding.
Thus, the modification to the IS that we make is in the first sentence of t=
he=20
first full paragraph on page 8.  The words =01&apply to=018 should be inser=
ted=20
after =01&SoCalGas will=018.  We specifically disapprove the IS language in=
 the=20
middle on page 8 beginning with the words =01&This Settlement=018 through t=
he end=20
of the paragraph, and the concomitant language in Appendix A setting the co=
st=20
at $12 million in 1999 dollars.
---------------------- Forwarded by Jeffery Fawcett/ET&S/Enron on 11/27/200=
0=20
08:45 AM ---------------------------
From: Jeff Dasovich on 11/22/2000 06:28 PM
Sent by: Jeff Dasovich
To: Jeffery Fawcett/ET&S/Enron@ENRON, Susan Scott/ET&S/Enron@ENRON
cc: =20

Subject: Bad Proposed Decision

Well, this shows the direction in which the "new" Commission is heading.  T=
he=20
very good news, though, is that  TW's proposal was included in both=20
settlements (now that's hedging!).  Thus,  the benefits to TW were preserve=
d=20
under both proposals.  Congratulations.  That's fantastic--hard work that=
=20
paid off.

We will of course express out extreme dissappointment with the PD, and poin=
t=20
out that this decision condemns California to a 20th century infrastructure=
,=20
when the state's 21st century economy demands much, much better. =20

We should discuss.  Since the PD empowers the likes of Norm and Florio, it=
=20
will be important to play very close attention to implementation of Hector.

Sorry to have to be the one to deliver the news.   But we have a knack of=
=20
making lemonade out of lemons and we'll do out best to do the same here,=20
whatever turns up at the end.

Best,
Jeff
----- Forwarded by Jeff Dasovich/NA/Enron on 11/22/2000 05:53 PM -----

=09Michael.Alexander@sce.com
=0911/22/2000 05:27 PM
=09=09=20
=09=09 To: Paul_Amirault%SCE@sce.com, tomb@crossborderenergy.com, burkee@ct=
s.com,=20
craigc@calpine.com, rick.counihan@greenmountain.com, jdasovic@enron.com,=20
MDay@GMSSR.com, Douglas.Porter@sce.com
=09=09 cc: Colin.Cushnie@sce.com, INGGM@sce.com
=09=09 Subject:=20


The PD in the Gas Restructuring is out.   I have yet to read the whole
thing, but the title "Approval With Modifications Of The Interim
Settlement..." does not bode well.  According to Steve Watson (and I only
have Steve's statement second hand), the decision reflects a fear that the
timing is wrong in light of the current volatile gas price market.

(See attached file: Proposed.doc)

--
Michael S. Alexander
Southern California Edison
626-302-2029
626-302-3254 (fax)

 - Proposed.doc
