Glen,

Can you help interpret this impact of this decision on California customers for us?  Since we are looking at the Southern Trails system again, is this really good for them?  Exactly what is the rate the peaking customer would be charged?

Many thanks, Kim.

 -----Original Message-----
From: 	Brennan, Lorna  
Sent:	Friday, August 03, 2001 9:45 AM
To:	Chavez, Gabriel; Dowd, Stephen; Gadd, Eric; Hyatt, Kevin; Millar, John; Ratner, Michael; Taylor, Gina; Hass, Glen; Loeffler, Michael; Stanton, Lon; Wilson, Rob; Harris, Steven; Donoho, Lindy; Goradia, Pallavi; Lindberg, Lorraine; Lohman, TK; Lokay, Michelle; Moore, Jan; Watson, Kimberly; Huber, Lee; Pryor, Tony
Subject:	Article on SoCal "Peaking" Rate

New Peaking Rate for SoCalGas Could Spur Bypass 
After various fits and starts surrounding the issue over a number of months, California regulators Thursday established an alternative demand stand-by charge, called a "peaking rate," for Southern California Gas Co., which could open up the utility to "economic bypass" by interstate pipeline projects lined up and ready to go at the border. The California Public Utilities Commission (CPUC) rejected the utility's own proposal as "anti-competitive." 
"This case has been very contentious," said the lead commissioner assigned to the case, Richard Bilas. "For the most part, the response to SoCal's application was negative." Noting active opposition from large end-users, merchant generators and interstate pipelines, Bilas said that it is difficult to find an ideal peaking rate for gas. CPUC President Loretta Lynch dropped an alternate proposal to support Bilas. 
Ideally, the regulators are trying to keep the utility and its captive customers whole, while not deterring the option of what they call "economic bypass," said Bilas, noting that SoCalGas' proposals did not "reflect market reality. The new rate calculation is very complex, and potential competitors have yet to comment on its impact. 
A number of proposed interstate pipelines are lined up at the border awaiting a decision which would make it economic for them to proceed into SoCalGas territory, including an expansion of Mojave to Sacramento, Questar Corp.'s proposed Southern Trails oil-to-natural gas converted pipeline from the Four Corners area to Long Beach, and Kinder Morgan and Calpine's Sonoran pipe to San Francisco.
Up to this point the utility's residual load service (RLS) charges -- which customers of other pipelines had to pay in addition to charges paid to the transporting pipelines -- made it uneconomic to sign up on other lines. Called on by the CPUC to come in with a more moderate system, SoCalGas had proposed replacing the RLS charge with a peaking charge that customers said was just as onerous. 
The CPUC made its decision on a revised peaking charge unanimously on a 4-0 vote, with one of the five-member body's commissioners absent. 
The CPUC action establishes a peaking rate for SoCalGas customers who want to take only partial service from the utility and get their baseload service from another pipeline. Customers will be required to pay a monthly demand charge, public goods charge collected on a volumetric basis (so if there is no use, there is no charge), a reservation charge with a complex formula, and an interruptible peaking rate for volumes actually received. 
Peaking customers will be subject to daily balancing and a credit for service interruptions of firm capacity, which will apply to both new and existing facilities. 
"The new rate contrasts to the rate design in place for SoCalGas' standard full-requirements firm-load customers who pay for priority on a volumetric basis," Lynch said. "We're changing the peaking rates so that customers not taking their full service from the utility will only pay for the amount of capacity they use on any given day. 
"The challenge for the CPUC in this case was to establish a peaking tariff for natural gas service that fairly compensates SoCalGas for standing ready to serve the peak needs only of some customers, while those customers go off its system for their baseload needs, but also to develop a tariff that allows SoCalGas to be able to compete with some of the energy company pipelines that plan to enter into SoCal's service territory. 
"We're trying to encourage and promote additional natural gas resources without encouraging cherry picking or overbuilding for which core customers would end up paying for," Lynch added.