-----Original Message-----
From: 	Brennan, Lorna  
Sent:	Wednesday, August 08, 2001 10:11 AM
To:	McGowan, Mike W.
Cc:	Ratner, Michael
Subject:	Southern Trails Article on Western Leg

Questar Can't Sell from Proposed Pipeline Under New CA Rate 
Although not giving up its search for customers in California, Salt Lake City-based Questar Corp.'s oil-to-natural-gas converted pipeline from the Four Corners of New Mexico remains stymied in operating its portion within California under a newly revised "peaking tariff" for Southern California Gas Co., according to Questar officials who have been analyzing the new rate established Aug. 2 by state regulators.  Questar is looking at alternative uses for the California portion of the approved interstate pipeline. 
"We can't work with (the rate) as it is," said Chad Jones, a Questar spokesperson. "It definitely doesn't go far enough to remove the obstacles in the way of developing new pipelines in Southern California. It still doesn't level the playing field. Although it is better than the current RLS (residual load service) tariff; it still punishes customers who want to take partial service from a SoCalGas competitor. 
"Customers still have to pay higher interruptible penalties than in other parts of the state, and higher rates for balancing services. We're at the point where we're not going to stop trying to market capacity on Southern Trails, but we're definitely at the point where we have to consider some alternative uses for the California portion (of the 700-miles, 16-inch-diameter pipeline)." 
One of the alternatives would be to operate the California part of the line as a petroleum or liquids line carrying product from the Long Beach Harbor area to existing petroleum or liquid products pipelines in and around the California-Arizona border. That's the alternative, however, Jones said, but finding a customer for a major portion of the converted pipeline's 120 MMcf/d capacity is still Questar's preference. 
After months of reviewing the issue and weighing alternatives, the California Public Utilities Commission last week established a new "peaking" or standby charge for customers taking partial service from a SoCalGas competitor, allowing those customers to pay only for the amounts of gas they use at any given time from the local gas transmission and distribution utility, SoCalGas. 
The CPUC tried to balance the need for the local gas utility to be made whole so added fixed costs did not have to be shifted to other customers, while trying to "encourage and promote additional natural gas resources without encouraging cherry-picking or overbuilding," according to CPUC President Loretta Lynch. 
Questar officials said Tuesday they have pretty much exhausted their appeal resources, and they are "not about to go head-to-head with the established big boys" in lobbying California's governor or state legislature, Jones said. "Thus, we're still looking for a large customer who would be willing to break the gridlock in Southern California in the name of promoting competition." 
The east-of-California portion of the Southern Trails pipeline is already fully subscribed and will start operations mid-year next year, Jones said.