FYI--Below is the Gas Daily article about the ACC comments filed at FERC in the CA. Infrastructure proceeding.    gh

Arizona warns of Southwest capacity shortfall
California is not the only state worried about the adequacy of its gas pipeline infrastructure.
In recent correspondence with FERC, the Arizona Corporation Commission urged federal
regulators to put California's capacity shortage in a broader regional context; failure to do
so, the ACC warned, might cause California's gas supply problems to spread to other states.
"Given the regional, multi-state nature of the interstate pipelines in the Southwest, any
actions taken by the FERC to address California's interstate pipeline system will have wide-spread
ramifications for Arizona and a number of other states," said the ACC.
As part of its effort to tackle California's energy woes, FERC staff has been studying the
state's pipeline infrastructure to see if there are ways to improve the delivery of gas. In May,
the commission hosted a conference devoted entirely to gas transportation issues in California
(GD 5/25); representatives from neighboring states also got involved.
In comments sent to FERC on June 22, the ACC expressed concern that measures to
remedy California's gas shortage might shift much-needed capacity away from its state. If
federal regulators do not press for the improvement of pipeline services throughout the South-west,
it might "lead to a worsening of regional problems and/or a shifting or spreading of
problems from California to Arizona and other states," the ACC argued.
In particular, the ACC said that it was alarmed about the continued reliance of Arizona shippers
on the El Paso Natural Gas system. At present, two interstate pipelines - El Paso and Transwestern
Pipeline - serve the state, but the bulk of Arizona shippers only have access to the El Paso system.
"The ACC is becoming increasingly concerned with the pipeline capacity situation in
Arizona and whether current natural gas shippers in Arizona, with existing contract rights on
the El Paso system, will receive reliable pipeline service in the future," wrote the commission.
"It is widely recognized that the El Paso system running through Arizona to California has
been operating at very high utilization rates recently. Additionally, it appears that little or no
additional pipeline capacity will be added by El Paso in the near future to serve existing cus-tomers
and their existing contract rights, beyond the Line 2000 expansion which will largely
replace capacity that has been lost for other reasons."
El Paso recently won approval for Line 2000, which will boost deliverability into Califor-nia
by as much as 230 million cfd. But despite efforts to add capacity, the pipeline has been
dogged by complaints about access to its system.
According to shippers in Texas, Arizona and New Mexico, El Paso has proposed a new
allocation scheme that would force captive shippers to pay more for access to its system. Echoing
the comments of the ACC, the shippers said they faced degradation of firm service rights because
of El Paso's diminished ability to deliver gas consistent with contractual obligations (GD 5/30).
FERC, in fact, is planning a technical conference next month to discuss the issues raised
by El Paso's latest allocation plan. The meeting is scheduled for July 18, but FERC allowed
that the meeting may continue through July 19.
The concerns of the ACC may help shore up the assertions of east-of-California shippers.
Contrasting the access that California shippers have to pipelines and storage facilities, the ACC said,
"FERC should ensure that captive shippers are not disadvantaged due to their lack of options."
Most importantly, said the ACC, FERC should encourage capacity additions that serve the
needs of both existing shippers and expansion shippers. "The complexity of the issues and the
potential for inadvertently exacerbating the region's pipeline capacity problems argues for a
careful and thorough approach to the issues, ensuring that customers in Arizona, California and
elsewhere in the region are well served by any change in the treatment of pipeline capacity in
the Southwest," the ACC concluded. (PL01-4, RP00-336) NH


Glen Hass
State Government Affairs
(402) 398-7419
glen.hass@enron.com