As a follow-up to our meeting last Friday, I have reviewed the Comprehensive Settlement Agreement (CSA), SoCalGas System Adequacy proceeding testimony of Lad Lorenz and the CPUC Dec. 11, 2001 Decision on Unbundling the SoCalGas system by implementing the CSA with modifications.  I also have a call into Rodger Schwecke at SoCal to discuss their upcoming tariff filing and the related capacity issues.  Some of the pertinent points made in these documents relative to receipt point capacity and allocation are as follows:

Comprehensive Settlement Agreement

Appendix B outlines the details of backbone transmission/receipt point capacity rights:
	
1. All receipt points will be defined with firm capacity and primary access rights that reflect physical limitations.  The Appendix B table of receipt point capacity indicates that for No. Needles, Transwestern has Primary Access Rights of 750MMcf/d and Mojave at Hector Road has Secondary Access Rights.

2.  For interconnects into SoCalGas with more than one upstream pipeline, secondary access rights will be defined.

3.  New or expanded interconnects with existing or new pipelines will have secondary access rights only and will be subject to bumping by gas scheduled through primary access points.  

In the text of the CSA, the Open Season procedures for intrastate backbone transmission/receipt point capacity are described in detail.  Briefly, its proposed to work as follows:

1.  Initial Reservation for Core customers.  SoCalGas Acquisitions, core transport agents and wholesale customers serving the core will be provided a set aside amount of capacity.  This included 300MMcf/d at North Needles.

2.  First Stage/Phase I of the Open Season for 50% of RP capacity after deducting core customer set aside.  Existing noncore customers may bid on any RP capacity up to 100% of their historical usage.

3.  Second Stage/Phase II of the Open Season for remainder of Phase I capacity, if any, not awarded or allocated.  Available to same existing noncore customers as in Phase I to bid on in this second round if they haven't been awarded capacity up to their 100% historical usage.

4.  Third Stage/Phase III of the Open Season for 50% of RP capacity after deducting core customer set aside plus any remaining capacity not awarded in Phases I and II.  Bidding open to any existing or new customers with creditworthiness established.

5.  SoCalGas will hold annual open seasons for expired or non-contracted available capacity.

6.  Market concentration limits were set such that no person or entity including affiliates may hold more than 40% of the capacity (after core set aside) at any one receipt point awarded through the open season process.  This does not include secondary market capacity or individually negotiated contracts acquired after the initial open season.

Examples of North Needles capacity:	Physical capacity	750 MMcf/d		Add'l 25/50	775/800
					Core Cust. set aside	300			Inc. core	313
					Avail. Cap. for bidding	450					462/487

					Phase I  avail. cap.	225					231/243.5

					Phase II avail. cap.	remainder of 225			remainder of
													231 or 243.5

					Phase III avail. cap. 	225 + remainder 			231/243.5 +
								of Phases I & II if any.			remainder of 
													Ph. I & II if any.

System Adequacy Proceeding--Lorenz Testimony

Lad Lorenz testifies that the proposal to allocate firm receipt point capacity on the SoCalGas system is intended to be used "until the commission acts in the GIR proceeding".  

In Section H. of Lad's testimony on Firm Receipt Point Access, Table II illustrates that North Needles will be expanded by 50MMcf/d to a level of 800.  In Table III under the heading of Firm Primary Access it states "TW--who then allocates among its shippers" in reference to the 800MMcf/d of capacity listed for North Needles.

In this same Section H, Lad states that this alternative proposal for allocating primary firm capacity at each receipt point will achieve improved reliability "until the Commission acts to approve the CSA".

CPUC Decision 01-12-018 on SoCalGas Unbundling

The Commission approved the CSA on Dec. 11, 2001 with certain modifications.  These modifications included:

1.  Market concentration limits were decreased from 40% to 30% and included capacity attained in subsequent open seasons or by individually negotiated contracts.  Secondary market capacity remains excluded from the market concentration limit.

2.  A secondary market price cap was established at 120% of the interruptible rate ($.07191).

3.  Reinstated the core reservation for intrastate capacity at 1044MMcf/d (CSA lowered it to 1000).  This explains why the core reservation for Needles is 313 and doesn't match the TW/SoCal contract level.  The additional 44 was allocated per a Calpine proposal on a prorata basis to each receipt point with Needles receiving an additional 13MMcf/d.

In the summary and conclusion sections of the Decision, SoCalGas was directed to include the additional 375MMcf/d of new backbone and receipt point capacity in its open season.  This part of the Order did not provide any direction as to how the new capacity was to be allocated to upstream pipelines.  Additionally SoCalGas was directed to file an advice letter for implementation and to include proposed methods for allocating any additional future capacity additions.