A.01-10-011 MP1/rg1/acb
COM/MP1/rg1/acb Mailed 12/23/03
Decision 03-12-061 December 18, 2003
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Pacific Gas and Electric Company Proposing a Market Structure and Rules for the Northern California Natural Gas Industry for the Period Beginning January 1, 2003 as Required by Commission Decision 01-09-016. (U 39 G) / Application 01-10-011(Filed October 8, 2001)
OPINION REGARDING THE GAS STRUCTURE AND RATES
FOR PACIFIC GAS AND ELECTRIC COMPANY FOR 2004
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A.01-10-011 MP1/rg1/acb
TABLE OF CONTENTS
Title Page
I. Summary 2
II. Background 3
III. 2004 Gas Structure and Beyond 6
A. Summary of the Proposals 6
B. Continuation of the Gas Accord Structure 8
1. Introduction 8
2. Positions of the Parties 9
a. PG&E 9
b. California Cogeneration Council and Calpine Corporation 14
c. California Manufacturers and Technology Association 16
d. Canadian Association of Petroleum Producers 17
e. City of Palo Alto 18
f. Department of General Services 19
g. Duke 19
h. Indicated Producers 20
i. Lodi Gas Storage, L.L.C. 20
j. Mirant 21
k. Northern California Generation Coalition 21
l. Office or Ratepayer Advocates 22
m. The Utility Reform Network 24
C. Discussion 28
IV. Winter Reliability Standard and Winter Firm Capacity Requirement 35
A. Introduction 35
1. Winter Reliability Standard Proposal 36
2. Facility Requirements to Support the Winter Reliability Standard 37
a. Central Backbone Improvements 37
b. Local Transmission Improvements 37
c. Backbone Transmission 38
d. PG&E Storage 38
3. Core Winter Firm Capacity Requirement 39
B. Other Proposals 41
C. Positions of Parties 41
1. Lodi Gas Storage 41
2. NCGC 44
3. ORA 45
4. Palo Alto 46
5. TURN 47
6. Wild Goose 49
7. PG&E 49
D. Discussion 53
V. Transmission Services 56
A. Background 56
1. Current Structure for Local Transmission Services 57
2. Current Structure for Backbone Transmission Services 57
a. Paths 58
b. Firm and as Available Rights 58
c. Delivery Points 59
d. Standard Service 59
e. Negotiated Service 60
f. Discounting 61
3. Proposals 61
a. Basic Backbone Transmission Services Structure 61
b. Basic Local Transmission Services Structure 62
c. Long-Term Firm Backbone Contracts 62
d. Commensurate Discount Rule 63
e. Scheduling Non-Performance 65
f. Bypass Transportation Charge Proposal 66
(1) Introduction 66
(2) Potential Bypass of Local Transmission Charge 66
(3) Potential Bypass of Backbone Transmission Charge 67
(4) Bypass Charge Proposal 67
4. Other Proposals Affecting Transmission 69
B. Positions of the Parties 70
1. CCC/Calpine 70
a. Bypass Proposal 70
b. Long-Term Contracts 71
2. CMTA 72
3. California Natural Gas Producers Association 72
4. Duke 72
5. LGS 73
6. NCGC 74
7. ORA 75
8. Wild Goose 75
9. PG&E 77
a. Bypass Proposal 77
b. Long-term Contracts 80
c. Other Issues 82
C. Discussion 83
1. Basic Backbone Transmission Services 83
2. Basic Local Transmission Services 83
3. Long-Term Firm Backbone Contracts 84
4. Commensurate Discount Rule 85
5. Scheduling Non-Performance 86
6. Bypass Transportation Charge Proposal 87
VI. Storage Services 88
A. Introduction 88
B. Proposals 90
1. Assignments of Firm Storage Rights 90
2. Core Firm Storage Service 91
a. Basic Storage Services 91
b. Injection and Withdrawal Profiles for CFS 92
c. Firm Counter-Cyclical Storage Rights for CFS 93
3. Standard Firm Storage Service 94
a. Basic Storage Services 94
b. Injection and Withdrawal Profiles for SFS 96
4. Long-term Firm Storage Contracts 98
5. Negotiated Firm and As-Available Services 98
6. Hub Services 99
7. Storage Shrinkage 99
C. Position of the Parties 99
1. Duke 99
2. LGS 100
3. NCGC 102
4. ORA 102
5. PG&E 102
D. Discussion 106
1. Assignments of Firm Storage Rights 106
2. Core Firm Storage Service 107
a. Basic Storage Services 107
(1) Firm Storage Injection, Inventory, and Withdrawal Profiles for Core Firm Storage 108
(2) Firm Counter-Cyclical Storage Rights for Core Firm Storage 110
3. Standard Firm Storage Service 110
a. Basic Storage Services, Non-Cycle Working Gas, and Compression 110
(1) Firm Storage Injection, Inventory and Withdrawal Profiles for Standard Firm Storage 113
(2) Firm Counter-Cyclical Storage Rights for Standard Firm Storage Service 114
4. Long-Term Firm Storage Contracts 115
5. Storage Shrinkage 116
VII. Contract Extension and Open Season 116
A. Background 116
1. Summary of Proposed Contract Extension Process 116
2. Summary of Proposed Open Season Process 118
3. Participation of PG&E Department in the Open Season 119
4. Other Proposals 120
B. Position of the Parties 120
1. CCC/Calpine 120
2. DGS 122
3. NCGC 123
4. PG&E 124
C. Discussion 126
VIII. Operations and Balancing 129
A. Background 129
1. Operational Overview 130
2. Operations and Balancing Under the Gas Accord 131
3. Balancing Services Proposals 132
a. Background 132
b. Additional Storage Capacity 132
c. Daily Imbalance Limit 133
d. Monthly Excess Imbalance Charge 134
e. California Gas Production 135
f. Measuring OFO and EFO Compliance by Core Procurement Groups 136
4. Nomination Scheduling Process Proposal 137
5. Supply Shortfall Proposals 138
a. Curtailment Process Proposal 138
b. Local Curtailment Noncompliance Charge 141
6. Shrinkage Proposals 142
a. Adjustment of Shrinkage Proposal 142
b. Storage Shrinkage Proposal 144
7. Noncompliance Charge Proposal 145
8. Anonymous Trading Platform Proposal 146
B. Positions of the Parties 147
1. CCC/Calpine 147
a. Curtailment Proposal 147
b. Daily Imbalance Proposal 148
2. CMTA 148
3. California Natural Gas Producers Association 151
4. Coalinga 154
5. DGS 154
6. Duke 155
7. Indicated Producers 156
8. LGS 160
9. Mirants 164
10. NCGC 165
a. Additional Storage Capacity 165
b. Daily Imbalance Limit 168
c. Imbalance Charge 168
d. Curtailment Process 171
11. ORA 171
12. Palo Alto 172
13. SPURR/ABAG 173
14. Wild Goose 173
15. PG&E 175
C. Discussion 184
1. Balancing Service Proposals 184
a. Additional Storage Capacity 184
b. Daily Imbalance Limit For the Monthly Balancing Option 187
c. Disposition of Monthly Imbalances 187
d. OFO Obligations for California Gas Production 189
e. Measuring Core Procurement Groups’ Compliance 192
2. Bumping Proposal 193
3. Supply Shortfalls and Capacity Constraints Proposals 193
a. Diversion or Curtailment 193
b. Local Curtailments 194
4. Shrinkage Proposals 196
5. Noncompliance Charges Proposal 197
6. Anonymous Trading Platform Proposal 198
IX. Operating and Maintenance Exenses 198
A. Summary of O&M Expenses 198
B. Positions of the Parties 200
1. Mirant 200
2. Palo Alto 201
3. TURN 202
4. PG&E 203
C. Discussion 205
X. Capital Expenditures 208
A. Summary of Capital Expenditures 208
B. Positions of the Parties 211
1. CCC/Calpine 211
2. Mirant 211
3. NCGC 212
4. Palo Alto 214
5. TURN 215
6. PG&E 215
C. Discussion 216
1. Introduction 216
2. Non-Cycle Working Gas 217
3. Pipeline Safety Act 218
4. Winter Reliability Standard 218
5. Reduction In Metering Costs and Power Plant Connections Costs 219
6. Gerber Compressor Station 220
7. Conclusion 222
XI. Cost of Service 222
A. Summary of Cost of Service 222
B. Discussion 224
XII. Demand Forecast 226
A. Summary of Demand Forecast 226
B. Position of the Parties 228
1. CCC/Calpine 228
2. CMTA 231
3. Duke 232
4. Mirant 232
5. NCGC 232
6. TURN 234
7. PG&E 235
C. Discussion 238
XIII. Cost Allocation and Rate Design 240
A. Summary 240
1. Backbone Transmission Cost Allocation and Rate Design 241
a. Gas Accord Period 241
(1) Cost of Service and Cost Allocation 241
(2) Rate Design 242
b. 2004 Cost Allocation and Rate Design Proposal 243
2. Storage Cost Allocation and Rate Design 245
a. Gas Accord Period 245
b. 2004 Proposals 247
(1) Introduction 247
(2) Core Firm Storage Service 248
(3) Standard Firm Storage and Market Storage Services 248
(4) Load Balancing and Self-Balancing Services 249
3. Local Transmission Cost Allocation and Rate Design 249
a. Gas Accord Period 249
b. 2004 Proposals 250
(1) Core and Core Wholesale 250
(2) Noncore 251
4. Other End User Rate Components 253
a. Customer Access Charge 253
(1) Gas Accord Period 253
(2) 2004 Proposal 254
b. Customer Class Charge 254
c. Transmission-level Eligibility Criteria 255
d. Distribution Rates 257
(1) Allocation of Distribution-level Costs 257
(2) Balancing Account Protection 258
5. Single Electric Generation Class 258
a. Gas Accord Period 258
b. 2004 Proposal 260
6. Other Proposals 263
B. Backbone Transmission Cost Allocation and Rate Design 263
1. Roll-In Of Noncore Redwood Path Costs 263
a. Position of the Parties 263
(1) CCC/Calpine 263
(2) CAPP 265
(3) NCGC 267
(4) ORA 269
(5) TURN 269
(6) PG&E 276
b. Discussion 278
2. Load Factor and Design Capacity 286
a. Position of the Parties 286
(1) CCC/Calpine 286
(2) CMTA 287
(3) CAPP 288
(4) Mirant 292
(5) NCGC 293
(6) SMUD 295
(7) TURN 295
(8) PG&E 297
b. Discussion 298
C. Storage Cost Allocation and Rate Design 309
1. Discussion 309
D. Local Transmission 311
1. Four-Tier Noncore Proposal and Backbone level Rate Structure 311
a. Position Of The Parties 311
(1) CCC/Calpine 311
2. Coalinga 323
3. Duke 325
a. Backbone level Rate Structure 325
b. Four-Tier Rate Proposal 337
4. LGS 338
5. Mirant 338
6. NCGC 343
7. ORA 344
8. Palo Alto 345
9. Sacramento Municipal Utility District 348
10. TURN 352
a. Backbone level Rate Structure 352
b. Four-Tier Rate Proposal 354
11. PG&E 358
a. Discussion 364
E. Other End-User Rate Components 371
1. Customer Access Charge 371
a. Position of the Parties 371
(1) Department of General Services 371
(2) Mirant 371
(3) NCGC 372
(4) PG&E 373
b. Discussion 374
2. Customer Class Charge 376
a. Position of the Parties 376
(1) TURN 376
b. Discussion 377
3. Transmission - Level Eligibility Criteria 379
a. Discussion 379
4. Balancing Account Protection Proposal 379
a. Position of the Parties 379
(1) Duke 379
b. Discussion 380
F. Single Electric Generation Class 380
a. Position of the Parties 380
(1) CCC/Calpine 380
(2) DGS 385
(3) NCGC 385
(4) RealEnergy 387
(5) PG&E 388
b. Discussion 388
XIV. Contingency Rate Adjustments 395
A. Summary of Proposals 395
B. Position of the Parties 397
1. NCGC 397
2. ORA 399
3. PG&E 399
C. Discussion 400
XV. PG&E Procurement Policy and Core Procurement Services 401
A. Summary 401
1. Proposals 402
a. Winter Firm Capacity Requirement Proposal 402
b. CPIM Proposal 403
c. Reliability Planning Proposal 404
d. Tariff Change Proposal 405
2. Other Proposals 406
B. Position of the Parties 407
1. SPURR/ABAG 407
2. TURN 409
3. PG&E 410
C. Discussion 412
XVI. Core Aggregation Transportation Service 415
A. Summary 415
1. Winter Firm Capacity Requirement Proposal 416
2. Transportation Capacity Proposal 417
3. Core Firm Storage Proposal 418
4. Core Aggregation Growth Proposal 420
5. Information Proposal 420
B. Position of the Parties 420
1. SPURR/ABAG 420
2. TURN 427
3. PG&E 427
C. Discussion 430
1. Winter Firm Capacity Requirement Proposal 430
2. Transportation Capacity Proposal 430
3. Core Firm Storage Proposal 433
4. Core Aggregation Growth Proposal 434
5. Information Proposal 434
XVII. Interconnection Services 435
A. Proposals 435
1. Gas Rule 27 Proposal 435
2. Off-System Direct Connect Proposal 437
B. Position of the Parties 438
1. CCC/Calpine 438
2. Duke 440
3. LGS 440
4. Mirant 440
5. NCGC 442
6. ORA 443
7. SMUD 443
8. PG&E 443
C. Discussion 449
1. Gas Rule 27 Proposal 449
2. Off-System Direct Connect Proposal 449
XVIII. California Gas Transmission Risk Management Program 453
A. Summary 453
B. Discussion 454
XIX. Future Gas Market Structure and Rate Filings 457
XX. Conclusion 458
XXI. Comments on Proposed Alternate Decision 459
XXII. Assignment of Proceeding 459
Findings of Fact 459
Conclusions of Law 472
ORDER 482
Attachment A
Attachment B
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A.01-10-011 MP1/rg1/acb
OPINION REGARDING THE GAS STRUCTURE AND RATES FOR
PACIFIC GAS AND ELECTRIC COMPANY FOR 2004
I. Summary
Pacific Gas and Electric Company (PG&E) filed the above-captioned application on October 8, 2001. PG&E’s application requested that the GasAccord[1] structure and rates for its gas transmission and storage system be extended for two more years (through the end of 2004) pending the resolution of PG&E’s bankruptcy filing.
In Decision (D.) 02-08-070, we approved a settlement by the parties which extended the Commission-approved market structure, rates, tariffs, and terms and conditions of service for PG&E’s transmission and storage system by one year. Under the settlement, the market structure for PG&E’s gas transmission service was extended for the period from January 1, 2003 to December 31, 2003, and PG&E’s gas storage service was extended for the period from April 1, 2003 to March 31, 2004. Due to the adoption of the settlement, the issues regarding the gas structure and rates for the period beginning January 1, 2004 were unresolved.
Today’s decision resolves the gas market structure, rates, and terms and conditions of service for PG&E’s natural gas transmission and storage system for 2004. PG&E and the other parties proposed for resolution a number of structural and policy issues, as well as cost and rate design issues. Appendix B of the decision lists a matrix of the issues addressed in today’s decision.
PG&E proposed a $453,736,000 revenue requirement for 2004 for its gas transmission and storage systems.[2] PG&E’s proposed revenue requirement represents an increase of 7% over the Gas Accord revenue requirement for 2003 of $423,923,000 million. Today’s decision adopts a revenue requirement for 2004 of $436,397,000.[3] The adopted revenue requirement represents an increase of 2.94% over 2003 gas transmission and storage rates of $423,923,000.
Today’s decision also addresses the various cost allocation and rate design proposals of PG&E and the other parties. Since this decision adopts a cost allocation and rate design methodology that is very similar to what was contained in the Gas Accord, we expect that the gas transmission and storage rates and charges will rise slightly, reflecting the 2.94% increase in the revenue requirement.