`[Federal Register Volume 66, Number 103 (Tuesday, May 29, 2001)]
[Notices]
[Pages 29102-29109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13351]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RP01-180-000; Docket No. RP01-222-000]


Before Commissioners: Curt Hebert, Jr., Chairman; William L. 
Massey, and Linda Breathitt San Diego Gas and Electric Company and The 
Los Angeles Department of Water and Power; Order Requesting Comments

Issued May 22, 2001.
    In response to petitions for relief concerning high natural gas 
prices in California, this order requests comments on whether the 
Commission should reimpose the maximum rate ceiling on short-term 
capacity release transactions into California, and the effects of such 
action on the California gas market.

Background

    1. On December 7, 2000, in Docket No. RP01-180-000, San Diego Gas 
and Electric Company (SDG&E) filed a petition for emergency relief 
requesting that the Commission immediately order (1) that price-caps 
for short-term releases of capacity for service to the California 
border and to points of interconnection between interstate pipelines 
and California local distribution companies (LDCs) be re-imposed 
effective immediately and kept in effect until March 31, 2001,\1\ and 
(2) that sellers be required to state separately the transportation and 
commodity components of the bundled rate for sales at these points so 
that the cap can be enforced on these transactions.\2\ Alternatively, 
SDG&E asserted that the cap could be enforced on such bundled sales 
through a mechanism that caps bundled sales at these points at 150 
percent of the sum of a reported average commodity sales price plus the 
as billed rate for interstate transportation.
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    \1\ Section 284.8(i) of the Commission's regulations, as 
implemented by Order No. 637, states that, ``[u]ntil September 30, 
2002, the maximum rate ceiling does not apply to capacity release 
transactions of less than one year. With respect to releases of 31 
days or less under paragraph (h), the requirements of paragraph 
(h)(2) will apply to all such releases regardless of the rate 
charged.''
    \2\ On May 18, 2001, in Docket No. RM01-9-000, the Commission 
issued an order proposing to impose certain reporting requirements 
on natural gas sellers and transporters serving the California 
market. The proposed reporting requirements are intended to provide 
the Commission with the necessary information to determine what 
action, if any, it should take within its jurisdiction. Our order 
today coupled with our May 18 order continues to focus on issues 
related to natural gas prices in California and actions we may take 
to address capacity release transactions and bundled sales (i.e., 
the ``gray market'').
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    2. On February 1, 2001, the Los Angeles Department of Water and 
Power (LADWP) filed a petition that requests that the Commission 
immediately rescind the portion of Order No. 637 that removed the price 
cap for short-term capacity release and pipeline capacity transactions 
for service to the California border and to points of interconnection 
between interstate pipelines and California LCDs until March 31, 2001. 
LADWP further requests that the Commission initiate a proceeding that 
will allow the Commission to determine by March 31, 2001, whether the 
removal of the price cap on short-term transactions associated with 
California is warranted.

Public Notice and Interventions

    Public notice of SDG&E's filing was issued on December 8, 2000. 
Interventions and protests were due by December 13, 2000. Public notice 
of LADWP's filing was issued on February 26, 2001. Interventions and 
protests were due by March 2, 2001. Pursuant to Rule 214 (18 CFR 
385.214 (2000)), all timely filed motions to intervene and any motions 
to intervene out-of-time filed before the issuance date of this order 
are granted. Granting late intervention at this stage of the proceeding 
will not disrupt the proceeding or place additional burdens on existing 
parties.
    With respect to SDG&E's petition, a number of California entities, 
including the Public Utilities Commission of the State of California 
(CPUC), California local distribution companies (LDCs), municipalities, 
and various business concerns, filed comments in support of granting 
the requested relief. Comments in opposition to SDG&E's petition were 
filed by various parties, mainly by gas marketers. Certain other 
commenters such as the Indicated Shippers and the Natural Gas Supply 
Association (NGSA) supported reimposition of the price cap on short-
term capacity release transactions but opposed any price cap on bundled 
sales of gas or the gas commodity. Since LADWP's request for relief is 
the same as SDG&E's fewer comments were filed in response to LADWP's 
petition. As with the SDG&E petition, California entities support the 
request for relief.

Discussion

    SDG&E and LADWP request that the Commission re-impose the price cap 
for short-term releases of capacity for service to the California 
border and to points of interconnection between interstate pipelines 
and California LCDs. Their request for relief is based on the 
assumption that high prices of gas delivered at the California border 
are due, in part, to the ability of persons selling to the California 
market to charge above the interstate pipeline's maximum tariff rate 
for the release of pipeline capacity. SDG&E points to the spot price at 
the California border of $50 per MMBtu for November and December 2000 
as evidence of significant market distortions requiring Commission 
action.
    In response to the requests filed by SDG&E and LADWP, the 
Commission Staff has been analyzing the capacity release information 
pipelines are required to maintain pursuant to section 284.13 of the 
Commissions's regulations. The Commission Staff has examined capacity 
release information for pipelines serving California for the period 
from November 2000 through April 2001. The Commission Staff's analysis 
in the attached Appendix shows that there were very few capacity 
transactions release transactions into California that were above the 
pipelines' maximum rates. For the period November 2000 through April 
2001, the pipelines' capacity release information shows that releases 
above the pipelines' maximum rates ranged from a high of 91,236 MMBtu/
day for April 2001 to a low of 7,000 MMBtu/day in December 2000. The 
interstate capacity into California is approximately 7,435,000 Mcf/day 
\3\ (an Mcf is roughly equal to an MMBtu) and the intrastate receipt 
capacity (takeaway capacity) is approximately 6,675,000 Mcf/day.\4\ 
Therefore, the volume of capacity

[[Page 29103]]

releases above the maximum tariff rate as compared to the interstate 
capacity into California ranges from a low of .09 percent for December 
2000 to a high of 1.2 percent for April 2001.
    In light of this information, the Commission requests comment on 
whether section 284.8(i), which states ``[u]ntil September 30, 2002, 
the maximum rate ceiling does not apply to capacity release 
transactions of less than one year,'' should not apply to capacity 
release transactions into California, that is, the maximum rate ceiling 
would be reimposed on short term capacity release transactions into 
California prior to September 30, 2002.
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    \3\ Energy Information Administration 1999 Report on California 
Interstate Natural Gas Pipeline Capacity Levels. The Commission has 
also recently approved an additional 485,000 Mcf/day of capacity 
into California. See, Questar Southern Trails Pipeline Company, 
Docket No. CP99-163-001, et al., 92 FERC para. 61,110 (2000); Kern 
River Gas Transmission Company, Docket No. CP01-106-000, 95 FERC 
para. 61,022 (2001); and E1 Paso Natural Gas Company, Docket No. 
CP00-422-000, et al., 95 FERC para. 61, 176 (2001).
    \4\ See, www.cpuc.ca.gov/static/industry/gas/gas+workshop.htm. 
April 17, 2001 presentation of the California Energy Commission at 
CPUC Natural Gas Infrastructure Workshop. An analysis done by 
Economists Incorporated for the Interstate Natural Gas Association 
of America shows that the interstate takeaway capacity is 5,853,000 
Mcf per day. See, ``Calif. Utilities Spurned Pipeline Projects'' in 
The Electricity Daily (May 18, 2001).
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    As part of this inquiry, the Commission requests comment on the 
following questions: (1) Would reimposition of the maximum rate ceiling 
on short-term capacity release transactions into California have any 
significant effect on the price of gas at the California border; (2) 
Should the reimposition of the maximum rate ceiling on short-term 
capacity release transactions be limited to California or extended to 
pipelines delivering into the Western Systems Coordinating Council 
(WSCC) region; (3) What effect do capacity release transactions have on 
wholesale electric prices; (4) What would be the effect of reimposing 
the maximum rate ceiling on short-term capacity release transactions 
into California given firm shippers' ability to make bundled sales at 
the California border; and (5) How will reimposing the maximum rate 
ceiling for short-term capacity release transactions into California 
impact shippers' ability to obtain short-term firm capacity.
    Any person interested in responding to the questions discussed 
above should file comments with the Commission within 20 days of the 
date of this order. The comments will be used in determining what 
further actions should be taken by the Commission in response to the 
petitions filed in this proceeding.

The Commission Orders

    Interested persons are directed to file comments in response to the 
questions posed above within 20 days of the date of this order.

    By the Commission.
 David P. Boergers,
Secretary.

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[FR Doc. 01-13351 Filed 5-25-01; 8:45 am]
BILLING CODE 6717-01-C`