Subject: FERC conference on El Paso capacity allocation (RP00-336)

Summary  Though this conference was scheduled to review all issues related to El Paso's capacity allocation method (including those in the pipeline's Order 637 proceeding), and with two complaints filed this summer regarding problems with the pipeline's allocation, major substantive issues were not covered at this conference.
For instance, the battle between Full Requirements (FR) shippers and Contract Demand (CD) shippers came up marginally, but not in terms as substantive as the proposed conversion of FR shippers to CD contracts.
Procedurally, there was also no decision on whether to proceed with a hearing, merits decision from the Commission or settlement, though it looks like a merits decision is the likely avenue for a decision.
Staff did not discuss case merits or ask pointed substantive questions.
Allocation Studies (Models)  El Paso opened the conference with a presentation/interpretation of seven capacity studies they have done to illustrate how its allocation proposal (March 27) would allocate the system's receipt and delivery points based on different scenarios.
For nominations, receipt and delivery points were specified and ranked by shippers, and the model used 20 pools.
The scheduling model looked at where constraints occurred (based on those shipper-supplied preferences), solved the largest constraints first, then ran second and third iterations to complete allocation.
There were questions on the studies, what they show, what the assumptions are, etc., and in the end shippers believe they need information not shown by the completed studies.
Shippers have requested six more allocation studies, showing possible impacts of seasonalization (winter and summer) and the difference between CD and Full Requirements Coincidental and Non Coincidental Peaks (winter and summer, 1995 - 2000).
El Paso interprets its studies as showing that the proposed capacity allocation method is workable, and in fact results in 247 MMcf/d of unallocated capacity (230 MMcf coming from the Line 2000 expansion proposal, and an extra 17 MMcf).
Shippers were skeptical of the "slack capacity" finding.
Other Issues  ?
Pooling: There was a small amount of discussion on the impact of moving from six to 20 pools.
It was noted that this should be addressed with Order 637 issues, expeditiously after capacity allocation method is resolved.
?
FR vs. CD: Though there were some FR vs. CD shippers discussions, they did not reflect the battle we see going on in the two complaints filed this summer by the TX, NM and AZ shippers (FR) and Aera Energy (CD shippers).
There was also no mention of converting FR shippers to CD service.
Note: never mentioned were the CD and FR complainants' proposals that El Paso (1) dedicate currently proposed expansions to existing shippers or (2) requiring mainline system expansion for existing service (RP01-484 and 486).
?
Release shippers:  Shippers contracting for released capacity were concerned about how they would be allocated, as well as those shippers picking up turnback contracts from the pipeline (which would have receipt and delivery points already allocated).
?
Receipt Point Designation:  The question was asked if shippers could designate specific receipt points rather than pools.
When asked what Commission policy is on pools vs. receipt points, both shippers and Staff clarified that they are neither mutually exclusive nor to serve as substitutes for one another - both should be available.
However, Staff noted that in the flexibility vs. reliability debate, it could be argued that El Paso should return to receipt point designation to maintain reliability.
Procedure Going Forward  The primary issue here ended up being procedural.
The procedural schedule is as follows: ?
El Paso further studies and answers to questions posed at conference or in writing:   Sept. 24 ?
Initial comments (on all capacity allocation issues and procedural recommendations): Oct. 15 ?
Reply comments:  Oct. 26