This consolidated proceeding is the first general rate case for PG&E’s Line 401, the California segment of a natural gas pipeline expansion project that extends from Alberta, Canada to Kern River Station in Southern California. The Commission granted a Certificate of Public Convenience and Necessity for the California segment in Decision (D.) 90-12-119, issued December 27, 1990, which was predicated upon incremental pricing. [ 39 CPUC2d 69, 166 (1990).] The pipeline went into service on November 1, 1993. Line 401 has a design firm delivery capacity of 755 million cubic feet per day (MMcf/d), and an average annual firm capacity of 851 MMcf/d. Prior opinions describe the mechanical features of Line 401 and historical and procedural background through early August 1996. [ D.94 - 02 - 042, Third Interim Opinion, 53 CPUC2d 215, 222 - 223 and Appendix A at 254 (1994); D.96 - 09 - 095, Fifth Interim Opinion, at mimeo. pp. 2 - 6 (1996).]
The Commission has issued nine decisions in this proceeding, and three related resolutions. Four actions stand out: (1) D.93-10-069 authorized temporary interim rates and terms and conditions of service, effective when Line 401 went into commercial operation; (2) D.94-02-042 increased a previously ordered cost cap, set interim rates, and found PG&E’s decision to construct Line 401 to be reasonable; (3) D.94-12-061 ordered a scheme of receipt point capacity allocation (RPCA) at the California-Oregon border, and authorized direct connections to Line 401 in limited circumstances; and (4) D.96-09-095 terminated a backbone credit mechanism intended to relieve Line 401 shippers from certain duplicative charges. Several petitions for modification of those decisions are outstanding, but we do not address the petitions in this decision.
Parties litigated the reasonableness of PG&E’s decision to construct Line 401 in an earlier phase of this proceeding, and adopted a finding of reasonableness in D.94-02-042. [ D.94 - 02 - 042, Finding of Fact 11, 53 CPUC2d 215, 248 (1994).] On June 27, 1995, administrative law judge (ALJ) James Weil reopened the decision to construct in order to review new evidence. Norcen Energy Resources Limited (Norcen) and other parties claim that PG&E violated Rule 1 of the Commission’s Rules of Practice and Procedure by concealing critical documents. The reopening began with the revelation--in another proceeding--of an October 24, 1991, memorandum from PG&E Vice President Jerry R. McLeod to several PG&E managers and attorneys (McLeod memo). [ Exhibit 455 in this proceeding, Exhibit 263 in A.93 - 04 - 011.] The memo is a 42-page document, including a cover memo, an eight-page presentation prepared for an October 25, 1991, meeting of the PG&E steering committee that would make the decision to go forward with the expansion project, and several attachments. The most significant attachment is an economic study by McKinsey & Company, a management consulting firm. The principals in the dispute over the decision to construct are PG&E versus Norcen, Toward Utility Rate Normalization (TURN), [ Effective November 13, 1996, Toward Utility Rate Normalization changed its name to The Utility Reform Network. The acronym TURN is unchanged.] and El Paso Natural Gas Company (El Paso). Other parties presented arguments in briefs.
The first seven applications listed in the caption for this decision, beginning with Application (A.) 92-12-043 and ending with A.96-08-043, comprise the Line 401 general rate case and are consolidated without restriction. Before August 1996 there were four active phases in the proceeding: (1) a market issues phase, including many general rate case issues; (2) an ITCS phase, by consolidation with A.94-06-044, in which PG&E seeks to amortize in rates the charges recorded in its ITCS balancing account; (3) a reopening of PG&E’s decision to construct the pipeline expansion; and (4) a Pipeline Expansion Project Reasonableness (PEPR) phase, covering capital costs and incremental operating and maintenance expenses.
On August 21, 1996, PG&E filed concurrently A.96-08-043 and a motion in this and other proceedings, which together seek Commission approval of a broad settlement known as the Gas Accord. In a ruling issued October 18, 1996, the ALJ consolidated the proceedings covered by the motion solely for purposes of considering the Gas Accord. On September 24, 1996, three parties filed a motion for Commission approval of a Joint Recommendation intended to supplant many provisions of the Gas Accord. Together, the Gas Accord and the Joint Recommendation are the subjects of a fifth active phase of the consolidated proceeding. This decision will address all five active phases.
Market issues are the subject of market assessment reports prepared by several parties, a market assessment workshop, post-workshop comments, prepared testimony, hearings, and briefs. ITCS issues are also fully developed in prepared testimony, hearings, and briefs. The combined record on market and ITCS issues includes 163 exhibits, transcripts of 35 days of hearings, and opening and reply briefs. [ Exhibits 201 through 362, and Exhibit 561, a comparison exhibit; Transcript Volumes 34 through 68, taken at hearings beginning April 1 and ending June 5, 1996; opening and closing briefs, filed June 26 and August 9, 1996.] The record on the decision to construct includes 161 exhibits, transcripts for eight days of hearings, portions of the same opening and reply briefs, and supplemental briefs. [ Exhibits 401 through 560, and 562; Transcript Volumes 69 through 76, taken at hearings beginning June 10 and ending June 20, 1996; opening and closing briefs, filed June 26 and August 9, 1996; and supplemental briefs, filed October 26, 1996.]
No formal hearings were held regarding the Gas Accord and the Joint Recommendation. Instead, we rely on pleadings, questions and answers filed following two workshops, and filed comments. The record on the Gas Accord begins with A.96-08-043 and five PG&E documents associated with the application. [ The documents are: (1) PG&E’s "Report on the Gas Accord Settlement," which has the character of prepared testimony; (2) Appendix 1, which is the Gas Accord itself; (3) a two - page document containing revised Tables 15 and 18 in Appendix 1, distributed by PG&E on September 11, 1996; (4) Appendices 2 and 3 to the report, containing recommendations by two customer advisory groups; and (5) a compendium of Gas Accord work papers.] The ALJ led unreported workshops on September 11-12 and November 5, 1996. The first workshop was generally dedicated to details of the Gas Accord. The second workshop covered: (1) a supplemental report on a post-1997 Core Procurement Incentive Mechanism (CPIM) , an element of the Gas Accord that was incomplete when the Gas Accord was filed; (2) the Joint Recommendation; and (3) remaining Gas Accord topics. The central purposes of the workshops were to develop questions and clarify uncertainties about the Gas
Accord and the Joint Recommendation. The parties answered the questions and discussed contested issues in subsequent written comments. Workshop discussions are not part of the record.
Formal record documents related to the Gas Accord include: (1) PG&E’s August 21, 1996, motion to adopt the Gas Accord; (2) filed responses to the August 21 motion; (3) PG&E’s October 18, 1996, motion to supplement A.96-08-043 with a post-1997 CPIM report, and the attached report; (4) four rounds of comments following the two workshops, filed September 24, October 4, November 14, and November 21, 1996; (5) a PG&E addendum to its November 14 comments, filed the next day; (6) PG&E supplemental comments filed on November 22, 1996, with the permission of the ALJ; (7) copies of side deals with four Line 401 shippers, and Gas Accord agreements executed by PG&E and three of the four shippers, attached to PG&E procedural comments filed December 5, 1996; (8) a copy of a Gas Accord agreement executed by the fourth shipper, attached to supplemental procedural comments filed by PG&E on December 9, 1996; and (9) two rounds of comments on the side deals, filed December 20 and December 30, 1996.
The record on the Gas Accord does not include draft implementation tariffs distributed by PG&E, or any written information relating to informal tariff workshops held by PG&E beginning in November 1996. Parties may raise concerns about tariffs when tariff revisions are filed for Commission approval.
The record on the Joint Recommendation includes the September 24, 1996, motion for adoption; filed responses to the motion; questions and answers contained in post-workshop comments filed on November 14, 1996; and discussion embedded in reply comments filed November 21, 1996.
Although the parties have served prepared testimony in the PEPR phase, hearings have not been convened. The Gas Accord would settle most PEPR issues.
Many parties actively participated in developing the record supporting this decision. Seventeen parties signed the Gas Accord before it was filed: (1) Amoco Canada Marketing Company, Amoco Energy Trading Corporation, and Amoco Production Company (together, Amoco); (2) California Cogeneration Council (CCC); (3) California Independent Producers Association (CIPA); (4) California Industrial Group (CIG); (5) California League of Food Processors (CLFP); (6) California Manufacturers Association (CMA); (7) City of Palo Alto (Palo Alto); (8) CNG Power Services Corporation; (9) Division of Ratepayer Advocates (DRA); [ Effective September 10, 1996, the Executive Director abolished the DRA as an organizational unit at the Commission. Former DRA professional staff working on this proceeding are redeployed to a new Office of Ratepayer Advocates (ORA). Because the Gas Accord and initial related pleadings were filed prior to abolishment, this decision recognizes both DRA and ORA as the Commission’s advocacy staff.] (10) Enron Capital & Trade Resources; (11) Enserch Energy Services (Enserch); (12) International Brotherhood of Electrical Workers; (13) PG&E; (14) School Project for Utility Rate Reduction and Regional Energy Management Coalition; (15) Sacramento Municipal Utility District (SMUD); (16) Suncor, Inc.; and (17) Transwestern Pipeline Company (Transwestern). Two parties wrote letters of support to PG&E, but did not execute Gas Accord agreements prior to PG&E’s filing of A.96-08-043: U.S. Defense Logistics Agency, Defense Fuel Supply Center; and Northern California Power Agency (NCPA). In its September 24, 1996, post-workshop comments, Southern California Edison Company (Edison) announced its intent to sign the Gas Accord, but did not include an executed agreement. Formal support for the Gas Accord by Edison and four other shippers was revealed in attachments to PG&E’s December 5 and December 9, 1996, comments. The four other shippers are San Diego Gas & Electric Company (SDG&E), NCPA, Rigel Oil & Gas Ltd., and Ulster Petroleums Ltd.
Three parties sponsor the Joint Recommendation: Department of General Services of the State of California (DGS); Department of Energy, Minerals & Natural Resources and the State Land Office of the State of New Mexico (together, New Mexico); and TURN.
Several other parties actively participated in hearings and workshops: (1) Alenco Gas Services, Inc.; (2) DEK Energy Company and Apache Canada Ltd. (together, Apache); (3) Burlington Resources; (4) Canadian Association of Petroleum Producers (CAPP); (5) CanWest Gas Supply U.S.A., Inc. (CanWest); (6) Chevron U.S.A. Inc. (Chevron); (7) El Paso; (8) Foster Associates; (9) Independent Energy Producers Association; (10) Interstate Gas Services, Inc.; (11) Mock Energy Services, L.P.; (12) Natural Gas Clearinghouse, Inc.;
(13) Norcen; (14) North American Chemical Company; (15) Pacific Gas Transmission Company (PGT), the PG&E subsidiary that owns and operates the segment of the pipeline expansion from the Canadian border to the California-Oregon border; (16) PanCanadian Petroleum, Ltd.; (17) Southern California Gas Company (SoCalGas); (18) Southern California Utility Power Pool and Imperial Irrigation District, acting principally on behalf of three Line 401 firm shippers, which are the Cities of Burbank, Glendale, and Pasadena; and (19) Wild Goose Gas Storage Company (Wild Goose).
The record supporting this opinion was submitted for Commission decision on December 31, 1996, by ALJ ruling following receipt of reply comments on side deals associated with the Gas Accord.
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