San Diego Union-Tribune

July 31, 2001

SoCal Gas fights FERC over pipeline

By Joe Cantlupe 

WASHINGTON -- A Southern California utility says the actions of a Texas pipeline company and federal energy regulators may cost it up to $100 million in unnecessary expenses -- and those expenses could translate into higher natural gas bills for consumers.

Southern California Gas Co. alleges that Houston-based El Paso Corp., one of the nation's largest natural gas pipeline companies, oversold access to a pipeline into Southern California in the same way that an airline might overbook its flights.

SoCal Gas, a subsidiary of San Diego-based Sempra Energy and a customer of El Paso since the 1950s, says it was forced to find less direct pipeline routes into San Diego at an added cost of between $50 million and $100 million.

SoCal Gas officials say they are evaluating the impact the additional expenses could have on consumers.

In response to complaints from several energy companies, the Federal Energy Regulatory Commission determined last year that El Paso's actions regarding access to its pipeline capacity were "unjust and unreasonable," FERC records show.

Federal regulators imposed a redistribution plan on El Paso -- a plan that ultimately cut two-thirds of SoCal Gas' capacity on the pipeline.

SoCal Gas and California state officials contend that the FERC plan actually punished SoCal Gas, not El Paso.

El Paso officials declined to be interviewed for this article. But the company said in documents filed with the FERC that it had acted properly and did not
compromise SoCal Gas' long-term contracts with El Paso. It also denied overselling its pipeline capacity.

"No party is denied transportation," El Paso said.

SoCal Gas is preparing to ask the U.S. Court of Appeals in Washington, D.C., to reverse the FERC's ruling and restore its full access to the pipeline, which runs from Topock, Ariz., into Southern California.

FERC commissioners have not commented publicly on the case, which dates back to the early 1990s, when El Paso began cutting back SoCal Gas' access to the pipeline and offering it to other shippers.

Other FERC officials, speaking on condition of anonymity, said the agency sought an equitable solution to the problem by divvying up the delivery
capacity at the Topock delivery point to dozens of gas shippers. Regulators noted that SoCal Gas does not have special rights to the pipeline.

California public utilities officials, in documents filed with the FERC, said consumers were "unwitting victims of El Paso's overselling practice."

Consumer groups also criticized the FERC and El Paso.

"FERC allowed El Paso to divvy up the space at the California border in such a way as to benefit marketers and shippers -- the gas middlemen -- to the detriment of the utility, which has to ship gas to residential customers in Southern California," said Marcel Hawiger of The Utility Reform Network, a consumer watchdog group based in San Francisco.

Natural gas powers most of the electrical generators in California, so when natural gas prices rise, electricity rates go up as well. And because many furnaces run on natural gas, winter home heating bills also spike when natural gas costs rise.

SoCal Gas serves 18 million households and small businesses in more than 23,000 square miles of southern and central California. Its customers include
1,500 large industrial and electrical generators, including San Diego Gas & Electric Co.

El Paso owns two of the five major interstate pipelines used to get natural gas to California.

In an unrelated case, the FERC is investigating charges that El Paso used other alleged manipulative practices to drive up California energy costs by $3.8 billion.