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Frontlines

Fortnightly Magazine - June 15 1997

escapes FERC jurisdiction in some respects as an exempt intrastate "Hinshaw" pipeline; the FERC cannot force SoCalGas to post released capacity on interstate pipeline bulletin boards.)

Adds Picket, "What they're doing essentially is reserving capacity for themselves at a below-market price."

The FERC has denied that claim. In an order issued May 14 (So. Calif. Edison Co. v. So. Calif. Gas Co., Docket No. RP97-284-000), the FERC refused to censure SoCalGas gas. The Commission said the company had not violated the commission's price cap imposed on the resale of pipeline capacity in the secondary market. Said the FERC: "So long as transactions take place at or beneath the price cap, the [FERC] does not inquire into the potential for the releasing shipper (or the pipeline) to exercise market power.

"Since shippers buying the release capacity are paying no more ... than the regulated rates for pipeline capacity, the release rates are just and reasonable."

Edison, however, suggests the FERC should be looking beyond the pipeline's transportation tariff. What about the opportunity cost (em the value of pipeline capacity in the generation market?

"We were surprised and puzzled," says Pickett, "as to what we see as a clear violation of policy of FERC policy to create a vibrant market in the capacity release market."

Fred John, senior vice president of Pacific Enterprises, shares no such puzzlement. Quite naturally, he describes Edison's claims as "totally without merit."

According to SoCalGas, Edison has "failed to cite any specific violations of any FERC orders or regulation in its complaint because no such violations have occurred." Further, the company denies requiring any sort of "minimum bid" for released capacity. In fact, SoCalGas says it regularly has sold capacity "above, equal to and below the open-offer rate." It adds that 70 percent of its capacity releases during the 1995-96 winter heating season sold at "below the open-offer rate," including some capacity sold to Edison.

"We have been posting since May 1996," says John. "Since then, Edison has never been denied the capacity they have sought. [T]here is absolutely no abuse of market power.

"It has been clear to most observers that Edison is attacking partnerships that pose a threat to their dominant position in the Southern California electric market."

Edison intends to fight on. "We will pursue [our] claim in both dockets," counters Pickett. "On rehearing at the FERC and in the Enova/PE merger before the state PUC.

"In the merger proceeding, we see [this activity] as evidence of pre-existing anti-competitive behavior that needs to be remedied, that will have greater impact if the merger goes forward."

Edison was to file its testimony at the California PUC in the Enova/PE merger case by June 20.

A Role for Antitrust?

If SoCalGas has not violated any federal or state law or rule, then why fix what ain't broke?

Pfeffer, for one, believes that the California power exchange should allay any fears of market power, even after a merger between Enova and PE.

As Pfeffer notes, the PUC has required all investor-owned electric utilities in California to buy wholesale power