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California sued El Paso for gaming the pipeline. But the blame may lie to the East.
Fortnightly Magazine - September 1 2001

longer provide reliable service under the terms of the settlement agreement signed five years back. They ask the FERC to force El Paso to expand its system to safeguard gas delivery rights for EOC customers. (.)

THE EASTERN SHIPPERS ASSAIL EL PASO FOR FAILING TO PLAN, BUILD, AND EXPAND THE PIPELINE NETWORK. They offer precise statistics showing per-day decatherm capacities for western flows on El Paso's north and south mainline routes. They seek to prove that the system is now dysfunctional-pushed over the edge by rising demand from gas-fired electric generators in California.

To buttress their case, the TNMA shippers offer a lengthy affidavit from Greg Lander, the pipeline capacity guru now consulting at Skipping Stone. Lander argues that El Paso should have seen it all coming-the changing patterns of trade and the new summer peak to serve gas-fired generation.

"Planning on continuation of load diversity would be problematic and possibly even reckless," says Lander.

Lander and the TNMA shippers add that Canada's new Alliance pipeline changed the game, diverting lower priced Canadian gas from the Pacific Coast to the Midwest, forcing California to rely more on El Paso for its gas needs. Excess gas delivery capacity into California would be "bled off and flow to Chicago," Lander explains. He says the shift transformed El Paso from a swing supplier of capacity to a base load supplier of capacity and gas to California, but Southern California Edison disputes that notion.

"While this was a fairly widely expected consequence of the Alliance project," says Edison, "it simply has not occurred. Since the construction of Alliance, El Paso has continued to be, and remains to this day, the swing pipeline transporting gas into California."

BY CONTRAST, THE CALIFORNIA SHIPPERS CITE EL PASO'S "FR" TARIFFS AS morally unjust and contrary to FERC's current thinking.

"Firm requirements customers can nominate up to the physical capacity of their delivery points even when they do not require this amount for their immediate needs. This 'gaming' provides them with a larger share of the allocations."

Such language strikes a nerve with the eastern shippers. "The complainants seek to demonize the FR shippers ... . If the commission gives in to the requested extortion, it will effectively export the California epidemic to Texas, New Mexico, and Arizona."

Enron sees FR service as the gas industry analogy for the native load preference that has dogged the electric sector. "The upshot of all this is that there is physical capacity available ... but ... shippers are contractually unable to obtain firm capacity ... . Whatever other harm complainants have alleged ... Enron would add to the list the fact that the FR contracts stand as a barrier to open access."

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