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Date: Wed, 29 Nov 2000 08:19:00 -0800 (PST)
From: jeffery.fawcett@enron.com
To: susan.scott@enron.com
Subject: Proposed Decision
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Certainly.  You might also be interested to know that I spoke at length tod=
ay=20
with Lad Lorenz, and like most parties to this proceeding, SoCal Gas is=20
awfully tired of this fight.  Lad doesn't expect that SoCal will file any=
=20
sort of substantive challenge to the CPUC's decision.  Of course, SoCal, wi=
ll=20
ultimately have the lead in writing the tariff sheets which implement the=
=20
features of the settlement.  I told him that, most likely, TW will monitor=
=20
the implementation phase of the proceeding but was probably not going to=20
mount any serious challenge to the CPUC's decision.






Susan Scott
11/29/2000 02:59 PM
To: Jeffery Fawcett/ET&S/Enron@ENRON
cc: =20

Subject: Re: Proposed Decision =20

Jeff -- good wrap-up.  May I forward to MKM and Drew?



Jeffery Fawcett
11/29/2000 10:58 AM
To: Steven Harris/ET&S/Enron@ENRON, Kevin Hyatt/ET&S/Enron@Enron, TK=20
Lohman/ET&S/Enron@ENRON, Christine Stokes/ET&S/Enron@ENRON, Michelle=20
Lokay/ET&S/Enron@Enron, Lorraine Lindberg/ET&S/Enron@ENRON
cc: Susan Scott/ET&S/Enron@ENRON=20

Subject: Proposed Decision

The GD article today regarding the proposed decision is a pretty good Reade=
rs=20
Digest version of the order.  Susan and I spoke with Jeff Dasovich and Mark=
=20
Baldwin yesterday, and the consensus of those conversations was that=20
Transwestern should remain involved in this proceeding only for purposes of=
=20
implementation/documentation.  Jeff offered that he might send a letter to=
=20
Governor Gray's office expressing both dismay and indignation that the CPUC=
=20
didn't complete their task and warning of the adverse outcome to California=
=20
ratepayers if these more modest reforms are approved.  He may ask the other=
=20
Comprehensive Settlement parties to join in signing the letter.  Susan, Mar=
k=20
and I spoke about this idea later, and we've got some reservations about TW=
's=20
role in admonishing the CPUC.   We should probably wait to see this letter=
=20
first before committing to anything.

Bilas draft cautious toward SoCal competition
Mindful of the current chaos over energy markets in the state, California=
=20
Public Utilities
Commissioner Richard Bilas has recommended the adoption of a much more=20
moderate
approach to promoting competition on Southern California Gas=01, (SoCal) sy=
stem.
In his draft decision, Bilas advised the commission to reject the unbundlin=
g=20
of intrastate
transmission and instead approve the first settlement filed in the case, th=
e=20
less far-reaching
Interim Settlement (IS), submitted in December 1999. SoCal, San Diego Gas a=
nd=20
Electric and
other parties filed two more settlements after the IS, reaching a=20
comprehensive agreement in
April this year.

But since then, gas and power prices skyrocketed in the state, prompting a=
=20
consumer
backlash and giving competition a bad name.  The draft language notes that=
=20
the first interim
settlement was supported by more customer groups than the later agreements.
Recent events =01&lead us to conclude that the centerpiece of this=20
investigation, the unbundling
of intrastate transmission and the implementation of a system of firm,=20
tradable intrastate transmission rights, should be delayed,=018 according t=
o the=20
draft order.  =01&This unbundling is the basis of the [comprehensive settle=
ment]=20
and we cannot approve it. We do not, however, wish to commit to paralysis=
=20
until 2006, as the [post-interim settlement] would have us do. Accordingly,=
=20
we believe Californians are better served at this juncture by the adoption,=
=20
with modifications, of the IS.=018

The biggest change to the IS in the draft is the rejection of an automatic=
=20
capacity expansion
by SoCal at Wheeler Ridge, Calif., with rolled-in rates if certain criteria=
=20
are met.  El Paso
Energy had objected to the provision in the IS that would have allowed SoCa=
l=20
to automatically
expand capacity at Wheeler Ridge by 100 million cfd if a certain number of=
=20
curtailments oc-curred. =20
El Paso objected to forcing all shippers to pay for the expansion at Wheele=
r=20
when only certain customers would benefit. =20
The draft says SoCal can file a separate application for the Wheeler Ridge=
=20
expansion, but approval would be conditioned on a traditional hearing proce=
ss.

The draft decision would also:
=01=07 End SoCal=01,s current =01&windowing=018 process, which limits shipp=
ers=01, ability to=20
change nominations
for deliveries between receipt points on the system. It is replaced with an=
=20
announced
daily calculation of capacity available at each receipt point;
=01=07 Establish Hector Road as a formal receipt point for nominations;
=01=07 Institute an operational flow order (OFO) procedure. Provides a foru=
m for=20
more changes
in OFO procedures if excessive OFOs are made;
=01=07 Set up =01&pools=018 of gas on the SoCal transmission system that ar=
e intended to=20
increase the
liquidity of gas trading;
=01=07 Make changes to balancing rules, while retaining the current 10% mon=
thly=20
imbalance
tolerance;
=01=07 Make SoCal=01,s own gas acquisition unit subject to the same balanci=
ng rules=20
and penalties
as all other shippers;
=01=07 Allow some limited imbalances trading, as well as the right to assig=
n and=20
reassign unbundled
storage contract in a secondary market, with a SoCal electronic bulletin=20
board set up
for it;
=01=07 Unbundle from core transportation rates the storage capacity cost ex=
ceeding=20
that required
for core minimum reliability; and
=01=07 Provide for rate recovery of up to $3.5 million in implementation co=
sts.

In addition, the draft would unbundle core interstate transportation from=
=20
rates, eliminate
core contribution to noncore interstate transition cost surcharges, elimina=
te=20
the core subscription
option as well as the caps for core aggregation programs.  The threshold fo=
r=20
participating in
core aggregation is reduced, and billing options are offered to core=20
aggregators.

Bilas=01, draft also warned that the commission may come back in two years =
to=20
open another
investigation into gas competition, taking into account any changes in mark=
et=20
conditions.
Bilas gave a little more insight into his decision in the text of the draft=
.
=01&The cost of gas as a commodity has vastly increased at the border, show=
ing a=20
differential
between the basin and border prices that is more than the cost of transport=
=20
and related services;
we question whether there will be an opportunity for discounting by markete=
rs=20
if more competition is allowed,=018=20
Bilas wrote in the draft decision.  =01&With half the state already committ=
ed to=20
a
restructured competitive natural gas industry, it suddenly seems as if the=
=20
benefits of such re-
structuring to enhance competition are speculative, particularly at this=20
time.  With one leg in the
water, the current has switched direction and it will be difficult, if not=
=20
foolhardy, to reach our
goals by forging ahead.

=01&We choose to take a cautious approach again,=018 the draft continues. =
=01&Rather=20
than proceeding
to unbundle transmission in Southern California now, we approve, with=20
modifications, the settle-
ment suggesting smaller steps towards a competitive market. Additionally, w=
e=20
unbundle core
interstate transmission and once again urge the Legislature to pass consume=
r=20
protection legisla-
tion aimed at unregulated marketers while we facilitate growth in core=20
aggregation programs.=018
The CPUC would not rule out the unbundling of intrastate transmission and=
=20
other restruc-
turing in the future =01&but believe that at this point in time the certain=
=20
benefits do not outweigh
the costs to most ratepayers.=018

All drafts must be filed 30 days before the meetings at which they will be=
=20
discussed. The
draft decision is currently on the agenda for the CPUC=01,s Dec. 21 meeting=
.=20