Message-ID: <16769182.1075857486487.JavaMail.evans@thyme> Date: Sun, 18 Jun 2000 09:59:00 -0700 (PDT) From: rebecca.cantrell@enron.com To: jane.tholt@enron.com Subject: El Paso ADR Settlement Conference, June 12-13 Cc: phillip.allen@enron.com, randall.gay@enron.com, tori.kuykendall@enron.com, stephanie.miller@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: phillip.allen@enron.com, randall.gay@enron.com, tori.kuykendall@enron.com, stephanie.miller@enron.com X-From: Rebecca W Cantrell X-To: Jane M Tholt X-cc: Phillip K Allen, Randall L Gay, Tori Kuykendall, Stephanie Miller X-bcc: X-Folder: \Jane_Tholt_Jun2001\Notes Folders\Discussion threads X-Origin: Tholt-J X-FileName: jtholt.nsf In the final analysis, we did not make a lot of progress in reaching agreement to settle the RP99-507 proceeding on El Paso's capacity allocation proposal at the conference in San Francisco last week. The parties have agreed to proceed on a dual track because of Burlington's concerns about timing. We will reconvene for settlement discussions July 12 and 13 at Southwest Gas's offices in Las Vegas after comments and reply comments are filed as permitted under the procedures agreed to at the May 2 technical conference at FERC. Comments are due June 30 and reply comments on July 7. Amoco and Burlington filed the original complaint on September 21, 1999, and requested fast-track processing under the Commission's new complaint procedures. Burlington is pushing to have the Commission adhere to the fast-track processing of the complaint, maintaining that an order should have been issued within 240 days (I don't know where they got that from -- I can't find any such requirement), and vehemently opposed any attempts to extend the procedural schedule. The tone of the meeting was set when Harvey Morris, representing the CPUC, was allowed to make a statement because he had to leave by 1:30 (the meeting started about 12:30). He started by saying that the CPUC was in complete opposition to the Settlement Proposal circulated by El Paso on June 6, and then outlined all the reasons it was unfair to California shippers and was in violation of the '96 Settlement. After Harvey spoke, El Paso then reviewed its June 6 settlement proposal, which you received by e-mail, and provided some additional explanations of assumptions, etc. Then the parties met in individual groups to caucus on their positions and reconvened as a group to discuss. Of particular note was the allocation of the 360 MM/d of San Juan-only capacity that El Paso proposed to take back from Burlington (97J4) and Amoco (97JB). El Paso said that it had been allocated 106 MM to the Havasu shippers, 180 MM to the EOC shippers, and 74 MM to all others (California CD shippers). This was a major point of contention in most of the ensuing discussions -- California shippers objected to EOC getting the lion's share of the additional San Juan capacity. Under El Paso's proposal, EOC shippers would get 82% of their rights from San Juan and 18% from Permian, based on BDs. CD shippers, on the other hand, get 61% and 39%, respectively. EOC shippers pointed out that the BDs were not actually representative of their load. BDs were simply a number negotiated among the EOC shippers to allocate the costs that were allocated between EOC and California in the '96 settlement. Certain EOC shippers suggested that their specified rights should be based on some other calculation, such as non-coincident peak day usage, rather than BD. Another major issue was the proposal that full requirements shippers (FR shippers) be given systemwide receipt point rights in addition to the specified rights they would get based on their billing determinants (BD). El Paso proposed that these systemwide rights would have a scheduling priority superior to that of a CD shipper using its capacity on an alternate firm basis (either alternate receipt/primary delivery or alternate receipt/alternate delivery). Of course, the FR shippers approved of the proposal but most other parties objected to it. Several suggestions were advanced to try to reach a compromise (for instance, limiting FR shippers to primary specified receipt point rights during Cycle 1 nominations), but none were accepted. Most non-FR shippers stated concerns about the practical impact of giving FR shippers such a scheduling priority, particularly since El Paso's interpretation was that the FR shippers would not have to nominate any of their Permian specified rights in order to come back to the San Juan with the systemwide rights. Everyone pretty much agreed that El Paso's proposal for capacity release of receipt point rights (#4 in their write-up) was a non-starter. It was put on the table to address an earlier suggestion by EOC shippers that, if they could be made economically neutral to using non-San Juan points, they might be more receptive to some restrictions on their specified rights. What they were looking for was some discount for using Permian and there was some further discussion along those lines but El Paso was not receptive, stating that such would mean opening the allocation of costs in the rate case. A third issue was who gets what rights at SoCal/Topock. SoCal Gas doesn't consider El Paso's proposal not to sell Block II turned-back capacity to its Topock point to be of much value since FERC has said they can't anyway. SoCal Gas is looking for a right to get out of any of its contract for which it cannot get a specified delivery point of SoCal/Topock. However, SoCal Gas can't at this point commit to the group a number that it could live with as a specified right at Topock. Conversely, all the other CD shippers who think they bought firm rights at SoCal/Topock are not willing to see SoCal Gas get all the rights unless they, too, can get out of their contracts. Fuel was the other contentious issue that seems to be a key sticking point for certain parties -- some insist it has to remain in the settlement, others say there can't be a settlement if it stays in. El Paso's proposal would move the fuel rate back to 4.85% effective 2/1/00 by changing the way they eliminate fuel used in facilities that have been refunctionalized as gathering. In the filing to be effective 2/1/01, the rate would go down to approximately 4.4% and then to 3.88% on 1/1/03. Burlington insists they will opt out of the settlement if they don't get relief on fuel. Apparently, to the extent El Paso doesn't include the costs of compressors that Burlington's gas utilizes in systemwide fuel, they have to pay a higher fuel rate to El Paso's gathering affiliate. They say it has already cost them several million dollars (I heard numbers between $9 and $27 million -- no hard data), and they will not settle without getting something in return. After the full group discussion and statements of position on Monday afternoon, Rick Miles, the FERC ADR facilitator, pushed for individual meetings between the various segments (EOC, California, producers, marketers, El Paso), based on several parties' representations that they were willing to continue talking. A schedule was worked out and the individual meetings took up the morning on Tuesday. Just before lunch, the entire group got back together and accepted Mr. Miles' suggestion that each segment select three or four representatives who would then engage in a full discussion of the issues. He felt that with a smaller group it might be easier to reach some understandings. However, it apparently didn't work because he called us all back late in the afternoon for a full group discussion, where the positions outlined above were stated and restated. Certain parties, when pressed, could not agree to certain basic principles because, they said, they would have to get input from others in their organization. Mr. Miles expressed his frustration that parties were at the table who didn't know what their bottom line position was (e.g., SoCal Gas, Southwest Gas). Following discussion by the producers, particularly Burlington, as noted above that they would not agree to an extension of the date for filing comments, the next settlement meeting was scheduled after the filing dates. Mr. Miles requested that parties send him an e-mail note that would state their bottom line settlement position, which he would keep confidential. He would review all the positions and to the extent possible put then together and float a settlement package of his own. He assured all that no one would be able to identify the individual positions from his package. One positive note at this meeting was that there was no conflict over the pooling committee's report. No one registered any complaints, although a few parties who had not been at the last settlement conference indicated that they would like to participate. This is how I see our bottom-line position. I would like to send it to Rick late this week if everyone agrees. A pooling procedure that will follow assigned priority rankings for both market and supply with no restrictions on pool-to-pool transfers (loops allowed). Only San Juan receipt point rights on our Havasu contract, or, preferably, termination of the contract so that the San Juan rights could be allocated to others as part of a settlement. Full requirements shippers systemwide rights above their specified point rights would not have a higher priority than CD shippers using alternate delivery points, although no objection to using some allocation method other than billing determinants, such as peak day volume, to establish those specified point rights. Do you have any opinion about the allocation of SoCal/Topock rights? Please give me a call when you've had a chance to look this over. I'm sure you'll have some questions! Also, we'll need to talk about what kind of comments we want to file.