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Mail # 70128 Part 2 : SB_GT&S_0768554.pdf

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Date:
Friday, 19 September 2014 07:37
Sender:
PG&E Tarif...:2/2
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Total file(s): 2

SB_GT&S_0768553.pdf
SB_GT&S_0768554.pdf
Content:

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Meredith Allen Pacific Gas and Electric Company
Senior Director 77 Beale St., Mail Code B10C
Regulatory Relations P.O. Box 770000
San Francisco, CA 94177
Fax: 415.973.7226
September 19, 2014
California Public Utilities Commission - Energy Division
Attention: Tariff Unit
505 Van Ness Avenue
San Francisco, CA 94102
Subject: PG&E Reply to Response of Shell Energy
Dear Energy Division Tariff Unit:
Pacific Gas and Electric Company (PG&E) hereby replies to the September 12, 2014
response from Shell Energy North America (US), L.P. (Shell Energy) regarding
PG&E's Advice 3509-G.
Introduction
On September 2, 2014, PG&E filed Advice 3509-G, requesting California Public
Utilities Commission (Commission or CPUC) approval of a revised and extended
Transwestern Pipeline (Transwestern) transportation agreement.1 On September
12, 2014, Shell Energy filed what it termed as a "response" letter to PG&E, the
Energy Division and all parties on the Application (A.) 13-06-011 Service List. In its
response, Shell Energy urges the Commission to defer consideration of PG&E's
proposed Transwestern contract until after the Commission resolves what it terms as
"related issues" to those in A.13-06-011. Shell Energy's response also advises that
"[ujntil the Commission addresses whether PG&E should hold firm interstate capacity
for core aggregation customers, the Commission should not approve an extension or
renewal of PG&E's firm upstream pipeline capacity contracts."
PG&E respectfully submits this response to Shell Energy's letter.
PG&E's Reply to Shell Energy's September 12, 2014 Letter
Shell Energy Assertion
On page one of its letter, Shell Energy urges the Commission to defer consideration
of PG&E's proposed revision and extension of its existing Transwestern contract until
after the Commission resolves related issues in A.13-06-011. On page two, Shell
1 PG&E's existing Transwestern transportation agreement expires on March 31, 2015. The
Transwestern contract quantities vary monthly, ranging from 83,000 Dth/day during non-
winter months, to 222,000 Dth/day during higher demand winter months.
2 Response, page 3.
SB GT&S 0768554
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PG&E Reply to Response of -2- September 19, 2014
Shell Energy
Energy repeats its recommendation, stating that "[i]n view of the close connection
between PG&E's proposal to revise and extend the Transwestern contract and the
issues in A.13-06-011, Shell Energy requests that the Commission defer
consideration of PG&E's advice letter until after the Commission addresses core
capacity issues in A.13-06-011." On page three, Shell Energy broadens its
recommendation stating that the Commission should not approve any firm upstream
pipeline capacity contracts proposed by PG&E until the Commission addresses the
issues raised in A.13-06-011, and decides whether or not PG&E should hold
capacity for customers of Core Transport Agents (CTA). Shell Energy recommends
that, at a minimum, the Commission limit the term of any proposed contract to one
year, until the Commission issues a decision in A.13-06-011.
PG&E Reply
PG&E strongly disagrees with Shell Energy's request that the Commission put
capacity decisions on hold until such time as the Commission issues its decision in
A.13-06-011. The Commission established an interim pipeline capacity range
specifically to provide guidance until a final decision is issued, and should allow the
capacity pre-approval process in Decision (D.) 04-09-022 to continue, enabling
PG&E to obtain the interstate pipeline capacity it needs while the Commission
adjudicates the issues in the proceeding. Regarding its Transwestern advice letter,
3509-G, PG&E seeks Commission approval of its proposed contract in accordance
with the rules and procedures established by D.04-09-022, and in accordance with
the Commission's existing interim pipeline capacity range. There is no indication
when the Commission's final ruling in A.13-06-011 will be issued. To defer
Commission approval of pipeline contracts as suggested by Shell Energy would
jeopardize the continuity of access to vital natural gas supply basins. Deferring all
approvals would lead to relinquishment of important renewal rights in existing
interstate pipeline contracts. It would preclude PG&E from securing longer term
supplies in the basins, would jeopardize existing PG&E hedge program
commitments, and would inhibit PG&E's compliance with the Commission's interim
range. For these reasons, it is imperative that the Commission continue to consider
and approve all reasonable approval requests for pipeline capacity, including advice
3509-G.
Shell Energy's request that the Commission limit the term of PG&E's proposed
Transwestern contract, and all future PG&E interstate pipeline contracts, to one year
until such time as the Commission issues a decision in A.13-06-011 is arbitrary,
unnecessary and ill-advised. It would be unprecedented and detrimental for the
Commission to impair PG&E's ability to acquire needed core capacity in the most
efficient and cost effective manner possible. In D.04-09-022, the Commission
recognized that "[a] diverse portfolio approach for the holding of interstate capacity
across supply basins and interstate pipelines with staggered terms maximizes
opportunities to benefit core customers with enhanced supply reliability and gas price
SB GT&S 0768555
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PG&E Reply to Response of -3- September 19, 2014
Shell Energy
stability."3 In light of this conclusion, the request by Shell Energy for the Commission
to limit contract durations to one year is contradictory to the Commission's policies
established in D.04-09-022, and should be rejected. Furthermore, the Office of
Ratepayer Advocates (ORA) and The Utility Reform Network (TURN) represent the
interests of all core customers, including CTA customers. The Commission has
entrusted them to participate in the interstate pipeline approval process since 2002.
ORA and TURN also participated in A.13-06-011, and are thus cognizant of the
parties' positions, including those of Shell Energy. In addition, the Energy Division
has been delegated authority in D.04-09-022 to approve pipeline contracts within
prescribed ranges. These entities possess the authority, interest, knowledge and
experience to carry out their duties responsibly, including determining the appropriate
pipeline contract duration.4
Shell Energy Assertion
On page one of its letter, Shell Energy claims that "PG&E's advice letter fails to
address whether (and if so, how) revision and extension of this Transwestern
contract conforms to the Commission's December 2012 decision (D.12-12-006) in
which the Commission established a new interim core interstate capacity range for
PG&E."
PG&E Reply
Although not stated explicitly in PG&E's Advice 3509-G, PG&E routinely offers to
make available to CTAs the confidential information in its pipeline capacity advice
letters upon the CTAs' execution of a non-disclosure agreement (NDA). This
process began in October 2012, with PG&E's Advice 3331-G, and has become
"standard procedure" for CTAs and PG&E, allowing PG&E to share commercially
sensitive information that is otherwise provided only to ORA and the Commission
staff (under the confidentiality provisions of General Order 66-C and Section 583 of
the Public Utilities Code), and to TURN (under a separate NDA). Even though other
CTAs have executed NDAs and attained confidential pipeline contract information
related to recent pipeline capacity advice letters submitted by PG&E, Shell Energy
has chosen not to avail itself of this process, and has never executed an NDA to
receive the details of PG&E's interstate pipeline contract proposals. The fact that
Shell Energy has lacked specific information regarding pipeline contract proposals
has not deterred it from protesting previous capacity approval requests, typically
objecting based on its general belief that PG&E should not acquire interstate pipeline
capacity on behalf of CTAs or their core customers.
3 Finding of Fact 1, p. 85 (emphasis added).
4 PG&E notes that it agrees with Shell Energy's assessment of the need for expeditious
Commission resolution of the issues in A.13-06-011. PG&E urges the Commission to
finalize its decision to provide necessary guidance for all parties.
SB GT&S 0768556
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PG&E Reply to Response of -4- September 19, 2014
Shell Energy
The confidential Appendix A of Advice 3509-G describes the proposed Transwestern
contract, discusses the importance and urgency of PG&E's request, and addresses
most of the issues raised by Shell Energy in its response. This confidential
information was made available to other CTAs after their execution of an NDA. Shell
did not inquire about the confidential appendix, and did not execute the required
NDA.
PG&E's confidential appendix to Advice 3509-G also discussed the relationship
between the Commission's interim capacity range and the proposed contract. PG&E
cannot repeat that entire explanation in a public forum without revealing
commercially sensitive information about the proposed Transwestern contract
quantity. For this response, however, PG&E affirms that approval of the
Transwestern contract is necessary for PG&E to comply with the Commission's
interim capacity range, and that given PG&E's existing capacity commitments, the
proposed Transwestern contract is vital to meet the demands of core customers.
Shell Energy Assertion
On page two of its response, Shell Energy claims that "PG&E's advice letter fails to
address whether PG&E needs the proposed quantity of firm Transwestern capacity
to meet the legitimate supply reliability needs of its core customers."
PG&E Reply
Historically, PG&E has relied on U.S. Southwest pipelines, including Transwestern,
to meet almost one-third of its pipeline capacity requirement, and has relied on
competitively-priced San Juan Basin supplies to help meet the demands of its
bundled core customers. Of currently committed pipeline capacity during the
proposed contract period, the Transwestern pipeline contract would represent only
about 17% of capacity volumes.5 The proposed Transwestern pipeline capacity
contract, and additional pipeline capacity contracts, are necessary to meet the needs
of PG&E's bundled core customers.
Shell Energy Assertion
On page one of its response, Shell Energy claims that PG&E's advice letter
"disregards the Commission's current consideration, in A.13-06-011, of further issues
directly related to PG&E's core interstate pipeline capacity holdings." Among these
issues, according to Shell, are PG&E's proposal in A.13-06-011 to reduce the
amount of firm interstate pipeline capacity held for core customers, and the proposal
by Shell Energy and the Core Transport Agent Consortium (CTAC) in the same
proceeding that PG&E should not hold firm interstate pipeline capacity for its core
aggregation customers.
5 Based on PG&E's total average annual interstate pipeline volumes.
SB GT&S 0768557
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PG&E Reply to Response of -5- September 19, 2014
Shell Energy
On page two of its response, Shell Energy states that PG&E proposed a reduced
core interstate capacity procurement obligation in A.13-06-011. Shell Energy states
further that PG&E's advice letter fails to address whether CTAs and their customers
need or want the Transwestern capacity. Finally, Shell Energy states that PG&E did
not consult with CTAs prior to requesting Commission approval of the revised and
extended contract. Shell Energy's response claims that "approval of PG&E's
proposed contract would amount to taxation of core aggregation customers without
representation."6
PG&E Reply
Shell Energy is correct that PG&E proposed an interstate pipeline capacity planning
range in A.13-06-11 that is slightly lower than the Commission's interim range.
However, PG&E's total committed contract volumes at the time of this reply, and
including the proposed Transwestern contract in Advice 3509-G, are also within
PG&E's proposed range.
Shell Energy's claim that PG&E ignored its position in A.13-06-011 and has failed to
consider the needs of CTA customers, is unavailing. The Commission's interim
range, with which PG&E must comply, includes both the demands of PG&E's
bundled core and CTA core customers. It also bears repeating that ORA and TURN
represent the interests of all core customers as they participate in the pipeline
contract approval process. Therefore, PG&E's proposed Transwestern contract, and
the Commission's actions to approve or disapprove it, consider the needs of all core
customers.
Shell Energy Assertion
Finally, Shell Energy states on page three of its letter that PG&E fails to explain why
it must extend the Transwestern contract at this time, given that the current contract
does not expire until March 31, 2015.
PG&E Reply
PG&E explained the urgency of its request in the confidential appendix of Advice
3509-G, and is unable to repeat that discussion in this public document. However,
PG&E's proposed revision and extension of the existing Transwestern agreement
secures future rights to Transwestern capacity. Without making the commitment
now, PG&E could lose those rights.
Conclusion
On October 19, 2012, Shell Energy (and CTAC) filed a similar protest to PG&E's
Advice 3331-G, in which PG&E sought Commission approval of its existing
Transwestern contract. The nature of the protest and the relief requested by Shell
6 Response, page 2.
SB GT&S 0768558
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PG&E Reply to Response of -6- September 19, 2014
Shell Energy
Energy and CTAC were almost identical to Shell Energy's September 12, 2014 letter
response. In October 2012, Shell Energy did not sign the NDA, yet asserted that
PG&E's proposed contract was unnecessary and should not be approved until the
Commission resolved issues raised by the CTAs in Rulemaking (R.) 04-01-025 and
A.01-10-011, proceedings which would have resulted in changes to PG&E's
interstate pipeline capacity holdings for core customers. On October 31, 2012, the
Director of Energy Division rejected the protest by Shell Energy and CTAC and
approved PG&E's request in Advice 3331-G. PG&E respectfully requests that the
Commission also approve PG&E's proposed Transwestern contract as filed in
Advice 3509-G.
Meredith Allen
Senior Director, Regulatory Relations
cc: Ed Randolph, Director CPUC Energy Division
John W. Leslie, McKenna Long & Aldridge LLP,
Attorney for Shell Energy North America (US) L.P.
Richard A. Myers - CPUC Energy Division
Franz Cheng - CPUC Energy Division
Belinda Gatti - CPUC Energy Division
Jonathon Bromson - CPUC Legal Division
R. Mark Pocta - Office of Ratepayer Advocates
Nathaniel Skinner - Office of Ratepayer Advocates
Pearlie Sabino - Office of Ratepayer Advocates
Marcel Hawiger- The Utility Reform Network
Service list for R.04-01-025
Service list for A.13-06-011
SB GT&S 0768559

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