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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
September 23, 2014
California Public Utilities Commission - Energy Division
Attention: Tariff Unit
505 Van Ness Avenue
San Francisco, CA 94102
Subject: PG&E Reply to the September 19, 2014 Response of Shell Energy
Dear Energy Division Tariff Unit:
Pacific Gas and Electric Company (PG&E) hereby replies to the September 19, 2014
response from Shell Energy North America (US), L.P. (Shell Energy) regarding
PG&E's Advice 3510-G.
On September 9, 2014, PG&E filed Advice 3510-G, requesting simultaneous
approval by the California Public Utilities Commission (Commission or CPUC) of two
proposed pipeline transportation agreements between PG&E and El Paso Natural
Gas (El Paso), and between PG&E and Kern River Gas Transmission (Kern River).1
On September 19, 2014, Shell Energy filed a response, essentially repeating the
allegations and claims made in its September 12, 2014 response to PG&E's previous
Advice 3509-G for approval of the Transwestern Pipeline transportation agreement.2
In its earlier response, Shell Energy urged the Commission to defer approval of
PG&E's proposed pipeline transportation contracts until after the Commission rules
on Application (A.)13-06-011. Shell Energy's September 19th response echoes its
previous argument, stating that the Commission should address the issues in
A.13-06-011 expeditiously and should not approve any new firm pipeline capacity
contracts for PG&E until the Commission determines the level of PG&E's core
capacity requirement and whether PG&E should hold firm interstate capacity for core
PG&E respectfully submits this reply to Shell Energy's letter.
1 PG&E requests approval of El Paso and Kern River contracts to comply with the
Commission's interim pipeline capacity quantity requirements established in Decision (D.)12-
12-006 and to meet the demands of core customers.
2 Shell Energy's response to PG&E's Advice 3509-G (Transwestern Pipeline Transportation
Agreement), filed on September 2, 2014.
SB GT&S 0768789
PG&E Reply to Response of -2- September 23, 2014
PG&E's Reply to Shell Energy's September 19, 2014 Letter
Shell Energy Assertion
Shell Energy contrasts PG&E's Advice 3510-G (El Paso & Kern River contracts), with
PG&E's September 16, 2014 Advice 3514-G, which seeks approval for a proposed
one year extension of the existing Foothills Pipeline (Foothills) contract.3 Shell
Energy notes in its September 19th response that although the proposed reservation
rates, quantities and duration are disclosed by PG&E's Foothills Advice Letter, those
same provisions are withheld in PG&E's El Paso and Kern River Advice Letter.
Comparing the two Advice Letters, Shell Energy asserts that "[wjhether or not the
agreed upon prices in the El Paso and Kern River contracts are confidential, the
quantity and term provisions in these contracts are not confidential and should not be
withheld from public disclosure."4
In addition to demanding that the proposed contract provisions be publically
disclosed in Advice 3510-G, Shell Energy criticizes PG&E for what it believes is
PG&E's failure "to discuss, in its advice letter, whether either of these contracts is
intended to replace existing firm interstate capacity contracts, or supplant gas
supplies PG&E currently purchases at the California border or at the PG&E
citygate."5 Shell Energy insists that "[t]his information is not confidential, yet the
information is critical in determining whether the contracts should be approved."6
PG&E disclosed the Foothills contract information in Advice 3514-G, because these
details do not warrant confidential treatment. Advice 3514-G requests Commission
approval to exercise PG&E's renewal rights, provided in the General Terms and
Conditions of Foothills' tariff. There is no unresolved negotiation between Foothills
and PG&E, with the outcome pending Commission approval. There is no final
pipeline-administered open season, in which the capacity may be awarded to the
highest bidder. Instead, the proposed reservation rate would equal the published
rate - the single tariff rate that all shippers on the Foothills system must pay for firm,
long term7 transportation contracts. Furthermore, the proposed Foothills contract
quantities have not changed in several years, essentially matching PG&E's upstream
3 PG&E seeks authorization to continue PG&E's two Foothills contracts for a one-year term
beginning November 1, 2015 through October 31, 2016. Foothills' tariff requires a one-year
notification for contract renewals.
4 Shell Response, p. 1.
5 Response, p. 2.
6 Response, p. 2.
7 i.e., one year or longer.
SB GT&S 0768790
PG&E Reply to Response of -3- September 23, 2014
NOVA and downstream Gas Transmission Northwest contracts, and have been
disclosed in previous Advice Letters.
In contrast, the contract details of PG&E's proposed El Paso and Kern River
contracts are commercially sensitive, including the proposed quantities and terms.
Both contracts required negotiation and the terms of each proposed contract should
not be made available to other market participants, such as Shell Energy, or
competing pipelines until PG&E has concluded each transaction.
In addition, Shell Energy asserts that PG&E should state how it intends to use the
two proposed contracts to serve its core bundled loads, suggesting that PG&E
should reveal whether the contracts will supplant gas supplies it currently purchases
at the California border or at the PG&E citygate.
Shell Energy's insinuation that this information is necessary and not confidential is
entirely misplaced. Any discussion of PG&E's gas supply commitments or intentions
to purchase in various markets would reveal supply portfolio purchasing plans and
strategies, enabling other market participants to utilize the information to maximize
their own economic self-interests at the expense of PG&E's core customers. The
information should not be disclosed in a public document.
Shell Energy Assertion
Shell Energy claims that "[transparency with respect to Quantity and term is
necessary to determine whether the capacity is needed to meet PG&E's core
capacity procurement obligation," and, "there is nothing confidential about an
explanation of why these proposed contracts are necessary to satisfy PG&E's core
Shell Energy also states that "PG&E provides no insight, in its public filing, as to
whether, and why, these new contracts are necessary at this time. This information
is not confidential, yet the information is critical in determining whether the contracts
should be approved," Shell Energy also maintains that "PG&E fails to address
whether these two contracts are needed to meet its interim core firm interstate
capacity procurement requirement, which was imposed in D. 12-12-006 (December
Shell Energy's insistence that the information it seeks is not confidential is
perplexing. It is not clear to PG&E how Shell Energy can make such a definitive
8 Response, p. 1-2.
SB GT&S 0768791
PG&E Reply to Response of -4- September 23, 2014
determination without actually reading the specific information in the context with
which it was provided to the Commission and TURN.
The Commission should not be persuaded by Shell Energy's self-serving arguments.
Shell Energy is a market participant providing core commodity services in
competition with PG&E, as well as with other market participants seeking
competitively priced pipeline capacity. As such, it is highly inappropriate for Shell
Energy to attempt to impose on PG&E, and on the Commission, its view of what
information PG&E should designate as confidential.
In the confidential Appendix A of Advice 3510-G, PG&E explained how the two
proposed contracts will help PG&E meet its obligations stemming from D. 12-12-006,
and discussed the urgency of its request. PG&E is unable to repeat that discussion
in this public document without revealing information that could jeopardize the
outcome of PG&E's proposed contracts. However, PG&E confirms in this letter that
the proposed contracts are necessary in order for PG&E to meet the demands of
core customers, and also to satisfy the Commission's interim pipeline contract
quantity requirements as specified in D. 12-12-006.
Shell Energy Assertion
Shell Energy's September 19th response also states:
Shell Energy does not understand why or how PG&E's explanation of
the need for the proposed Transwestern contract (or its need for the
proposed El Paso and Kern River contracts) is "confidential." Unless
PG&E publicly reveals the basis for entering into its proposed interstate
contract, there is no public basis for the Commission to approve the
contracts. PG&E's assertion that everything related to a proposed
contract, including PG&E's explanation of "need" for the capacity, is
"confidential" makes a mockery of the advice letter process.
PG&E states that it "routinely offers" to make the confidential
information in its proposed contracts available to CTAs, upon the
execution of a nondisclosure agreement ("NDA"). There are two
fundamental problems with this "offer": First, the confidential
information cannot be used in a public "protest" or "response" to
PG&E's advice letter. Second, the confidential information cannot be
disclosed to an individual who participates in the commercial
marketplace. There is limited value, therefore, to having a market
participant such as Shell Energy obtain information that PG&E labels
10 D.12-12-006, Ordering paragraph 2.
SB GT&S 0768792
PG&E Reply to Response of -5- September 23, 2014
PG&E should disclose, in the public version of its advice letters, the
relevant contract terms, perhaps excluding price, and the reasons why
it is "urgent" and "reasonable" for the Commission to approve the
proposed contract. The information that PG&E currently provides
publicly through its expedited advice letter provides no basis for parties
to object, and no basis for the Commission to act on PG&E's proposed
First, it is the Commission, and not Shell Energy, with statutory responsibilities to
protect consumers from unreasonable costs through effective oversight and
regulation. In exercising these responsibilities, the Commission must balance the
public's interest in utility activities with the potential harm of requiring the utilities to
publish confidential market sensitive information which could adversely affect utility
procurement activities and pipeline capacity negotiations.
Second, the information that Shell Energy claims does not warrant confidential
treatment is clearly commercially sensitive and should be protected to serve the
interests of core customers.
Third, PG&E and the other utilities routinely designate such commercially sensitive
information as confidential pursuant to Public Utilities Code Sections 454.5(g) and
583, D.06-06-066 and General Order 66-C. For example, SoCalGas routinely files
its expedited letter approval requests for interstate pipeline capacity without the
market sensitive contract details, which are provided only to the Energy Division and
ORA under these confidentiality provisions and to TURN under a NDA. In Advice
4553 (October 29, 2013), SoCalGas requested approval of its Transwestern contract
in this manner. This procedure is entirely appropriate.
Furthermore, as PG&E explained in its September 19, 2014 reply, Shell Energy and
its outside counsel may readily review the confidential information by executing a
non-disclosure agreement with PG&E (as have other CTAs). Shell Energy would
then have the option of filing a confidential protest or response based on the
confidential material. It is not clear to PG&E why this procedural path is
unacceptable to Shell Energy and why it instead insists on being able to debate the
merits of PG&E's negotiated terms and conditions in public. Shell Energy's
purported explanation, that "[tjhere is limited value" in reviewing the confidential
material, is puzzling. Other CTAs have executed NDAs and presumably would not
do so if they thought it was of "limited value."
11 Response, pp. 2-3.
SB GT&S 0768793
PG&E Reply to Response of -6- September 23, 2014
Finally, PG&E notes that it has its own concerns with how Shell Energy is
participating in the advice letter process. PG&E's previous Transwestern Advice
3509-G was protested by Shell Energy on September 12th, and answered by PG&E
on September 19th. The protest period for Advice 3509-G has expired. Yet Shell
Energy again raises issues regarding Advice 3509-G in its September 19th response
to PG&E's Advice 3510-G. Shell Energy appears to be taking a second bite at the
apple through its current "Response."
Shell Energy Assertion
In its September 19th response, Shell Energy refers to PG&E's previous reply in
which PG&E states that deferring Commission approval of pipeline contracts would
jeopardize the continuity of access to vital natural gas supply basins. Shell Energy
This is a serious charge, yet PG&E provides no support for its
statement. In fact, the evidence in A.13-06-011 demonstrated that
there is ample interstate pipeline capacity available to serve the PG&E
market, regardless of whether PG&E holds firm interstate capacity
rights on the pipelines that connect to California. Deferral of
Commission action on PG&E's proposed contract renewal would not
jeopardize access to gas supply basins. Rather, a deferral of
Commission action would reduce costs to PG&E's core customers.12
Shell Energy appears to be using the Advice Letter process to try to advance the
arguments it made in A.13-06-011. This is inappropriate. Although PG&E does not
wish to re-litigate that case, it feels compelled to address some of the "evidence"
proffered by Shell Energy and the Core Transport Agent Consortium (CTAC) in
A.13-06-011 and referred to by Shell Energy in its response. Shell Energy and
CTAC witnesses testified that by virtue of the sufficient amount of pipeline capacity
connected to California, there is no need for CTAs to acquire or hold interstate
pipeline capacity to serve their core customers. Shell Energy's September 19th
response relies on this litigation position and omits evidence presented by PG&E in
A.13-06-011 that despite operationally connected pipeline connections to California,
core customers should subscribe to interstate pipeline capacity to ensure supply
reliability. Among other things, PG&E demonstrated that long-term contractual
commitments to serve demands upstream of California are increasing.13 Market
events since PG&E presented its evidence in A.13-06-011 have further confirmed
the soundness of PG&E's position. Contrary to Shell Energy's claims, deferral of
12 Response p. 3.
13 PG&E's Supplemental Testimony filed October 15, 2013 (A.13-06-011), pp. 2-1 -2-2.
SB GT&S 0768794
PG&E Reply to Response of -7- September 23, 2014
Commission action on PG&E's proposed contracts could jeopardize PG&E's long
term access to gas supply basins and may substantially increase costs to core
Shell Energy Assertion
Shell Energy repeats the following position articulated in its September 12th
response: "Until the Commission decides the level of PG&E's core capacity
requirement, and until the Commission addresses whether PG&E should hold firm
interstate capacity for core aggregation customers, the Commission should not
approve any new firm pipeline capacity contracts for PG&E."14
As PG&E stated on pages 2-3 of its September 19th letter, putting capacity approval
decisions on hold would jeopardize long-term transportation access to supply basins,
preclude PG&E from securing longer term gas supplies, jeopardize PG&E's hedge
program, and inhibit compliance with D.12-12-006.
Shell Energy is clearly predisposed to object to all of PG&E's pipeline contracts and
Advice Letters, regardless of whether or not the proposed contracts benefit core
customers and/or allow PG&E to comply with the Commission's interim pipeline
capacity quantity requirements. PG&E requests that the Commission weigh Shell
Energy's responses accordingly and evaluate PG&E's capacity Advice Letters on the
merits of each request. Shell Energy's September 19th response is premised on its
belief the Commission should not require PG&E to hold interstate pipeline capacity
for CTAs. However, its position has not been adopted by the Commission. Unless
and until the Commission directs PG&E to do otherwise, it must continue to hold
interstate pipeline capacity for CTAs.
The proposed El Paso and Kern River contracts are necessary to satisfy core
demands and comply with the Commission's interim capacity planning range. PG&E
respectfully requests that the Commission approve PG&E's proposed El Paso and
Kern River contracts as filed in Advice 3510-G.
Senior Director, Regulatory Relations
Response, pp. 3-4.
SB GT&S 0768795
PG&E Reply to Response of -8- September 23, 2014
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 0768796