News

Today the California Public Utilities Commission issued several decisions that will impact Pacific Gas and Electric Company's gas transportation rates, rates for gas transmission and storage on PG&E's California Gas Transmission system and in-kind shrinkage allowances effective January 1, 2005. Most notably, the Commission endorsed the settlement reached this year by PG&E and 30 market participants.

Gas Accord III Settlement Approved

Today the CPUC adopted the all-party Gas Accord III Settlement reached in August, setting rates for gas transmission and storage for 2005 through 2007. The settlement, which retains CGT's current unbundled structure for transmission and storage services, was endorsed by every segment of the northern California gas marketplace. It makes only a few changes to CGT's current business rules and services, as described previously in Pipe Ranger News and below.

Yesterday the CPUC also issued a final decision in PG&E's Cost of Capital proceeding. This decision provided the final input to settlement rates, revising gas transmission and storage rates slightly. Final rates are, on average, 0.3% lower than those originally proposed by the settlement. Today CGT updated Pipe Ranger's Rates pages to reflect final, CPUC-approved rates for 2005, 2006 and 2007.

With CPUC approval of the Gas Accord III Settlement and the Cost of Capital case, northern California shippers will enjoy rate certainty for the next three years.

Annual Shrinkage Adjustment

On November 18, 2004, PG&E filed its annual shrinkage allowance adjustments with the CPUC. These revised shrinkage factors, now detailed on Pipe Ranger's freshly updated Shrinkage Factors page, will become effective on January 1, 2005.

Only a few shrinkage factors will change, and only slightly. Redwood Off shrinkage will fall from 1.11% to 1.0% and core distribution shrinkage will fall from 2.4% to 2.1%. All other shrinkage rates remain unchanged.

By February 2005, PG&E intends to file a separate advice letter revising storage shrinkage rates effective April 1, 2005. PG&E will continue to revise shrinkage rates annually.

Annual True-Up Filing Affects End-Use Rates

In November, PG&E filed its Annual True-Up of Transportation Balancing Accounts, revising end-use customer gas transportation rates to adjust for a variety of balancing accounts, low-income customer discounts, previously authorized annual attrition adjustments from the General Rate Case settlement and the El Paso Capacity Settlement allocation to core aggregation customers. The annual true-up will affect gas end-use customer rates effective January 1, 2005, just as the Gas Accord III Settlement and the Cost of Capital decision will. CGT backbone transmission and storage rates are not impacted by this true-up, however.

For more information on these end-use customer rate changes, noncore end-use customers may contact their PG&E Account Manager directly and gas marketers may contact their CGT Account Services Representative.

Few Services Revised in 2005

The Gas Accord III Settlement continues CGT's current market structure with few changes. In addition to setting backbone transmission and storage rates for three years, the settlement will implement the following revisions:

No Open Season or Extension

No formal contract extension or open season process will be offered for 2005 through 2007. CGT Sales Representatives are now available to discuss each customer's gas transmission and storage needs for 2005 and beyond.

Backbone Level End-Use Service

Beginning January 1, 2005, PG&E will offer certain noncore end-use customers a new backbone level service. Customers must meet all of the following criteria to qualify for this service and the corresponding rates:¹

•  The load must be new or incremental to PG&E's system since March 1, 1998.
• The load must never have physically connected to PG&E's local transmission or distribution system.
• The lateral pipeline must be directly connected to PG&E's backbone transmission system and must be 100% owned or paid for in advance by the end-use customer.

PG&E expects approximately 12 end-use customers to qualify for backbone level end-use service. No action is required by qualifying customers to receive the new rate on January 1, 2005. PG&E Account Managers will contact qualifying customers directly.

Qualifying end-use customers will no longer pay the local transmission rate component, about $0.15/Dth, but will continue to pay appropriate transportation charges, customer access charges, the G-SUR franchise fee surcharge and charges for public purpose programs just as they did prior to implementation of this new service.

Storage Market Enhancements

The settlement makes two refinements to enhance the competitiveness of storage markets. First, Mission Off as-available rates will fall to zero ($0.00/Dth) for gas withdrawn from storage. This zero rate will match the Mission On as-available rate and will provide gas withdrawn from storage equal access to both on-system and off-system markets. Additionally, firm Redwood On and Baja On contracts will include an option to convert a portion of contracted capacity to firm Mission On service at no cost. Please contact your CGT Sales Representative to discuss a contract conversion.

Minor Revisions for CTAs

The settlement adopts three minor revisions for Core Transportation Agents:

1. CTAs will gain the option to accept a proportional share of the PG&E Core Procurement department's firm interstate pipeline capacity held on TransCanada's GTN System (GTN) and upstream Canadian pipelines.
2. The rule for exemption to CTA's firm winter capacity requirements will be based only on compliance with low inventory OFOs, rather than all OFOs.
3. The core brokerage fee will be increased from $0.024/Dth to $0.030/Dth.

Commensurate Discount Rule Eliminated

The commensurate discount rule, which requires CGT to provide Baja path service at a commensurate discount to any Redwood On discounts provided, will be eliminated because PG&E no longer has any affiliate relationship with GTN.

Ready for the New Year

With the northern California gas market structure clearly defined through 2007, CGT looks forward to offering reliable, economic transportation and storage services tailored for each customer's needs. CGT Representatives are now available to discuss those needs or any questions you may have.

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