El Paso files long

El Paso files long-awaited pipeline service restructuring plan

Washington (Platts)--2Apr2004


El Paso Natural Gas late Thursday finally filed its comprehensive order 637
compliance plan. The restructured service scheme is intended to produce "a
system that will ensure the highest level of reliability and parity of service
to each customer each day even when all customers are using their contract
entitlements at the same time," said the pipeline. Among other things, El Paso
is proposing to provide firm within-the-path rights to firm shippers,
establish segmentation services, clarify discounting policy and update the
system's critical condition procedures. In a separate, concurrent filing, the
pipeline proposed to update and revise some existing imbalance management
services, and to establish some new imbalance menu options, to encourage
shippers to align their receipts and deliveries. To allow shippers to make use
of their contracted firm capacity through segmentation, El Paso offered a
proposal to "path" its system.

Large segments of the system -- which features two main east-to-west sections
and three crossover segments -- would be identified as physical paths within
which shippers could fairly easily segment their capacity. All firm shippers
would be assigned firm primary receipt-to-delivery point rights based on their
contract capacity flows, the filing said, noting that assignment of path
rights would be based on monthly contract rights. Shippers would be free to
swap or exchange path rights after the initial assignments are completed. To
minimize the issuance and impact of operational flow orders, El Paso would
create a new warning period called a "strained operating condition." No
additional penalties would apply during an SOC, which El Paso characterized as
"a warning period to provide shippers adequate opportunities to organize their
business and adjust their schedule quantities to avoid potential penalties."

In the second filing, El Paso noted that its existing imbalance service
options include pipeline interconnect operational balancing agreements,
imbalance netting and trading, gas in-kind makeup and payback opportunities,
negotiated cash-outs and a default cash-out program. It wants to "enhance"
these options by "further automating the shippers' monthly imbalance trading
process," adding an automatic monthly imbalance netting process and offering a
swing service at delivery points and park/loan services in supply areas. The
pipeline's march toward order 637 compliance has been somewhat tortured. It
attempted to begin the process in June 2000 roughly on schedule with other
major pipelines, but complicating factors involving the unique nature of its
system and customer profile conspired to delay the process. Because it would
require "a very significant rewrite of El Paso's key business systems prior to
implementation," it proposed an Apr 1, 2005, effective date.