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Judge says Calif. PUC should reject Sempra's $621M North-South gas project

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Judge says Calif. PUC should reject Sempra's $621M North-South gas project

A California Public Utilities Commission judge hasrecommended that the regulator reject the North-South gas pipeline expansion planned by utilities.

Administrative Law Judge Karl Bemesderfer disputed whetherthe project, which would involve linking Sempra's northern and southern gassystems, would improve reliabilitythe way Southern California GasCo. and San Diego Gas& Electric Co. said it would. While the utilities in theirproposal pointed to a number of instances of gas supply constraint, the judge'sproposed decision dismissed claims that better connections between the NorthernSystem and Southern System could have overcome supply concerns.

"Except for … one event, the reliability problems allresulted from a system-wide gas supply shortage, so there was no gas to deliverfrom the northern system even if the North-South pipeline had been in place,"Bemesderfer wrote in his proposed decision April 5.

The companies contended that the pipe build and compressorstation upgrade, estimated to cost $621.3 million, is needed to meet the dailyminimum flow requirements on the Southern System and as insurance againstevents that could interrupt the flow of gas into California on 's pipeline.The Sempra utilities are able to move about 280 MMcf/d of gas supplies from theNorthern System to the Southern System to help meet Southern System demand. TheNorth-South project would allow for 800 MMcf/d more gas to move from theNorthern System to the Southern System.

But, Bemesderfer said, while stakeholders agree that theSouthern System's flow requirements should be met, the proceeding participantslargely concluded that SoCalGas and SDG&E did not show why the North-Southproject is "either a necessary or a desirable way to meet thoserequirements."

Instead, there are other, lower-cost options for improvingthe reliability of the Southern System, Bemesderfer asserted.

For instance, EnergyTransfer Partners LP's TranswesternPipeline Co. LLC proposed spending $463 million to build a30-inch-diameter lateral and compressor station that would enable SoCalGas totransport 800 MMcf/d from the Northern System to the Southern System. Thisproposal's construction route also would pose "significantly fewer" safetyhazards than the proposed route of the North-South pipeline, Bemesderfer noted.

Meanwhile, TransCanadaCorp. proposed a $503 million project involving a 15 miles of24-inch pipeline and 94 miles of 36-inch pipeline to tie into the SouthernSystem, adding 800 MMcf/d of gas access. This proposal, too, would pass throughsparsely populated areas with fewer safety risks than the North-South pipeline,Bemesderfer said.

Further, El Paso Natural Gas is already working on itsHavasu Expansion Project, which involves a 42-inch pipeline and compressionfacilities, scheduled to be in service in 2020, the proposed decision noted.The company said it could enter into binding contracts with SoCalGas to supplyadditional gas to the Southern System for about $72.3 million per year for upto 800 MDth/d.

"Each of the Transwestern, TransCanada and [El Paso]proposals meets the need for enhanced Southern System reliability at a lowercost and with fewer safety risks than the North-South project,"Bemesderfer wrote, noting that other intervenors also proposed relying onexisting tools, such as tariffs and contract changes.

SoCalGas and SDG&E filed their North-South projectapplication in December 2013, proposing two pipelines — one from Adelanto toMoreno that would cost $331.8 million and one from Moreno to Whitewater thatwould cost $186.1 million — and a compressor station at Adelanto that wouldcost $110.7 million. The companies revised their proposal in November 2014,ditching the Moreno-to-Whitewater line but raising the cost estimates to $484.5million for the Adelanto-to-Moreno pipe and $136.8 million for the compressorstation.

SoCalGas did not immediately respond to requests for commenton the proposed decision. The CPUC commissioners can vote on the administrativelaw judge's proposed decision no sooner than May 12.