fyi
---------------------- Forwarded by Stephanie Miller/Corp/Enron on 04/18/2001 01:14 PM ---------------------------
   
	  From:  Rebecca W Cantrell @ ECT                           04/18/2001 12:53 PM	
		


To:	Stephanie Miller/Corp/Enron@ENRON, Steven P South/HOU/ECT@ECT, Randall L Gay/HOU/ECT@ECT, Patti Sullivan/HOU/ECT@ECT, Phillip K Allen/HOU/ECT@ECT, Kristann Shireman/HOU/EES@EES, Robert Superty/HOU/ECT@ECT, Colleen Sullivan/HOU/ECT@ECT, Donna Greif/HOU/ECT@ECT, Ed McMichael/HOU/ECT@ECT
cc:	Suzanne Calcagno/NA/Enron@Enron 

Subject:	Kern River 637 Segmentation Issue

Report from yesterday's technical conference.  FYI, Kern River originally argued that there is no viable segmentation opportunity on its system because there are currently no gas supply sources available to its shippers between the Utah and Nevada markets to source a segmented transport.  After a technical conference last October, Kern River did file a segmentation proposal, but I'm not sure how much value it would have as a practical matter.  Note the Southwest Gas arguments (summarized in #3 below) for allowing backhauls from California to Las Vegas under a segmented agreement.

---------------------- Forwarded by Rebecca W Cantrell/HOU/ECT on 04/18/2001 12:31 PM ---------------------------


Donna Fulton@ENRON
04/17/2001 12:05 PM
To:	Rebecca W Cantrell/HOU/ECT@ECT, Leslie Lawner/NA/Enron@Enron, Suzanne Calcagno/NA/Enron@Enron
cc:	James D Steffes/NA/Enron@Enron, Christi L Nicolay/HOU/ECT@ECT 
Subject:	Kern River 637 Segmentation Issue

Becky,

I did attend this morning's Kern River technical conference in Docket No. RP00-337 at FERC.  The discussion was only on the segmentation proposal made by Kern River.  They have filed pro forma tariff sheets to allow:
segmenting of firm contracts at any point
segmentation and release
subject to a limitation of MD at any overlapping points
backhaul from supply pooling points or points where gas is physically received
sets out secondary priorities for transportation within the path and outside the path

After Kern River made this pro forma filing, there were two protests by Dynegy and Southwest Gas.  Kern River discussed these protests at this technical conference in attempt to resolve all issues.

1.  Kern River agreed with Dynegy's point that a segmenting shipper should retain primary rights to mainline capacity when using points within the original contract path or even when outside of path but the mainline constraint remains the same as within the path.

However, after determining priorities on mainline capacity, if constraints occur at specific new points in the segmented transaction, then the transaction could be given secondary priority based on the receipt or delivery point capacity.

Indicated Shippers needed to be assured that their capacity to Wheeler would not be diminished due to this new policy.  Kern River responded that this is how they have always treated flex points and that because Wheeler was a constrained point, any segmented transactions that used Wheeler (new) would be secondary to the current rights (not on the basis of mainline but on the basis of the delivery point scheduling).

2.  In response to Southwest's first issue, Kern River also agreed to make changes to provide parity between segmentation for release and segmentation for a shipper's own use of transportation.  If a shipper segments a contract, it can get additional primary receipt or delivery point capacity within the path if it is available from the pipeline.

It was also noted that a shipper can segment a contract that goes from A to C into two transactions - A to B and then a backhaul from C to B.  In doing this, since there is no overlapping of mainline capacity, both transactions can be at the original MDQ.  The result could be double the MDQ at the new delivery point B.  This seems very flexible of Kern River and perhaps more than many other pipelines currently are willing to offer.  

3.  The last issue raised by Southwest was the controversial one and was not resolved at today's technical conference.  Southwest wants to use its firm transportation contract on Kern River through segmenting to backhaul from Wheeler Ridge delivery point or from PG&E delivery point to Las Vegas.  Kern River currently will provide this kind of service only on a IT basis - a separate service to Southwest.  They claim that this cannot be provided on a firm basis.  Southwest states that this is displacement service and barring insufficient deliveries at Wheeler or PG&E (very unlikely, according to Southwest), could be provided under their firm contract.  They are willing to take the risk that the capacity would not be available if Kern does not have enough forward haul to Wheeler or PG&E.

Indicated Shippers claimed that this is similar to a service provided by Transwestern; however Transwestern offered this as a pipeline firm service.  Kern River claims that it does not and cannot offer this backhaul as a firm service.  Kern River also argued that per GISB once gas is scheduled on a firm contract to a secondary point that it is considered firm.  IT can be bumped intraday and this backhaul service may be bumped.

Mirant also supported Southwest on this issue because they know of some power plants in the Las Vegas area being built that could use this kind of service.

Kern River maintained that this service is not required by Order No. 637.

Kern River will file changes to the pro forma tariff by May 15.  Comments by the parties are due June 1 and Kern River can file in reply by June 11.  Comments should be emailed to the parties.