Southern Trails disappointed by CPUC decision

SALT LAKE CITY, Aug. 8, 2001 — Officials from Questar Southern Trails Pipeline Co. today expressed disappointment with the California Public Utility Commission’s (CPUC) Aug. 2, 2001, ruling on Southern California Gas Company’s (SoCal Gas) Residual Load Service (RLS) tariff.

“The CPUC’s proposed new peaking rate, while an improvement over SoCal’s current RLS tariff, still does not level the playing field,” said D.N. Rose, Southern Trails president and CEO. “It punishes customers who want to take partial service from a SoCal competitor, and it will discourage the development of new pipelines inside California.”

Under the CPUC’s proposed new peaking rate, new gas-fired power plants wanting natural gas service from both SoCal Gas and a new competing pipeline will pay a higher rate for SoCal’s service than captive customers taking service entirely from SoCal. In addition, new power plants would be subject to more restrictive balancing services than captive customers and would pay even more for interruptible service than California power plants in other parts of the state.

Rose noted the previous RLS tariff was so punitive that not a single customer has taken service from a competing pipeline since the RLS was enacted in 1995. The new SoCal peaking rate, while not as onerous as the RLS tariff, will likely preserve SoCal’s monopoly in Southern California. “The CPUC’s peaking rate is anti-competitive,” Rose said. “Neither PG&E (Pacific Gas & Electric) nor any interstate pipeline enjoys such protection from competition.”

Questar is seeking entry into the California market with its Southern Trails Pipeline project, which could deliver 120 million cubic feet of natural gas daily to Southern California. Questar purchased the former crude-oil pipeline in November 1998. The existing 16-inch-diameter pipeline runs about 700 miles from New Mexico, through Arizona, and into California, traveling through San Bernardino, Riverside, Orange, and Los Angeles counties to Long Beach. The project received both federal and state certification last year and has completed extensive environmental reviews.

The eastern zone of the Southern Trails Pipeline, which extends from the Four Corners area to the California state line, is fully contracted. Questar expects to have it in service by mid-2002.

Rose indicated that the future of the California section of Southern Trails is uncertain. While not abandoning efforts to put the pipeline into natural gas service, the company will be forced by the unfavorable CPUC decision to consider alternative uses for the California portion, including possible conversion to transport crude oil or other liquid petroleum products.

Questar Southern Trails is a subsidiary of Questar Corp., a $2.5 billion diversified natural gas company headquartered in Salt Lake City. Through subsidiaries, Questar transports natural gas through a 2,000-mile system in Utah, Colorado, New Mexico and Wyoming. The company also serves as the primary natural gas distributor in Utah, offering services similar to those offered by SoCal Gas and PG&E in California.

SOURCE: Questar Southern Trails Pipeline Co.

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