SoCalGas says Edison's market power allegations are without basis, an attempt to crush competition

Business Wire, April 7, 1997

LOS ANGELES--(BUSINESS WIRE)--April 7, 1997--

Edison's FERC complaint designed to harass SoCalGas as part of a

massive effort to defeat the proposed Pacific Enterprises-Enova

Corp. merger, SoCalGas charges

Southern California Gas Co. (SoCalGas) Monday strongly urged federal regulators to reject and deny Southern California Edison's complaint against SoCalGas over interstate pipeline capacity.

SoCalGas said Edison's allegations, filed last month at the Federal Energy Regulatory Commission (FERC), are designed to derail the proposed Pacific Enterprises-Enova Corp. merger and to eliminate any possible competition before electric industry restructuring is launched in California.

Edison's complaint that SoCalGas has abused its market power over capacity is "totally without merit," said Fred John, senior vice president of Pacific Enterprises, the parent company of SoCalGas. In its response filed Monday at the FERC, SoCalGas further stated that Edison failed to cite any specific violations of any FERC orders or regulations in its complaint because no such violations have occurred.

"It has been clear to most observers, including the business press, that Edison is attacking partnerships that pose a threat to their dominant position in the Southern California electric market," John said. "This has been true in the proposed partnership of Duke/Louis Dreyfus with the Los Angeles Department of Water and Power, and in our merger with Enova."

Among other allegations, Edison asserts that SoCalGas' use of "minimum bid" procedures withdraws capacity from the interstate market that would otherwise be sold at a lower price.

SoCalGas responded that it does not use "minimum bid" procedures. Rather, the company makes an initial open offer at the beginning of each month, which is a starting point for setting the sales terms for capacity that it wishes to release. In fact, SoCalGas said it has regularly sold capacity at above, equal to and below the open offer rate, with more than 70 percent of its capacity releases in 1995-96 sold at below the open offer rate.

Despite allegations that it refused to negotiate prices for capacity release, SoCalGas said it has regularly sold capacity to Edison at less than the initial open offer, and that its contracts with Edison bear this out.

SoCalGas emphatically states that the current process is not "improper" as Edison has charged, but rather is in accordance with FERC Order No. 636 requiring that terms and conditions be noticed in an offer to release or purchase capacity. Indeed, it has been used by SoCalGas since 1992 without complaint from Edison until now.

SoCalGas also rebutted the charge that it fails to post use of its own capacity rights for its core market above the level reserved for core customers. In fact, SoCalGas voluntarily posts all core capacity transactions, even though it is not obligated to do so by any FERC regulations or orders, the filing states.

"Our posting of capacity gives the non-core the opportunity to bid for this capacity, but Edison has never chosen to bid for it," John said. "We offer capacity under the same price and take conditions to other non-core customers, including Edison, who also has never taken advantage of this.

"We have been posting since May 1996, and since then Edison has never been denied the capacity that they have sought. In light of this, it's clear to see that there is absolutely no abuse of market power that has occurred or that can occur," John added.

On the subject of affiliate transactions, SoCalGas told the FERC that it has done more than any other energy company to protect against affiliate abuse, adding that none of Edison's allegations in this area are specific, or even real. SoCalGas currently provides a complete report of each affiliate transaction to the California Public Utilities Commission (CPUC).

At the same time, Pacific Enterprises and Enova have proposed post-merger affiliate transaction rules that are stronger than Edison has with its affiliates, like Mission Energy, the filing states. The filing further states that the PE-Enova companies "have nothing to hide, do not oppose disclosure of affiliate transactions to regulators, and have done nothing wrong or questionable."

SoCalGas' filing asks the FERC to dismiss the Edison case as being without merit, since no FERC or CPUC rules have been violated.

CONTACT: Southern California Gas Co., Los Angeles

Jeri Love, 213/244-3030