Five Suppliers Agree to Provide Natural Gas

Source: Business Wire Publication date: 2001-02-06

SAN FRANCISCO--(BUSINESS WIRE)--Feb. 6, 2001--Pacific Gas and Electric Company announced today that five of its natural gas suppliers -- BP Energy Company, Texaco Natural Gas Inc., Dynegy Marketing and Trade (all of Houston), Texaco Canada Petroleum Inc. and Dynegy Canada Marketing and Trade (both of Canada) -- have agreed to continue selling gas to the utility as part of an arrangement giving them a security interest in future revenues collected from gas customers.

While the news that these five suppliers will continue gas deliveries provides a reason to be optimistic, these suppliers alone cannot provide enough natural gas to avert severe shortages in the coming days or weeks. Pacific Gas and Electric Company will continue to work with its remaining 20-25 suppliers to persuade them to sign on to the utility's proposal and keep gas flowing to the utility's 3.8 million gas customers in Northern and Central California.

"We're very pleased that several of our suppliers have agreed to keep gas flowing this winter to millions of Californians who rely on natural gas for heat and hot water," said Gordon R. Smith, president and CEO of Pacific Gas and Electric Company. "The energy crisis has made normal business operations very difficult these past few months, so it is rewarding to see the hard work and creativity put into this proposal pay off. If additional suppliers sign on to our proposal in the next few days, we remain hopeful we can avoid what otherwise threatens to be a very serious gas shortage."

The U.S. Department of Energy order that has kept gas flowing since January 19 is set to expire at midnight tonight (February 6). Should any of Pacific Gas and Electric Company's gas suppliers stop delivery, the shortfall would have to be covered by gas in storage, or by whatever other purchases the utility is able to make. If storage gas is depleted, widespread gas curtailments that affect residential and business customers become more likely. The utility currently has approximately nine days' worth of gas in storage, if it were forced to rely mainly on storage gas with only a small amount of supplies flowing into the state.

At this time, two major suppliers have informed Pacific Gas and Electric Company that they will cut off natural gas supplies to California when the federal order expires at midnight. They are J. Aron & Co. (the gas trading arm of New York-based Goldman Sachs) and Western Gas Resources of Denver. These two suppliers combined provide more than 10 percent of the natural gas used by Pacific Gas and Electric Company customers.

The California Public Utilities Commission approved Pacific Gas and Electric Company's proposal to offer gas suppliers a security interest in future gas customer accounts receivable on Jan. 31. The utility had requested the authorization because nearly all of its suppliers had requested special payment arrangements that the utility could not accommodate because of its poor financial condition.

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-- Martin Thompson (mthom1927@aol.com), February 07, 2001