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PG&E faces 10 pct cut in natgas deliveries from Wed. Tuesday February 6, 9:09 PM EST SAN FRANCISCO, Feb 6 (Reuters) - Pacific Gas and Electric Co. (PCG) warned on Tuesday that the expiration at midnight of a federal order to sell natural gas to the troubled utility will cut off 10 percent of its supplies.

"We've received confirmation from two of our suppliers, one our single largest supplier, that they will stop delivery at midnight tonight," a spokesman for the San Francisco-based PG&E Corp. (PCG) unit said.

He said the suppliers, J. Aron & Co., the commodities division of Goldman Sachs (GS), and Denver-based Western Gas Resources (WGR), were requesting payment in advance for their gas for fear of non-payment by the financially strapped utility.

J. Aron is the single largest gas supplier to PG&E, accounting for about 9 percent of the utility's daily gas needs, while WGR comprises less than 1 percent.

A federal order renewed two weeks ago by the Bush administration requiring gas and power companies to continue to supply California expires at midnight Tuesday.

The administration reiterated on Tuesday it will not extend either order, initially signed in January by the outgoing Clinton Administration.

Last week, the California Public Utilities Commission (CPUC) approved a plan allowing Pacific Gas and Electric -- which has amassed more than $7 billion in wholesale power costs it has not been able to recoup due to the state's retail price cap -- to use its customers' gas bills as collateral to assure gas suppliers they will get paid for shipping to the utility.

Despite that assurance, the two suppliers said they would stop shipments Tuesday night, the spokesman said.

As a result, PG&E will have to increase its use of gas storage reserves to meet the daily gas needs of its 3.8 million gas customers in northern and central California, the spokesman said, adding those supplies could be depleted in about a week.

The spokesman said five other gas suppliers have confirmed they will continue selling gas to the utility after the federal order expires, while 20 to 25 other suppliers have not yet indicated what their plans are.

PG&E has over the past two weeks secured additional gas from some of its usual suppliers in the day-ahead spot market to meet its daily demands but not enough to boost what it has in storage.

The utility has warned it might not be able to meet all of its customers' needs if its deliveries are not increased.

California is in the midst of an energy crisis marked by soaring prices for wholesale electricity and gas, strong demand for power to support a growing economy and population, and tight supplies of electricity caused by a lack of generating capacity.

http://money.iwon.com/jsp/nw/nwdt_rt.jsp?section=news&news_id=reu-n06250136&feed=reu&date=20010206&cat=INDUSTRY

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