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Monday, February 26, 2001 Gas Pipelines: Next Big Issue

There can be no solution to California's crisis unless the fuel for new power plants can be delivered.

As Gov. Gray Davis struggles with the immediate issues of California's electric energy crisis, other problems loom. One is getting enough natural gas into the state to fuel the new power plants he is counting on this year and next. The construction of new gas pipelines is another infrastructure matter that was neglected during the 1990s and must be dealt with now.

At least the governor is making progress in restoring the fiscal health of the state's major utilities, a problem proving more complex and difficult than he seems to have anticipated. One well-placed energy official says "there are a lot of moving pieces coming together," although Pacific Gas & Electric was balking at a proposed rescue plan in which the state would take over the firm's transmission lines. PG&E's reluctance is understandable, but the chief alternative--bankruptcy--is worse. The governor has threatened to seize the PG&E part of the grid if the company refuses to bargain. That's a last resort, obviously. But PG&E should not consider it an idle threat. It's in everyone's interest to keep the utilities out of bankruptcy. Looking down the road, natural gas supply and cost problems are expected to ease as new gas wells are drilled. Gas prices already are sinking. Still, moving the gas into California from Oklahoma and Texas or the Rocky Mountains remains an uncertain proposition in the long term. The five major gas pipelines supplying California from those regions and Canada already are running at full capacity. Experts think that pipeline capacity will have to be increased 10% to fuel the new plants in Davis' plan. California, which produces only about 16% of the gas it uses, needs to do what it can to spur construction of new gas pipelines into the state. The Federal Energy Regulatory Agency, which controls interstate gas shipments, has approved construction of two new pipelines, but it's uncertain whether they will be finished in time to ease California's crunch. Davis and the Bush administration need to look for ways to speed up construction, if that can be achieved without sacrificing environmental protections. There also are bottlenecks in the gas distribution system once the fuel reaches California.

The shortage of pipeline capacity also makes expansion of renewable energy even more attractive in California. This includes power generated by wind, solar, geothermal, small hydro plants and biomass waste. The state made a big push for more renewable energy in the 1970s, but the drive was inhibited by market forces, regulatory roadblocks and reluctance from utilities. Today, renewable sources account for only 12% of the state's electricity, far less than what California could produce at reasonable prices.

Davis and lawmakers are working on a multimillion-dollar program that would include a 50% tax credit for the installation of renewable generation systems that could power large apartment houses and businesses. The plan also offers $50 million in rebates for new small renewable generation systems. Other proposals would benefit homeowners installing solar panels.

One industry official has said the attitude of the utilities in the 1980s was that "real men build big power plants." Today, smart people develop as many sources of power as possible. However, natural gas is still the dominant fuel, and getting it through the door to California is as important as drilling new wells.

http://www.latimes.com/cgi-bin/print.cgi

-- Martin Thompson (mthom1927@aol.com), February 26, 2001