Gas pipeline expansion planned to meet growing power need

By Seth Hettena

The Associated Press

May 16th, 2001

SAN DIEGO -- Southern California Gas Co., the nation’s largest gas utility, announced plans Tuesday for a $40 million pipeline expansion to keep pace with the state’s growing demand for electricity and ease the strains on its transmission system.

Analysts say California’s electricity crisis is threatening to exhaust the state’s supplies of natural gas, which fuels most electric generating plants. A drought in the Pacific Northwest has cut hydroelectric power supplies, putting pressure on natural gas-fired plants to make up the shortfall.

Southern California Gas, a unit of San Diego-based Sempra Energy, will build a 32-mile pipeline from near the town of Victorville north through the Mojave Desert to tap into the large Kern-Mojave pipeline. The expansion will add capacity for enough gas to power three 500-megawatt power plants that could provide enough electricity for 1.5 million homes.

Energy boost: Combined with $15 million in improvements to the transmission system announced in March, the expansions will boost Southern California Gas’ capacity by 11 percent.

Both projects are expected to be completed by the end of the year.

Two-thirds of Southern California Gas’ natural gas is sold to power plants and industrial users. The added demand from power plants has helped use up 95 percent of the capacity in the company’s transmission system, up from historic levels of about 75 percent.

While Southern California Gas said it expects to meet its obligations to its 5 million residential and small business metered customers, company spokeswoman Denise King said the expansion "gives a little extra margin, a little space on our system."

"This is kind of an assurance that we’ll be able to provide reliable service to all of our customers as we have in the past," she said.

But Mark Bernstein, an energy analyst with RAND Corp., a think-tank in Santa Monica, said the expansion is "an insurance policy they’ll cash in on."

"It’s to make sure we don’t have a gas crisis like we have an electric crisis," he said.

"If you plan for the average they’ll be just fine," Bernstein said. "But there could be situations weather-wise or if things get worse on the electric side, where they could begin to have supply problems."

Prices: Along with the supply problems, the cost of wholesale gas on the spot market at the California border rose to as much as $14 per thousand cubic feet, nearly three times the price elsewhere. That has in turn kept the price of electricity at high levels.

State regulators have alleged that the El Paso Corp., which controls more than 40 percent of the natural gas capacity entering California, conspired to drive up prices by curtailing supply. The Houston-based company blames the high prices on demand exceeding supply.

The accusations are the subject of hearings this week before the Federal Energy Regulatory Commission.

King declined to address the allegations against El Paso.

"Our focus is to encourage the Federal Energy Regulatory Commission to put temporary caps on natural gas coming across the interstate pipeline to help in the solution toward natural gas prices," she said.

-- PHO (owennos@bigfoot.com), May 16, 2001