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SoCal Gas May Have To Cut Gas Supply To Pwr Plants-Report

Updated: Wednesday, May 23, 2001 04:24 PM ET Email this article to a friend! Printer-friendly version By Jason Leopold

OF DOW JONES NEWSWIRES

LOS ANGELES (Dow Jones)--Southern California Gas Co., a unit of Sempra Energy (SRE, news, msgs), may have to cut natural gas supply to some power plants this summer to ensure it has an adequate supply in storage to meet demand this winter, according to a draft report on natural gas issues released this week by the state's Energy Commission.

In addition, Sempra unit San Diego Gas & Electric will likely have to curtail natural gas delivery this summer to generators that have fuel switching capabilities because of tight supplies, the report says.

"SoCal gas is at the greatest risk for having to choose between serving electric generators and storing sufficient gas for winter," according to the report.

Demand for natural gas from new and existing power plants will stress the natural gas infrastructure in 2001, according to the report, and California "natural gas utilities will likely be able to just barely satisfy the demand of electric generators during the summer of 2001 and still store enough gas to serve core needs at peak during the winter of 2001-2002."

The report, expected to be presented June 5, at the commission's Electricity and Natural Gas Committee hearing, underscores the likelihood that California's energy crisis will continue for years to come.

In-state production of natural gas from existing wells has been declining over the last decade to about 15% of total state consumption today, according to the report.

But natural gas supplies in North America appear to be sufficient to meet California's demand for the next 50 years, according to the U.S. Geological Survey.

Natural gas prices at the Northern and Southern California border have reached record levels during the past year because demand outstripped supply and suppliers may have manipulated the wholesale market, the commission said.

"An inadequate natural gas infrastructure is a major contributor to high prices for natural gas in California," according to the report. "In addition, market participants may have manipulated prices even higher than justified by existing infrastructure bottlenecks. But it is the inability to rely on competition between gas suppliers that contributed to higher prices in California. The lack of surplus of slack capacity enables interstate pipeline shippers to charge transportation premiums for gas sold in California."

Moreover, a drought throughout the western U.S. is putting additional pressure on natural gas-fired power plants to meet the region's electricity needs because a lack of water cannot fuel hydroelectric power plants.

Interstate gas pipelines and storage facilities of natural gas are strained, "especially in Southern California," creating bottlenecks in delivering supplies from interstate pipelines to consumers and power plants, according to the report.

In order to eliminate the bottlenecks, California needs to support an expansion of the pipelines used by PG&E Corp (PCG, news, msgs) unit Pacific Gas & Electric and SoCal Gas to promote competition.

"The Energy Commission and the (Public Utilities Commission) should undertake a joint evaluation of the design criteria for interstate gas infrastructure, including pipelines and storage facilities, to determine specific projects that would remove bottlenecks in the utilities' gas systems," the report states.

The commission said it plans to monitor pipeline expansion projects to ensure the state's utilities, marketers and generators are securing enough pipeline capacity to meet the state's demand for natural gas.

-By Jason Leopold; Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com

http://quicken.excite.com/investments/news/story/djbn/?story=/news/stories/dj/20010523/BT20010523006320.htm&symbol=PCG

-- Martin Thompson (mthom1927@aol.com), May 23, 2001

Answers

Welcome to the New Millennium, with Y2K Bug embedded system bottlenecks causing a New Era of infrastructure stress, shortage, and tight margins. Will the Y2K Bug "Flood" even peak in 2001, or will the effects continue to cascade on and on for many years to come?

Use and get what you can off this site and the Internet now, while we still can. It wouldn't be surprising to see that go next. There are already signs of "sputtering" clearly evident.

-- Robert Riggs (rxr.999@worldnet.att.net), May 24, 2001.

With the limited pipeline capacity, what will happen when all the new gas-powered generators come on line next year and in 2003? Will they all run at half-capacity because they can't get the gas? I hope we are building new pipelines, too.

-- Margaret J (mjans01@yahoo.com), May 24, 2001.