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PG&E Utility Asks CPUC for Expedited OK to Buy Gas for Calpine Plants

Noting that it was concerned about reliability of power and natural gas systems in northern California due to Calpine Corp.'s precarious financial situation, Pacific Gas and Electric Co. (PG&E) Wednesday made public two filings last week at the California Public Utilities Commission for authority on a very expedited basis to shore up natural gas supplies for Calpine's critical generation plants that operate under "reliability-must-run" contracts with the state grid operator. PG&E Corp.'s utility originally asked that it get the emergency authority within three business days.

The filings foreshadowed Calpine's voluntary Chapter 11 bankruptcy filing made late Tuesday in a federal bankruptcy court in lower Manhattan in New York City (see related story).

In a motion to the CPUC, the PG&E utility said it was "concerned about Calpine's ability to continue reliable operation of its power plants in Northern California and to secure and deliver the gas supplies [usually carried through the PG&E utility pipeline system] necessary to run them."

Calpine operates some 41 plants in California, including the nation's largest geothermal complex at the Geysers, and most of which were acquired from PG&E's utility in the late 1990s. PG&E voiced concerns about Calpine's ability for delivering and transporting some of the largest volumes of gas on the utility backbone transmission/distribution system.

"PG&E is concerned that Calpine's financial difficulties could lead to reliability issues for the electric grid and the gas system in PG&E's service area, including possible harm to service to both electric and core/non-core natural gas customers now, or later this winter," the utility said in its filing, which was followed up by a second filing requesting that the whole administrative law process be shortened so the regulators can quickly rule on the utility's request for authority to buy and deliver gas as needed for electric and gas system reliability purposes.

In its filing, PG&E said it understood that the CPUC energy division is continuously monitoring what it called "the magnitude of the risks to the electric and gas systems," keeping in close contact with the California Independent System Operator (CAISO).

California's energy policymakers and infrastructure operators last week said they were not worried about the negative impact from Calpine filing for Chapter 11 bankruptcy. They don't expect an adverse impact on electricity reliability in the state, although there could be some economic fallout, energy policymakers were told last week. About one-third of Calpine's 27,000 MW fleet of natural gas-fired and geothermal generating plants is located in California.

Calling Calpine's situation "regrettable," CPUC President Michael Peevey raised the question with state energy officials last week at a joint meeting of the CPUC and California Energy Commission to review the current status of the state's recently revised Energy Action Plan.

As a safeguard, PG&E's utility asked the CPUC for a so-called "assigned commissioner's ruling" giving the utility broad authority to purchase gas as needed and be assured of recovering its costs in retail utility rates.

Meanwhile, Standard & Poor's Ratings Services Wednesday issued a brief statement on Calpine, saying that the Chapter 11 and protection sought by affiliates of Calpine were "anticipated and considered in the stability rating" on Canadian-based Calpine Power Income Fund. Both the company and the Income Fund have had "negative" outlooks assigned for some time.

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