PG&E Finalizes UDS Deal, Aiming for Others
While it came late to the national marketing party PG&E Corp.
is not sparing the horses and it has racked up some impressive
gains in its ongoing effort to create a national presence, reaching
the top of the list in natural gas trading volumes and recently
signing one of the largest agreements to supply multiple energy
"We believe that a good portion of the future of customer
strategies in the energy business will be centered on an integrated
services model," Grant Farris, PG&E's senior vice president for
alliance management said recently. Farris is heading the company's
efforts to create more energy alliances that go beyond just
commodity buying or demand-side management programs.
PG&E has one of the best illustrations of the integrated
model in the the $2 billion, seven-year agreement signed in July 29
with Ultramar Diamond Shamrock (UDS), one of the largest
independent petroleum refiners and convenience merchandisers in
North America. The UDS alliance is probably the most balanced
agreement between electric and natural gas services that PG&E
has inked so far. "I have no doubt that we will be announcing more
of these alliances later this year," said Farris.
Through major acquisitions in 1996, PG&E has substantial
natural gas operations in Texas, including trading, pipelines,
processing and gas supplies. Like many other large industrial
operations, the San Antonio-based UDS is very energy-intensive in
its operations, but not necessarily sophisticated in how to manage
its extensive use of energy, Farris said. Thus, PG&E is expected
to change out processes and equipment, develop cogeneration and
generally upgrade the UDS operations from an energy standpoint.
Some of its solutions, such as developing cogeneration or changing
out electric motors on petroleum pipelines, will be an opportunity
for PG&E to use its gas buying, processing, transportation and
storage operations to serve UDS. All this is expected to save UDS
20% annually on its energy bill.
Farris noted that all of the holding company's nonutility
companies will be involved in this alliance, meaning U.S.
Generating Co., the power plant developer/owner, and PG&E Gas
Transmission may link up with parts of UDS's energy operations,
along with PG&E Energy Trading and PG&E Energy Services. "We
feel one of the things we really bring is the expertise in energy
management," Farris said. "At the end of the day, every nickel we
find that helps them cut their costs goes right to their earnings."
Specifically, under the alliance PG&E's nonutility companies