Higher Gas Interruption Priority Sought for Generation
Sempra Energy Chairman and CEO Stephen Baum has called on state
regulators to award electric generation greater priority in the
interruptible queue so its gas supply won't be among the first to
be cut off during extreme cold-spells and in emergency situations.
"The interruptible [procedures], which now traditionally
schedule electric production as one of the lowest priorities, I
think definitely need to be reconsidered given the essential nature
of the commodity," he said last Wednesday at a "summit" on winter
gas prices in Columbus, OH. "...I think regulators ought to
consider [gas] supply to electric generation as a priority just as
important as the core load," especially in western markets.
In "large areas of the West, where winters are relatively mild,
it is probably more important to assure electric supply than it is
to assure even home heating for core [gas] load. And this means
that regulators must catch up with these priorities," Baum noted.
Moreover, with natural gas now enjoying year-round peak status,
state regulators need to ensure that gas distributors' delivery
systems can "not only to accommodate [the] cold-winter needs for
the core, but also [can provide] sufficient delivery capability for
electric generation," he told industry executives and regulators at
the "Governors' Natural Gas Summit: Responding to the Looming
At San Diego Gas and Electric (SDG&E), Sempra's combined gas
and electric utility, this may mean "accelerating pipeline
projects" that were planned in the future for residential service,
"so we can enhance service to electric generation as soon as
possible," Baum said.
"Rules on how [gas] utilities manage the intrastate systems will
also have to be updated so that each participant's responsibilities
for providing reliable supplies are clearly defined and performance
At the federal level, he urged FERC to give greater attention to
capacity-allocation practices involving interstate pipelines and
their affiliated brokers/marketers. "I believe that we've seen...in
California some spiking in prices of interstate transportation
systems because of this relationship in terms of the bidding of
In the residential gas market, Baum said that Sempra Energy's
gas utilities, which also include Southern California Gas, have
been warning customers in southern California that they could face
35% higher gas bills this winter if usage remains the same as last
year, as well as higher electricity bills. He recommended that
utilities be allowed to use some type of "smoothing mechanisms" to
offset spiraling gas prices for residents, similar to levelized
price plans (see related story).
He noted that the electricity crisis in San Diego this summer
"has sounded a warning bell" for the gas industry. "The
consequences of ignoring this warning and allowing this summer's
events to be repeated in natural gas markets [this winter] will be
disastrous. We know now that our gas systems must be made ready to
serve the increasing demands for electric generation; they must be
able to offer generation highest priority for services; and the
natural gas marketplace must be workably competitive..."
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