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LADWP Fuel Mix Changing: New Gas Supply, Renewable Deals in Play

The Los Angeles Department of Water and Power (LADWP) is still attempting to lock in both long-term natural gas supply contracts and reserves as a hedge against future volatility in wholesale energy prices at the same time it is lining up more renewable sources of power for its system that enjoys about a 2,000 MW surplus already for peak loads. Completion of nearly half of a 10-year, $1.8 billion re-powering program further changes its future energy mix, a LADWP executive told NGI Wednesday.

A major net result will be a greatly reduced overall requirement for natural gas, but exactly how much lower it will be in future years is still unknown, according to John Schumann, LADWP's director of power systems planning/projects.

"Part of our strategy is that we are hedging some of our gas, so we are looking for gas reserves," said Schumann, noting that one of its objectives is to reduce the city-run utility's exposure to volatile wholesale gas prices. "The negotiations are still ongoing and we haven't finalized anything yet. Our hedging program is moving along, but obtaining reserves and new contracts are still in the negotiations stage."

Last fall, LADWP started the bidding process with about four major potential gas suppliers, looking for long-term supplies up to 120 MMcf/d to be delivered through the now-abandoned California portion of Utah-based Questar Corp.'s Southern Trails converted oil pipeline running from part of New Mexico to the California-Arizona border. And at the same time, LADWP through a public sector joint power financing unit, Southern California Public Power Authority (SCPPA), made a trip through the U.S. oil/gas patch, looking for potential reserves that might be locked up on a collective basis by a group of California munis, including LADWP.

Natural gas requirements longer term are bound to change for LADWP, said Schumann, who thinks calculations have been made internally, but because of the added push in renewables, the now five-year-old integrated resource plan (IRP) is being revised. When the muni gets its new IRP, it will be able to more precisely calculate how much its gas requirements should shrink.

"Right now I really can't give you the amount of savings we anticipate," he said. "Times have changed and we're looking at things a little differently today. We haven't yet set a goal on our gas reductions, but it will come out of how all this fits together."

With the recent completion of the second of eventually four repowerings on LA Basin generation units, both the Haynes (Units #3-4) and Valley generating stations are now 30% more efficient, and they operate within the most stringent air emission requirements, Schumann said. Combined, they represent more than 1,100 MW.

Two other repowering projects are set to be done by 2010 -- Haynes (Units #5-6) and Scattergood, an 800 MW gas-fired plant on the Pacific Coast just south of Los Angeles International Airport.

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