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SoCal Edison to Issue Natural Gas RFO for 5-Year Supplies

March 13, 2006
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Facing the stark realities of California's heavily natural gas-dependent power supplies, Southern California Edison Co. Wednesday announced plans to issue a request for offers (RFO) next month for natural gas supply contracts and financial hedge products stretching out almost five years. The Edison International utility said it received a "robust response" to its Dec. 12 request for information from potential suppliers.

In addition to traditional gas supplies, Edison indicated that it will specifically ask for proposals for supplies from new infrastructure, such as liquefied natural gas (LNG) terminals and new pipeline capacity.

In the RFO, Edison said it will seek bids and hedges for its tolling generation agreements, its new Mountainview Power Plant coming online in Redlands, CA east of Los Angeles, qualifying facility contracts, and California Department of Water Resources (DWR) tolling contracts that the utility manages. Bids associated with the DWR deals would be implemented through separate contracts with the state agency that contracted for various long-term supplies during the western energy crisis in 2001.

With its gas requirements "substantial and growing," Edison now is dependent upon the fuel for half of its power supplies, said Pedro Pizarro, senior vice president, power procurement. "We intend to solicit longer contracts [up to 59 months] than are common in today's market to protect our customers from the degree of short-term price volatility seen during 2005."

Edison is following in the footsteps of its neighboring public-sector utility, the Los Angeles Department of Water and Power (LADWP), the nation's largest muni, which last year led a coalition of Southern California public-sector utilities that collectively purchased their own gas reserves in Wyoming. A high-ranking LADWP official earlier this month told NGI the city-run utility is actively looking to line up more gas supplies on a long-term basis. In that regard it is actively working with the American Public Power Association in Washington, DC, to try to get federal clarifying legislation that will allow public-sector utilities to use tax-exempt financing to secure such supplies.

Edison asked potential RFO participants to contact its procurement unit "immediately and begin preparation of enabling and credit agreements." The utility's Supply Management Director Kevin Cini said these agreements will be needed before any awards can be made at the conclusion of the RFO process, which he said the company intends to "process rapidly."

Interested suppliers are encouraged to review the utility's and DWR's current standard enabling agreements and credit support agreements for natural gas products and financial derivatives at Questions about the upcoming RFO can be addressed to via e-mail.

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