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 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 are able "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 Energy Crisis."
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 enforced."
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 capacity."
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.
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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