SoCalGas to Provide PG&E with Added Supplies in March

Southern California Gas Co. agreed last week to provide up to 30 MMcf/d to its Northern California gas utility counterpart, Pacific Gas & Electric, as long as unpaid balances never exceed $16.5 million for the supplies. The deal runs through March 31.

PG&E's gas utility had asked the California Public Utilities Commission late in January to order SoCalGas to provide emergency supplies to the San Francisco-based utility's core gas customers, but SoCalGas strongly objected. CPUC hearings were held and a proposed decision is scheduled to be considered March 7 by regulators.

SoCalGas Chairman Ed Guiles said his company hopes to be "part of the solution" to California's energy crisis. "PG&E's problem is not a lack of natural gas; it is a lack of credit," said Guiles. "We are providing the assistance we can, but our priority must be in providing reliable service to the 18 million people we serve, as well as maintaining the financial health of our company."

Guiles said the contract should not adversely impact supplies or costs for any of SoCal's five million customers. SoCalGas, whose credit has not been adversely affected by either the electricity crisis or the wholesale natural gas price spikes this fall and winter, essentially will be a purchasing agent for PG&E's utility. It intends to buy supplies from the Pacific Northwest and have them transported over PG&E's own interstate pipeline system, PG&E Gas Transmission --- Northwest.

But PG&E said it still is not dropping the emergency filing as a result of this deal. A PG&E spokesperson said the company has only about 60% of its projected average daily requirements of 1 Bcf/d assured in contracts, including the new deal with SoCalGas, which is the 14th contract among more than two dozen possible suppliers that provided volumes prior to the utility's creditworthiness becoming an issue. Because of this shortfall and the need for more supplies as backup, PG&E will continue to pursue the emergency order at the CPUC, said PG&E's Staci Homrig.

"We need a lot more back-up," she said, noting that the SoCal deal, "while welcome," is relatively small compared to the company's projected needs in March to serve its core loads.

PG&E in a CPUC Feb. 16 hearing said it had sufficient supplies for the rest of the winter as long as seasonal temperatures do not drop much below historical levels. Earlier in the winter because of creditworthiness problems from the electric side of its business, major gas suppliers were refusing to extend short-term supply without payment in advance. Both federal and state actions were needed to keep adequate supplies flowing to PG&E.

Richard Nemec, Los Angeles

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