In the continuing western crusade to manage skyrocketing wholesale natural gas prices, the Chairman of the California Energy Commission (CEC), Joe Desmond, called the state’s supplies and infrastructure adequate for the coming winter, while warning that prices will continue at their current historic high levels through the winter and competition for natural gas will continue to become more intense on a national level. Desmond made these observations as part of a press briefing he called Tuesday in Sacramento.

With California being geographically located at the western end of the nation’s natural gas pipeline grid system and 87% of its gas supplies having to be imported, Desmond said the state is increasingly sensitive to the growing “liquid, national market” for gas. And the state is unwilling to accelerate the regulatory process for siting a liquefied natural gas (LNG) terminal because it might compromise the thoroughness of the ongoing environmental and safety reviews of three current off- and on-shore sites being proposed, he added.

Mainly the Southwestern states are the principal competition to California for new gas supplies because “they have also relied upon gas-fired power generation in the last several years, and this is impacting the interstate price for gas at Topock [on the Arizona-California border] as we’re looking at this,” Desmond said. “So states like Nevada and Arizona that have relied on natural gas-fired generation much like California has [9,908 MW of new generating capacity in the last 10 years — all natural gas-fired] are actively seeking new supplies.

“You’re seeing much the same thing in the other Southwest states, and that is, in fact, what is driving up the gas price. Gas also is flowing in both directions along the California-Mexico border, so we have to think about competing to get gas to flow north into California.”

Desmond’s bottom line was that this winter there will be “sufficient supplies of natural gas, but they are just going to cost more.” Storage levels overall for the state are at the 234 Bcf level, or 90% of where they were at this point last year, running ahead of the five-year average for storage levels, he said.

In a number of visuals used to chart supplies and prices estimated for the future, Desmond showed the projections for price this winter are in the $12 to $14/MMBtu range, with California being at the lower end of the range, and the nation overall on average being quite a bit higher than California. The CEC estimates for translating wholesale natural gas prices into costs for the consumer use the $5/MMBtu gas price as resulting in $11 billion in annual costs; when the price doubles to $10/MMBtu (close to current average wholesale prices), the annual cost to state consumers doubles to $22 billion.

California’s record annual gas bill was set in the crisis year of 2001 when gas costs collectively topped $16 billion, and the CEC estimates that prices this year will result in a similar total greater than $16 billion, after three years in which the costs were below that level for three straight years.

In response to a question, Desmond indicated that the state would not try to “speed up” the review process on three proposed LNG terminal sites — one in the Portland of Long Beach, and the other two offshore Oxnard, CA. “You don’t want to do anything that would compromise the thorough review of the environmental and safety concerns. That has been laid out in existing regulations. There is no need for us to do anything to suggest the need to accelerate and suddenly short-circuit or circumventing an important environmental review.”

Desmond reiterated that his agency took the lead two weeks ago in filing with the Federal Energy Regulatory Commission, outlining a number of safety and security concerns that were voiced collectively and individually by various California agencies.

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