Freeing up 27 Bcf of supplies in an idle Southern California Gas Co. underground storage facility this summer could help further reduce natural gas prices in California this summer, the state’s chief energy regulatory agency said Wednesday. It is one of several items on the California Public Utilities Commission agenda for today that are aimed at easing the summer electricity supply and price crisis.

The CPUC also is circulating a draft decision that would approve a recently concluded deal between small qualifying facility (QF) power generators and Southern California Edison Co.

Some actions related to the California governor’s deal with Edison are expected to be taken, but the issue of suspending retail customer choice will not as regulators circulate a draft decision, awaiting further guidance from the state legislature, which is wrestling with language that would reshape so-called “direct access” in the state. (Various state officials in the Treasurer’s Office, Finance Department and Water Resources Department are developing the parameters for future direct access in case the legislature eventually acts on the issue.)

The SoCalGas cushion gas supplies from its shut-down Montebello underground storage field “frees up capacity that will not have associated transportation charges with it because it is already here in California,” CPUC President Loretta Lynch said.

“It should have the effect of bringing down gas prices somewhat in the California market this summer by essentially providing gas that will not have the transportation charge associated with it.”

During a wide-ranging news media briefing, Lynch reiterated her often expressed criticism of El Paso Natural Gas and its affiliates for “gaming” the state’s natural gas market, and thus driving up wholesale costs for both power and gas.

Lynch said she is “very encouraged” by speculation that FERC is reconsidering imposing a 24/7 power price cap, rather than just during emergency power alerts. She is also pleased that the federal regulators reconsidered a CPUC motion in the El Paso Natural Gas border pricing case, too.

However, she was critical of a congressional request to FERC Tuesday for “not going far enough” by covering forward contract pricing, leaving the door open for what she considers “gaming” in the forward markets.

Lynch said there is still a “fundamental problem” with all proposed wholesale price mitigation measures because the capped prices are set too high in her opinion. She criticized FERC for “never requiring the generators” to divulge their natural gas supply contracts, so it could be more precisely determined how much they are paying for the fuel to produce power. She speculated that some of them could have long-term gas contracts at very favorable prices, but instead are applying today’s much higher spot gas prices to their alleged cost of power production.

“The FERC has never required the generators to prove up their gas costs,” said Lynch, noting that she thinks the proposed power mitigation prices assume current spot market costs for fuel, and “that is just too high.”

“I would encourage FERC to find out the facts. If they don’t find out the facts and they assume the most expensive prices for gas, then the most inefficient plants get the benefit. Instead of making assumptions that we know are not true for everyone, you build high costs on top of high costs on top of high costs, so price mitigation becomes no mitigation at all.

“Instead it looks suspiciously like the old (California restructuring) system where the highest price wins.

“We don’t know how much the generators are buying on the spot market, and neither does the FERC because they have never asked. Obviously they need to ask for the facts before they can set a price that all consumers in California are going to have to pay.”

One other step the state regulators are going to take today is provide some interim incentives for natural gas-fired distributed generation this summer as a means to get added power supplies online, and to do what Lynch called “break the back of the generator cartel that is gaming the California market.”

Although she expressed skepticism about FERC’s latest indicators, Lynch said she is “hopeful” there may be more relief coming.

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