California’s two major energy agencies told a state Senate Utilities and Communications Committee last week (Feb. 10) in Sacramento that additional “energy action” is needed this year to keep the state on its current track of restoring the major energy utilities to full financial strength and increasing the electricity and natural gas systems’ reliability for the future beyond 2006.

Michael Peevey, president of the California Public Utilities Commission (CPUC), and Bob Therkelsen, executive director of the California Energy Commission (CEC), appeared before the committee to give newly mandated annual reports to the legislative energy policy committee. The two agencies are the prime movers in back of a new “energy action plan” outlined last year.

The primary emphasis of the plan is energy efficiency programming, Peevey told Senate committee chairperson, Sen. Debra Bowen, along with steps to increase electricity and gas reliability in terms of infrastructure and supply reserves. Peevey stressed also that the action plan proposes to increase the goals of the state’s mandated renewable portfolio standards (RPS) for private-sector utilities to achieve the 20% level in 2010 rather that the current 2017 target in state law.

Natural gas was given equal emphasis by both the major state energy agency heads, and Peevey stressed the CPUC had just passed a long-delayed settlement on Southern California Gas Co.’s unbundling of its in-state transmission pipeline and underground storage system; PG&E’s utility had begun a second phase of its own unbundling of gas transmission/storage, and the state has now set upon a two-phase effort to re-configure California’s natural gas markets and delivery infrastructure linked to the major interstate pipelines that supply the state from the Southwest, Rockies and western Canada.

(A day later, however, the CPUC delayed action on the implementation of the old SoCal settlement and Commissioner Loretta Lynch proposed abandoning the settlement in lieu of the ongoing new statewide gas restructuring investigation. Sempra Energy’s SoCalGas utility and all the major stakeholders wrote to the CPUC recently urging that the much-delayed implementation be dropped, a SoCalGas manager told an industry conference in Long Beach last Thursday.)

“In 2004, our natural gas outlook rulemaking will make the decisions needed to allow the state’s gas utilities to diversify gas sources and obtain all the supply, storage and pipeline capacity needed for reliable service at competitive prices,” said Peevey, emphasizing that liquefied natural gas (LNG) likely will be one of the new sources in the mix. (He said there were currently nine proposals for terminals that could serve California; Therkelsen later told Sen. Bowen he was aware of only seven proposals.)

“We will be sorting out (in the gas investigation) what combination of supplies and utility contracts best serve ratepayers.”

Noting that there clearly is a “benefit to adding nontraditioinal supplies,” such as liquefied natural gas (LNG) to SoCal’s 3.875 Bcf/d backbone pipeline system and a storage capability that pushes its peak-load throughput to more than 6 Bcf/d, Beth Musich, LNG program manager for the Sempra utility, told the Long Beach conference that the ongoing CPUC gas investigation will address the unbundling of SoCal’s transmission/storage system and the need for a “simple system of firm trade-able capacity rights” flowing from the interstate pipelines to the burner-tip.

“(A trade-able rights system) doesn’t exist for us today,” Musich said. “Right now, who gets into our system is set by the upstream, interstate pipeline. We send the nominations to them, then upstream they confirm who’s gas gets sent.”

Also as part of the so-called OIR (Order Instituting Rulemaking) by the CPUC is the integration of new receipt points into the SoCal pipeline system, and potential LNG receiving terminals at Long Beach Harbor or offshore Ventura County or supplies from North Baja will create these points, she said. “The system will provide our customers with the ability to choose their supply source and keep rates competitive (with more gas-on-gas competition).”

The state Senate’s lead energy policy committee called the informational hearing last Tuesday in Sacramento to get a “2004 Outlook and Report” from the state’s two principal energy agencies. It may not be “interesting, but it will be informative,” said the committee chairperson’s chief staff advisor.

Besides the energy action plan and the PG&E utility bankruptcy deal, issues that the CPUC is wrestling with that may require action by the lawmakers include: (a) electricity direct access, (b) allocation of Department of Water Resources (DWR) power supply costs among the three major private-sector utilities, (c) PG&E utility outage investigations, (d) the CPUC’s response to a three-year-old law (SB 39XX) mandating power plant inspections, and (e) the impact on the CPUC from Gov. Arnold Schwarzenegger’s halt of all new regulations.

On specific questioning from Sen. Bowen, both Peevey and Therkelsen said the new governor’s prohibitions on new regulations is not affecting the overall operations of their respective agencies. Therkelsen said the CEC obtained an exemption for its 2005 building standards from the governor’s regulation moratorium.

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