Continuing low wholesale natural gas prices are not translating into expansion of San Diego-based Sempra Energy’s two utilities’ natural gas distribution pipeline systems. Other factors could be stimulating growth, but the commodity price isn’t, a Sempra spokesman told NGI.
While gas utilities elsewhere are feeling more of a bump in distribution because of low prices (see Daily GPI, Jan. 4), Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co. (SDG&E) are seeing distribution system growth more tied to population/economic growth, with economic growth “quite slow,” said the spokesperson.
Accelerating capital construction costs also are dampening enthusiasm for distribution expansions. What gets charged to the customer/builder in this case can be complicated, too, which influences distribution growth. “Such cost increases are actually accelerating, which is a disincentive for potential new customer hookups, despite the low commodity cost of gas,” the spokesperson said.
The focus nowadays for distribution systems, as well as transmission pipelines, is on integrity and safety. The utilities “are complying with new regulations and using new technologies to provide safe and reliable gas service as part of a continuous improvement process,” the spokesperson said.
The two operations connect more than 6 million meters, which combined is the largest in the nation. Management is emphasizing ongoing work to implement best practices and voluntary actions outlined in the American Gas Association’s (AGA) document on enhancing safety. The AGA’s voluntary actions are geared to improve safety in constructing, operating and maintaining gas pipeline systems. Post the San Bruno, CA, pipeline explosion in 2010, many mandatory rules and programs have been implemented by state and federal regulators (see Daily GPI, June 25, 2012).
The utilities use the California Gas Report as a guide. The mid-2012 report estimated a “modest” rate of decline in statewide gas demand, averaging about 0.25% annually from now through 2030. Apart of the net decline estimates are projected annual growth in gas demand for natural gas vehicles, enhanced oil recovery and wholesale markets.
“Aggressive energy efficiency programs are expected to make a significant impact in managing growth in the residential, commercial and industrial markets,” the report stated.
More recently, the California Energy Commission’s (CEC) recent natural gas outlook in its updated Integrated Energy Policy Report (IEPR) cited potential increases in national gas demand due to coal-to-gas switching and California’s greater reliance on gas-fired generation to smooth out more reliance on renewable sources such as wind and solar. Those renewable sources hold “high significance” to the state’s energy planners.
There is also the issue of added transmission and distribution pipeline capacity as a result of stepped up state pipeline safety requirements. California’s growing dependence on natural gas — 90% of which is imported — “makes it essential for California to keep abreast of trends in natural gas markets at the state, national and global levels,” said the CEC report, which was published last October.
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