NGI The Weekly Gas Market Report
Sempra Energy Chairman and CEO Stephen Baum has called on stateregulators to award electric generation greater priority in theinterruptible queue so its gas supply won’t be among the first tobe cut during extreme cold-spells and in emergency situations.
“The interruptible [procedures], which now traditionallyschedule electric production as one of the lowest priorities, Ithink definitely need to be reconsidered given the essential natureof the commodity,” he said last Wednesday at a “summit” on wintergas prices in Columbus, OH. “…I think regulators ought toconsider [gas] supply to electric generation as a priority just asimportant as the core load,” especially in western markets.
In “large areas of the West, where winters are relatively mild,it is probably more important to assure electric supply than it isto assure even home heating for core [gas] load. And this meansthat regulators must catch up with these priorities,” Baum noted.
Moreover, with natural gas now enjoying year-round peak status,state regulators need to ensure that gas distributors’ deliverysystems are able “not only to accommodate [the] cold-winter needsfor the core, but also [can provide] sufficient delivery capabilityfor electric generation,” he told industry executives andregulators at the “Governors’ Natural Gas Summit: Responding to theLooming Energy Crisis.”
At San Diego Gas and Electric (SDG&E), Sempra’s combined gasand electric utility, this may mean “accelerating pipelineprojects” that were planned in the future for residential service,”so we can enhance service to electric generation as soon aspossible,” Baum said.
“Rules on how [gas] utilities manage the intrastate systems willalso have to be updated so that each participant’s responsibilitiesfor providing reliable supplies are clearly defined and performanceenforced.”
At the federal level, he urged FERC to give greater attention tocapacity-allocation practices involving interstate pipelines andtheir affiliated brokers/marketers. “I believe that we’ve seen…inCalifornia some spiking in prices of interstate transportationsystems because of this relationship in terms of the bidding ofcapacity.”
In the residential gas market, Baum said that Sempra Energy’sgas utilities, which also include Southern California Gas, havebeen warning customers in southern California that they could face35% higher gas bills this winter if usage remains the same as lastyear, as well as higher electricity bills. He recommended thatutilities be allowed to use some type of “smoothing mechanisms” tooffset spiraling gas prices for residents, similar to levelizedprice plans.
He noted that the electricity crisis in San Diego this summer”has sounded a warning bell” for the gas industry. “Theconsequences of ignoring this warning and allowing this summer’sevents to be repeated in natural gas markets [this winter] will bedisastrous. We know now that our gas systems must be made ready toserve the increasing demands for electric generation; they must beable to offer generation highest priority for services; and thenatural gas marketplace must be workably competitive…”
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