Using authority it was granted in recent years, the Los Angeles Department of Water and Power (LADWP) is in the latter stages of year-long negotiations for “pre-paid” natural gas supplies and, in some cases, purchase of gas reserves, an official with the city-run utility told NGI on Wednesday.

Deals could be wrapped up in the next two months, said the LADWP official. At the same time, the nation’s largest municipal utility also has been talking with all the major proposed liquefied natural gas (LNG) project sponsors in the West.

“We’re in the final negotiations on some pre-paid supplies, and we’re in preliminary activities involving the purchase of gas reserves,” the official said. The gas reserves are being pursued by a group of public sector utilities concentrated in Southern California, but also including a few in the northern half of the state and southern Nevada.

“The time is working out a little better in our favor as (wholesale natural gas) prices have decreased pretty dramatically in the last six weeks. It looks pretty good for gas supply deals, and the timing for closing a couple of deals is real close.”

LADWP continues discussions with “most all” of the LNG project proponents, the official said, adding that the municipal utility would like to do a deal with a supplier that has domestic gas reserves that can be used as a back up in case there are interruptions of the foreign-based LNG supplies.

“Where we consider greater value is when the LNG source has additional reserves (domestically) with which it can back up the (foreign) LNG supplies with gas from the Rockies or other specific U.S. basins in the West,” the official said. Examples would be what Shell can provide through its Coral gas marketing unit, or what ChevronTexaco can provide, the LADWP source said.

LADWP currently has a long-term gas supply deal with a branch of Duke Energy calling for 30 MMcf/d through 2007, and it has various hedges in place that cover 65% to 70% of its natural gas needs through 2008-09, the LADWP official said.

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