The California Public Utilities Commission (CPUC) offeredPacific Gas and Electric half a loaf again last week, extendingfrom three months to six months its authorization for the utilityto sign gas supply contracts securitized by gas customer revenue.Meanwhile, not satisfied with their handiwork on the electric side,California politicians said they might have to get into gaspurchasing to shore up new generation requirements.

The utility had asked for authorization for the securitizationprogram for up to a year, as it continued to juggle a precariousgas supply situation precipitated in part by its eroded finances. APG&E gas utility spokesperson, Staci Homrig, said the utilityhopes even the modest extension will allow more suppliers to signcontract extensions. As of Friday, PG&E had 11 suppliersrepresenting about 40% of its supply requirements signed on to atleast the 90-day version of the new contracts.It had enoughsupplies to last through this month, with storage down to 5.8 Bcfof available working gas owned by core customers, she said. Thereis another 30 Bcf of “non-cycling” gasthat has to be kept in thestorage field, plus a couple Bcf of gas owned by non-core or coreaggregate customers.

ÿThe CPUC first took action on the securitization plan Jan. 31,allowing PG&E’s utility to offer suppliers in effect, a lien onthe utility’s retail customers bills which cover the full cost ofthe wholesale gas prices, as an incentive for the suppliers extendcontracts with PG&E’s gas utility operations (see NGI, Feb. 5& 12).

The tight natural gas supplies to the state could get tighterthis summer since most of the added 5,000 MW of generation capacitythe governor has promised this year will be natural gas-fired. Theteam of industry and state officials leading the effort to addgeneration acknowledged that could mean the state would be gettinginto the fuel supply business.

“We recognize there are going to be additional demands placed onthe state’s gas supplies, plus knowing we have run into problemswith gas deliveries to existing plants, clearly means that we aregoing to have to do something to make sure we understand what theproblems are with gas. But I can’t rule out the state gettinginvolved in natural gas purchases until we have completed theplanning for this additional generation,” said Larry Hamlin, aSouthern California Edison generation executive on loan to thestate to head up bringing new generation plants online. “We knowthat the gas situation is one of the areas which we are going tohave to give high priority. The California Energy Commission, withwhich I am working on this assignment, has indicated that therehave to be ways to increase storage or do something to try tofacilitate the delivery of gas for peaking requirements.

“We know it is a problem and are going to try to designsomething to address those issues.” Hamlin noted that some 1,300 MWof new peaking capacity is included in the total, which is made upof 37 separate units spread around the transmission grid, most ofwhich have not been built as yet. Another 600 MW involves units nowoffline that are old and will be re-started, such as units at AESCorp.’s Huntington Beach power plant.

The governor’s generation team admitted that as many as 4,000 MWof the goal, or about 80%, was in the pipeline or in existing butidle plants, before the governor announced his latest push foradded generation. For example, 1,300 MW will come from three newplants that have been under construction for the past 18 months,with a targeted start some time in the mid part of the year.

Making the added capacity even more critical, Hamlin confirmed,is the expectation that there will be less power to import from thePacific Northwest this summer. It was supplies from that regionlast summer dropping considerably from 1999 that caused the supplycrunch that helped create the wholesale price spike throughout theWest.

Richard Nemec, Los Angeles

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