Sempra Energy Thursday came out swinging in response to a challenge of its LNG plans by two consumer groups, The Utility Reform Network (TURN) and Rayepayers for Affordable Clean Energy (RACE). The groups are disputing a California Public Utilities Commission decision to allow Sempra’s two Southern California utilities to establish a joint receipt point for liquefied natural gas (LNG) or other supplies flowing north from Mexico (see NGI, Sept. 6, Sept. 13).

TURN and RACE have asked state regulators to reconsider a Sept. 2 decision allowing natural gas from LNG shipments to flow into California from Mexico at the Sempra utility operated receipt point. They claim the CPUC action results in retail utility natural gas ratepayers “subsidizing” Sempra’s corporate push to import LNG.

A Sempra spokesperson said the utilities will be filing written responses to the CPUC later this month, but in the meantime, the company strongly objects to allegations that utility ratepayers will be asked to “subsidize” infrastructure development along the border with Mexico for gas imports from the proposed 1 Bcf/d LNG terminal, Energy Costa Azul LNG, which is being developed by Shell and Sempra a few miles north of Ensenada, Baja California Norte. The $610 million terminal has been approved by Mexican regulators and is expected to be in service in 2007 (see related story).

In a 20-page request to the CPUC to rehear the matter, the consumer groups argued that utility ratepayers will be subsidizing the LNG development because the joint receipt point for gas entering San Diego will effectively give large end-users on the Southern California Gas Co. system a free ride across the San Diego Gas and Electric Co. gas transmission pipeline system in San Diego County.

The groups contend that a “broad spectrum” of Californians opposes the North Baja project. However, Sempra already has obtained all of the permits necessary to move forward with the LNG terminal and has signed several LNG supply agreements, including a 20-year deal with Shell on Thursday and a separate 20-year deal with BP Indonesia on Tuesday (see related story in this edition and see Daily GPI, Oct. 13).

The Sempra spokesperson said the consumer groups’ filing is mainly procedural, and in any event, the CPUC decision on the joint SoCalGas-SDG&E receipt point did not specify any rate changes. The utilities will file in December for any rate changes they think the CPUC needs to make.

“The CPUC action did not allow a competitive advantage to LNG projects in Mexico exclusively,” said the Sempra spokesperson. “It helps assure access for California consumers to more competitive gas supplies (which, in turn, is expected to lower wholesale gas costs). The CPUC decision said it would provide operating efficiencies (in the state’s gas transmission system), and to the extent that benefits outweigh the costs, those benefits will help lower retail utility natural gas rates.”

“This gas hasn’t arrived here yet, but it already stinks,” said Marcel Hawiger, a TURN attorney. “The CPUC’s proposal not only grants favored treatment to Sempra LNG, it fails to follow the CPUC’s own procedures for granting such special treatment.

“The (CPUC) simply attempted to do ‘too much, too fast’, without adequate regard for statutory and due process requirements,” Hawiger wrote in his filing, asking for a rehearing and rescinding “the portions of the decision that establish Otay Mesa as a joint receipt point for both SDG&E and SoCalGas and set ‘interim rates’ for the use of that receipt point.”

It is the creation of the so-called “interim rates” that the consumer groups argue establishes the subsidy by the utility ratepayers for the expected LNG supplies.

Sempra’s spokesperson said the CPUC specified that any costs related to the joint receipt point’s acceptance of LNG supplies would be covered by the LNG developers — not the utility ratepayers. And to the extent that the new supplies helped bring down overall gas costs to ratepayers as a net benefit, the developers would share some of those benefits in the form of lower future charges for getting into the two utilities’ joint, but separate pipeline systems.

Nevertheless, TURN fired a broader criticism at Sempra by blaming the San Diego-based utility holding company at least partially for the state’s continued “high electricity bill.” The TURN attorney alleged Sempra took advantage of the 2000-2001 energy crisis to lock in a lucrative long-term power supply contract with the California Department of Water Resources (DWR).

Hawiger contended that the CPUC has ignored the state Energy Action Plan’s stated preference for energy efficiency and increased renewable energy resources first before the pursuit of major LNG imports, which the consumer attorney alleged only subjects the region to “greater safety and security threats.”

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