In a message aimed indirectly at California regulators, Sempra Energy senior officials told financial analysts Thursday that the current statewide natural gas market restructuring proceeding could end up lower costs for retail customers if the regulators opt for new transportation capacity from North Baja and the Rockies.

New capacity with a $200-$300 million price tag is part of the proposed action Sempra’s utilities have recommended in the ongoing proceeding before the California Public Utilities Commission (CPUC).

Sempra said what it considers “the right strategy” — verified by a third-party, Cambridge Energy Associates — is to increase diversity of supplies in the heavily gas-dependent state by getting more from the Rocky Mountain region and potentially liquefied natural gas (LNG) coming into its utility pipeline transmission system covering the southern half of the state.

“We can provide the ability to reduce total cost to our customers — both core and noncore — and we want them to have a diversity of entrants into our system,” said Edwin Guiles, the CEO of Sempra’s two major utilities, San Diego Gas and Electric Co. and Southern California Gas Co. “We think LNG will play a key part, although we don’t know which specific projects will get built.”

Guiles said for the distribution utility business the need for new capacity equates to a “$200-$300 million investment opportunity” in transmission, possible additional compression, and other things depending where the need is in our system (San Diego or Los Angeles areas).”

He emphasized that if “simple displacement” is involved in opening up new supply areas, then investment in added infrastructure is in the under-$300 million range, but if it is incremental supplies longer coming into the SoCalGas-SDG&E system, then added transmission infrastructure may be needed, too.

Regarding the utility infrastructure upgrades tied to various LNG terminal scenarios, Sempra CEO Steve Baum said the utility companies and the merchant units in Sempra’s global businesses cannot talk to one another, given the strict rules regarding affiliate transactions.

“There can’t be any affiliate interaction,” Baum said. “So the utility must plan for its customers on its best estimates of what is right for that business and makes application to the California Public Utilities Commission on that basis. This may not be very coordinated from a corporate perspective, but it is what is required.

“So what we have tried to do as a corporation is get the attention of the governor, of the legislature and of the CPUC regarding this issue of natural gas entering the southwest of the United States, and I’ve said several times that California needs to think on a real current basis about the opportunity LNG presents.

“There is a lot of suspicion that somehow the utilities in California are simply the instrument of Sempra’s larger plan to make money in the LNG business. I can tell you, that is not the case. If California is able to receive significant quantities of LNG, theoretically the molecules coming in may have to go to Arizona and displace gas and have to come around the interstate system into California, with the end result that customers would pay higher transportation rates.”

The Sempra strategy is to have a “significant” expanded pipe at the U.S.-Mexico border in North Baja to bring LNG directly into the state, saving a lot in transportation charges, according to the company’s argument.

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