The California Public Utilities Commission’s (CPUC) approach to restructuring natural gas utility operations in recent years drew praise from the nation’s largest gas distributor, Southern California Gas Co. (SoCalGas), Wednesday at the final session of the two-day LDC Forum — Rockies & West conference in Los Angeles. The praise during a panel discussion on gas buying came from both utility and large end-user perspectives.

“I think the gas cost adjustment mechanism we’ve been operating under [with the CPUC] is just great,” said Jim Harrigan, SoCalGas vice president for gas acquisition. “I know from the shareholders’ perspective that might not always be the case, but narrowly from the long-term perspective of a distribution utility, it allows our 35 people [doing gas buying] to provide good service to our customers.

“The mechanism provides an objective measurement of what we should be doing at any given time [to meet our goal of balancing price and reliability].”

Pacific Gas and Electric Co.’s Laura Scott, manager of gas supply, was more neutral toward the CPUC-sanctioned gas-buying mechanism, saying “it is what it is and influences the way we buy gas. It isn’t about timing the market, it is all about reliability and that way you march forward and it helps assure that you don’t get into speculating.

“If the mechanism isn’t working and the market dynamics have changed, we have found the CPUC is open to making things more reflective of the market.”

All of the utilities — the manager of gas trading for Portland General Electric, Val Yildirok was also on the panel — agreed that they could use more diversity of supplies. That is why they all welcome integrating liquefied natural gas (LNG) imports when they begin showing up in the West next year and the many still undefined proposals for new natural gas pipelines in the West, including a so-called “secret” proposal from El Paso Natural Gas Co. that was mentioned frequently by panelists during the two-day LDC conference.

From a large end-user’s perspective, Peter Finie, manager of energy resources in three western states for asphalt maker Vulcan Materials Co., said his firm buys in three-year contracts through marketers six to eight months ahead of the supplies being needed, and reliability (and flexibility) — more than price — is the key consideration for its load that averages about 100 MMcf monthly.

“We’re probably the worst nightmare for a third-party supplier because in any given month our needs for gas can swing 40% or more from what we contracted for and what we really need at that time,” said Finie, noting that Vulcan can’t make asphalt in damp or wet weather.

“We’re a very hands-on company,” he said. “We keep track of what’s going on in the market at any given time and want to be able to talk to the traders, so we deal with dependable, high-credit-rating [at least double-A] companies that have demonstrated direct ties to the producers.”

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.