Federal Energy Regulatory Commission officials Friday were reviewing Sempra Energy's emergency request to reinstate price caps on short-term releases of interstate gas pipeline capacity for service to the California border until March 31, 2001.
In a Thursday filing, Sempra Energy said high-priced capacity charges have helped drive natural gas prices at the California border to $50/Mcf, more than 10-fold during the past year. Art Lawson, a spokesman for Sempra unit San Diego Gas & Electric Co. (SDG&E), said the gas itself costs about $8.50/Mcf and the "rest" is attributable to the cost of buying capacity on the pipelines. He could not say how much firm capacity the company holds on pipelines serving California.
Under FERC Order No. 637, the agency experimentally lifted price caps on secondary market capacity until Sept. 1, 2002, because of concerns the value of pipeline capacity was being unnecessarily restrained by the FERC�s cost-of-service price cap.
A FERC spokeswoman said the agency expected to issue a call for comments on the Sempra petition late Friday or early Monday. It is unclear who would be most affected by a price cap, but analysts say the problem has been exacerbated because there are fewer pipelines serving California than the Midwest and Northeast.
Enron Corp., which owns Transwestern Pipeline Co., had to read the Sempra petition before commenting on it, a spokeswoman said. El Paso Energy Corp., which also serves California, did not respond to requests for comment about the potential effect of the Sempra filing.
SDG&E's FERC filing states that the market for interstate pipeline capacity is showing significant distortions. Edwin Guiles, Sempra�s group president of regulated operations, said in a statement that California has been hit particularly hard because of sky-high pipeline capacity costs to the state's utilities.
The vast majority of the price increase is coming from the increased price for getting gas from the supply basins to the California border, Sempra executives said. And, they said, volatile futures market for natural gas currently point to even sharper price increases later this winter.
About one-third of the power plants in California are natural gas-fired and, with winter demand for heating on the rise, tight gas supplies have worsened the situation.
SDG&E is proposing a capacity price cap that would cut gas prices about 80% to less than $10/Mcf, the company said. The utility has been working to blunt the impact of high natural gas prices, but Guiles said it still cannot account for the high cost of gas delivery to the state border.