INGAA: California tariff crimps gas pipeline industry

Oct. 22, 2001
California state regulators have approved a pipeline tariff that limits competition and discourages the development of new interstate pipelines needed to directly serve California consumers, pipeline industry officials charged last week.

California state regulators have approved a pipeline tariff that limits competition and discourages the development of new interstate pipelines needed to directly serve California consumers, pipeline industry officials charged last week.

The claim came in testimony by the Interstate Natural Gas Association of America to a US House of Representatives subcommittee.

INGAA testimony

INGAA said the California Public Utilities Commission in August approved a "peaking service" tariff on Southern California Gas Co.'s pipeline that discourages comparison shopping. Under the tariff, if an electric power generator wants to take gas service from two pipelines, it will pay a higher rate on SoCalGas's pipeline than a customer that takes gas entirely from SoCalGas, INGAA said.

Last week, San Diego Gas & Electric Co. filed a request with CPUC for the same kind of "peaking service" tariff for its intrastate pipeline.

Regulatory actions such as these will discourage new interstate pipelines from being built in the state, INGAA said.

"INGAA believes that additional pipeline capacity in California is critical," said Gay Friedmann, INGAA senior vice-president of legislative affairs. "Absent additional pipeline capacity, California customers will never get to a truly competitive market and the choice and lower prices that such a market can provide.

"The peaking service discourages the development of interstate pipelines that can directly serve California end-users," Friedmann said.

California's energy woes

Last winter, California experienced natural gas demand by electric generators at unprecedented levels. The demand spike-caused by weather, economic growth, a drought that reduced hydropower generation, and low gas storage levels-meant the natural gas infrastructure system was "severely strained," she said.

Also, California prices diverged from the benchmark Henry Hub price, in part because of the inability of SoCalGas's intrastate pipelines to take away gas delivered by interstate pipelines to the border. The high prices resulted from the premium paid by nonfirm-capacity customers such as power generators to obtain transportation on the intrastate systems.

Because of the shortage of intrastate capacity, SoCalGas is now expanding its intrastate pipeline system by 375 MMcfd.

The assumptions and requirements for the California natural gas market must be reevaluated, the trade association said.