Power should be gas supply priority, Sempra chairman argues

Higher natural gas prices helped touch off the crisis in electricity suffered by consumers and companies in southern California, Sempra Energy Chairman Stephen Baum said Wednesday at the Governor�s Natural Gas Summit. Gas use this summer surpassed the winter peak for the first time ever, Baum said. He appealed for changes in rules that set a low priority on serving power plants with gas in times of crisis.


Ann de Rouffignac
OGJ Online

COLUMBUS, OHIO�Higher natural gas prices helped touch off the crisis in electricity suffered by consumers and companies in southern California, Sempra Energy Chairman Stephen Baum said Wednesday at the Governor�s Natural Gas Summit sponsored by the Interstate Oil & Gas Compact Commission (IOGCC).

Gas use this summer surpassed the winter peak for the first time ever, Baum said. He appealed for changes in rules that set a low priority on serving power plants with gas in times of crisis.

Baum admitted that this past summer has been �agonizing� for Sempra unit San Diego Gas & Electric Co.

What's more the fallout from the high natural gas prices and short supply could continue into this winter in California, Baum said.

Sempra will have a shortfall of $600 million in collections from electricity consumers through 2002 because of the price cap imposed by regulators in California. The rate cap on retail electricity prices doesn�t solve the fundamental wholesale market issue which Baum said is at the heart of the problem. Instead, he said, smoothing out the charges is a better way to help consumers deal with the volatility of the market that hit them suddenly.

He warned the electricity crisis could continue into the winter, if there is a natural gas supply problem. Residential consumers have first call on natural gas for heating, while supplying electric generation is the lowest priority in times of crisis, he said.

�The rules require that service to electric generators be suspended when residential supply is threatened,� Baum said. He argued electric generation deserves a higher priority than it presently receives in determining who will get gas if supply is short.

�Electricity is a more fundamental requirement than natural gas,� Baum said. �It�s more important to insure electricity supply than natural gas.�

Year round gas demand in California is also contributing to gas supply worries. Price pressure is up now even at a time when it should be easing for the electricity generation industry. He noted higher electric bills will continue through the winter because rising natural gas prices are driving up generating costs.

Baum also warned fuel switching is not much of an option should there be a supply crunch. Recently, the California Independent System Operator (ISO) asked some power plants to switch to fuel oil. Public outcry stopped the switch.

California's electricity supply could also be threatened if US gas exports to Mexico were interrupted, Baum said. Mexican power plants ship electricity back across the border into southern California.

More in Pipelines & Transportation