SOCAL says California pipeline capacity adequate

Contradicting critics, Southern California Gas Co. (SOCAL) insists it has sufficient capacity to meet demand for gas this summer on its intrastate pipeline system. But bottlenecks at the border almost insure certain customers, including electric generators, will pay higher gas prices this summer, said Norman Pederson, attorney with Jones, Day, Reavis & Pogue of Los Angeles.


By Ann de Rouffignac
OGJ Online Staff

HOUSTON, May 30 -- Contradicting critics, Southern California Gas Co. (SOCAL) insists it has sufficient capacity to meet demand for gas this summer on its intrastate pipeline system.

"SOCAL gas has adequate transmission capacity to meet the current needs of our customers," said Lad Lorenz, official with SOCAL, Los Angeles, at a recent Federal Energy Regulatory Commission conference. "No curtailments have occurred in the last 10 years. None are expected for the summer or next winter."

At the same conference, California state regulators told FERC they expected curtailments on the SOCAL system during peak usage this summer.

Lorenz said the pipeline operates with 15-20% excess capacity during normal usage. But he conceded during peak demand the pipeline system runs full. "The market is saying that excess capacity is good. But who will pay for it?" said Lorenz.

Lorenz cautioned that large expansions to increase capacity could run into trouble in years to come. He predicted gas demand in California will fall in 2004-2005. More efficient newer electric generating plants are replacing the older units which will "unload the system," he said.

Moreover, the drought affecting the Pacific Northwest and California hydroelectric power output will also end. With hydropower in short supply, demand now for gas-fired generation is higher than normal.

"We are proceeding with the expansions anyway," he said.

Earlier this year, the company reported plants to expand capacity after critics charged constraints on the system are partly responsible for the fact gas prices are higher in southern California than elsewhere in the US.

Expansions, including 200 MMcfd at Kramer Junction, 50 MMcfd at North Needles, 85 MMcfd at Wheeler Ridge, and 40 MMcfd on Line 85 in the Northwest are projected to add 475 MMcfd of firm transmission capacity to the system.

Noncore customers, including industrials and power generators, have access to 200 MMcfd of existing interruptible capacity. But critics say interruptible capacity doesn't guarantee generators and other noncore customers in southern California have access to a steady economical supply of gas on a constrained capacity pipeline.

California rules prohibit sale of firm capacity at the border to noncore customers. Without access to firm capacity generators have more difficulty arranging for gas supply from the producing basins, said Mark Pocta of the Office of Ratepayer Advocates.

"Producers won't sell the gas because the pipeline (SOCAL) can't guarantee take-away," he said.

Bottlenecks at the border contribute to the higher prices paid by noncore customers, said Norman Pederson, attorney with Jones, Day, Reavis & Pogue of Los Angeles.

"We may or may not get by without curtailments this summer. But there will be tremendous mark-ups in price between the basins and the border," he said.

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