Gas Weathervane Twisting in the Wind

By Published On: April 10, 2004

Despite the strong political push to increase natural gas use, deals with Southern California Gas remain in limbo because of a lack of clear regulatory signals. The problem has been further exacerbated by the California Public Utilities Commission’s decision last week to keep alive what some stakeholders call an “outdated” settlement regulating transport and storage of natural gas on SoCal’s system. “It is hard to tell where we go from here,” said Norman Pedersen, an attorney for the Southern California Generation Coalition. Others warn that the resulting confusion hurts the market and the economy. “The biggest impact is that [liquefied natural gas developers] won’t build facilities,” said Steven Greenberg, Distributed Energy Systems principle. LNG developers and shippers don’t have contracts because of a lack of regulatory certainty, he added. The imported reconstituted gas is expected to supply about one-quarter of future gas needs, according to a California Energy Commission report. There are eight major gas proceedings at the CPUC, and no one knows how critical issues?including access to pipelines, storage issues, and rates?will be resolved. The SoCal settlement is seen as further muddying the waters because it was designed for a market that no longer exists, is unnecessarily complicated, and is a solution in search of a problem, according to critics. “Why hang on to history? It only adds confusion,” gas consultant Matt Brady said. On April 1, a majority of the CPUC members, with Geoffrey Brown in the lead, approved the December 2001 gas settlement, although the settlement faced industry-wide opposition (see <i>Circuit,</i> April 2, 2004). The Utility Reform Network’s attorney Marcel Hawiger said keeping the agreement in play “was a huge distraction from the real problem in the natural gas system.” It was also driven by former CPUC president Dick Bilas’s “ideology of unbundling of the system” and designed for power plants with dual fuel capacity, which no longer exist. Setting clear ground rules for the complex intra-interstate system “should be driven by the reality of the market,” he added.

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