Warnings that heating up my cold South Pasadena house in the mornings will cost 70 percent more this winter highlight the need to import liquefied natural gas in a hurry, say many market analysts. However, LNG may not bring lower prices. That's because almost immediately upon opening, LNG terminal operators will become such large suppliers of gas to California that they will gain inordinate market power. Only two terminals are expected to be built-or maybe three, counting one that Sempra Energy is constructing in Baja California. Regulators dread that terminal operators will be able to withhold gas from the market to force prices higher. It's a real fear grounded in the experience of the 2000-01 state energy crisis. What's worse, however, is that regulators will be able to do little but sit on their hands. The fact is that natural gas has long been deregulated. Federal energy policy legislation enacted earlier this year prevents regulators from exercising any power to control the price of imported LNG, such as requiring open access at terminals. "There is no way we can regulate the price," according to Harvey Morris, California Public Utilities Commission assistant general counsel. However, as I lay awake at night listening to the furnace, I thought of one way California could check the price of the LNG on which it will soon become dependent: "The Arnold Schwarzenegger Memorial LNG Terminal." That's right. California should build its own LNG terminal and operate it under open-access conditions. The governor could make history by including such an import facility in his bond initiative. The storage tank could be adorned by a huge painting of Schwarzenegger as a testimonial to his foresight in caring for California's energy future. The ability of all users-from utilities on behalf of their core customers to power plant operators and industrial facilities-to bring gas in through such a public facility would prevent private terminal operators from exercising market power. By building its own terminal, California would be able to enforce the "gas-on-gas competition" that the energy industry so fondly talks about in the same breath as LNG. The timing could not be better. West Coast LNG terminals are still in the early stages of development. Financing for a state project could easily be rolled into the $50 billion infrastructure bond initiative that Governor Arnold Schwarzenegger expects to introduce in the weeks ahead. The proposal would win easy backing from union and consumer groups, both of which would benefit. Many environmentalists would support it if some of the gas was reserved for providing clean fuels for vehicles and the terminal was located in a remote location. Some, no doubt, would oppose the project, saying that it's okay for the public sector to build highways, but not energy facilities. Balderdash! Remember the Tennessee Valley Authority and the Bonneville Power Administration. In California: ? The Department of Water Resources built and operates the 762 MW Oroville hydropower and water supply project. ? Long Beach built and operates its own municipal gas utility, including oil and gas wells. ? There are the state?s legion of public power agencies. The reality is that millions of Californians depend on government-operated facilities for the energy they need. A state-owned and -operated liquefied natural gas terminal would be in the grand tradition of public investment in energy infrastructure for the public good. California could easily build a liquefied natural gas terminal capable of importing 1 Bcf of gas a day or more for under $1 billion. Sempra's Baja California terminal will cost $600 million. A state-run facility with such a capacity could supply about one-seventh of the gas California needs and could be expanded as needed to promote healthy competition and keep gas prices as low as possible. The plan also would open the opportunity for the governor and his cabinet secretaries to go on new trade junkets to exotic locations. Just think of the photo opportunities: whale watching off of Sakhalin Island, snorkeling among the tropical fish off Australia's Barrow Island, bushwhacking through the Amazonian jungles of Ecuador-all in the name of bringing home liquefied natural gas. California, however, would have to observe important environmental and safety conditions in siting such a facility. Likewise, it would have to promote human rights and environmental protection where liquefied natural gas is produced. But these would only add to the governor?s legacy. Key criteria would include: ? Placement of the facility at a remote location where no population will be endangered in the event of an accident. Likely candidate sites would be offshore or around Point Conception. ? Diversion of a portion of the imported gas for use as a low-polluting vehicle fuel to power LNG buses, trucks, trains, and off-road equipment used at ports and construction sites. ? Diversion of a portion of the LNG to be converted into hydrogen to power motor vehicles. The gas could be re-formed using steam generated by renewable energy technologies, such as wind turbines or solar thermal systems. In effect, this would create a hybrid hydrogen production facility that would marry fossil fuel with renewable energy for the coming ?hydrogen economy.? This hybrid approach would prepare the way for eventual production of hydrogen through renewable processes, such as biogas combined with solar or electrolysis run by solar or wind power. \t ? Guarantees and third-party monitoring of LNG production sites that send cargoes to the terminal to ensure that human rights and environmental protection meet international standards. Regular audit reports would be published, and the governor would jawbone producers to pay appropriate mitigation fees to local populations. \t ? Revenues from terminal operations would be split to pay off financing bonds and to fund energy-efficiency programs and construction of renewable energy systems. Overall, enhanced funding for renewable energy projects would reduce the need for natural gas and further dampen gas prices. \t Building and running its own natural gas terminal would offer the chance for California to protect consumers against high gas prices while meeting its environmental objectives and creating a stream of cash to help with the transition to a renewable energy future. With economic regulation a thing of the past, it's time for the state to put its money where its mouth is when it comes to protecting Californians against high energy prices. It's time for the state to invest in a liquefied natural gas terminal in order to make the market work.