Lawmakers look at high natural gas prices

The Associated Press
Sunday March 25, 2001



SACRAMENTO — Natural gas costs six times more in California than in neighboring states, leaving residents worried about paying their bills and businesses struggling to recoup the high costs without losing customers, lawmakers were told Friday. 

The testimony came at a hearing opening the Assembly’s investigation of the state’s soaring natural gas prices, including whether market manipulation helped drive up costs and worsen the state’s energy crisis. 

Pacific Gas and Electric Co. customer Gladys Cook of Sacramento told the committee her natural gas bill rose from about $47 or $57 a month last year at this time to $344 in February and $112 this month. 

“It was just a terrific shock, especially after the Christmas holiday and everything,” said Cook, who lives with her 87-year-old mother, a retired teacher. Cook said they turned down the heat and water heater to try to reduce their bills. 

Natural gas that sells for $5.25 elsewhere sells for nearly $30 at the California border, said Assemblyman Darrell Steinberg, chairman of the Assembly Energy Oversight Subcommittee. 

“We’re going to examine every possible reason for the price spike,” he said. 

The soaring prices are especially worrisome to growers who use natural gas to heat greenhouses in winter so they will have garden plants to sell in the spring, said Mike Vukelich, founder of the Color Spot Nurseries of Northern California. 

Vukelich said his gas bill rose from about $518,000 a month to more than $1 million for six nurseries. His company sells to large chain stores, such as Target, Walmart and Home Depot, that won’t pay more, he said. 

The cities of Los Angeles and Long Beach each filed lawsuits this week, accusing several gas companies of conspiring to drive up prices by limiting supply. 

And Sweetie’s, a San Francisco bar, filed a class-action lawsuit Friday accusing several natural gas companies of manipulating California’s natural gas market to unfairly drive up prices. 

The lawsuits say Southern California Gas Co., San Diego Gas and Electric, El Paso Natural Gas Co., Sempra Energy, El Paso Corp. and affiliated companies decided in a Phoenix hotel room in 1996 to block construction of gas pipelines that could have helped the state avoid its power crisis. 

Rick Morrow, vice president of customer service for Southern California Gas Co., denied executives at the Phoenix meeting with El Paso Gas representatives were conspiring to drive up gas prices. 

“There was no mystery to the meeting,” he said. “What is being alleged is absolutely false.” 

Morrow said his company’s customers are seeing far less of an increase in gas prices because SoCal Gas has long-term shipping contracts. 

The collusion allegations are being probed by state Attorney General Bill Lockyer, who is also looking into high electricity prices. Lockyer this week told state senators he has subpoenaed several documents from power suppliers; he said he could not share those records with lawmakers. 

The state Senate plans hearings next month to investigate whether electricity suppliers withheld power to raise prices. 

FERC, which Davis and many lawmakers contend isn’t doing enough to control California’s energy prices, declined to send a representative to the Assembly hearings.  

Friday’s hearing is expected to be the first of several. High natural gas prices – blamed by the state’s two largest utilities for nearly $14 billion in losses – are a key factor in the state’s energy crisis, but by no means the only one. 

A tight electricity supply, due in part to maintenance at California power plants and scarce hydroelectricity in the Pacific Northwest, has caused rolling blackouts four times this year, including twice this week. The state had sufficient power to avoid alerts Friday. 

The alternative power industry has been hit doubly hard in recent months. 

Many small natural gas-fired plants haven’t been paid by Southern California Edison since November. PG&E has been paying its alternative energy providers only about 15 cents for each dollar they are owed. 

Several of those plants shut down earlier this week because they haven’t been paid. 

The loss of those 3,100 megawatts of power – enough for about 2.3 million homes – was a major factor in rolling blackouts this week that hit Southern California for the first time. A measure aimed at putting those alternative energy providers back on the state’s power grid stalled in the Assembly on Friday. 

The bill, approved by the Senate, would direct the Public Utilities Commission to set prices for smaller renewable energy providers, including solar, wind and cogeneration plants. 

It would also let the PUC force Edison and PG&E to pay those small plants. 

Jerry Bloom, an attorney for the California Co-generation Council, said the bill wouldn’t help cogeneration plants, which typically use natural gas plus another form of energy such as steam, because the price isn’t tied to the changing price of natural gas. 

“It all but guarantees they will go out of business,” he said. 

Legislators were considering altering the bill to include different prices for cogeneration and renewable-energy plants. 

The measure failed to win a two-thirds majority in the Assembly Thursday, when Republicans balked at two other energy issues it included. 

The other sections would have put the state first in line among Edison’s and PG&E’s creditors, aiding its efforts to borrow $10 billion to buy electricity on the utilities’ behalf, and capped electricity rates for large San Diego utility customers. 

CalEnergy spokesman Jay Lawrence said alternative-energy plants are carefully watching the legislation’s progress. 

There is still talk among them about the possibility of forcing Edison into bankruptcy, Lawrence said. 


On the Net: 

California ISO: www.caiso.com