Election Section

Regulators OK selling gas co. space on pipelines

By Karen Gaudette The Associated Press
Thursday December 13, 2001



SAN FRANCISCO — California power regulators are allowing the nation’s largest natural gas utility to sell customers space on its intrastate pipelines, mimicking a system already in place on pipelines that carry natural gas into the state. 

Industry officials say the change will stabilize rates and boost efficiency. 

But critics fear it will allow fewer companies to control most of the pipeline space — and that energy prices could increase if demand leaps because of chilly weather, or if gas-fired power plants need to churn out more electricity. 

The state Public Utilities Commission voted 3-2 on Tuesday to approve the proposal, which allows Southern California Gas Co. to sell space on its “backbone” transmission pipelines. 

These pipelines carry natural gas flowing into California to a smaller distribution system that then transports it to homes, businesses, factories and power plants. 

Under the order, power sellers and SoCal Gas customers will bid to buy pipeline space, with preference to those who hope to reserve that space for the longest time. 

Customers also will be able to trade that space and any space they’ve reserved in which to store extra gas. This enables them to accumulate more than the 30 percent of pipeline space allowed to them under the PUC order. 

Denise King, a SoCal Gas spokeswoman, said residential and small business customers will not see their 2002 bills rise because the utility has reserved enough space for the gas they will use. 

The new system will allow customers to better control the point from which their gas arrives, and help them save money by selling or trading away space they don’t need, she said. 

But critics worry that customers could end up paying high prices to ship gas through the Southern California pipelines — just as happened last winter on interstate lines bringing gas to the area. 

The two PUC commissioners who opposed the plan argued that opening up the pipeline could lead to one company taking too much control. 

They said the large amount of interstate pipeline space owned by El Paso Corp. this year and last pushed California natural gas prices through the roof.  

Residents paid $6.6 billion for natural gas in 1999, $12.3 billion last year and had paid $7.9 billion through March 2001, according to a state Assembly report. 

“It just opens up one more avenue where people can try to buy up a large percentage of pipeline space, except this time on the intrastate portion rather than the interstate portion,” said Marcel Hawiger, an analyst with The Utility Reform Network, a San Francisco-based consumer advocacy group that opposes the plan. 

While the order will not affect residential and small business customers of SoCal Gas directly in 2002, it eventually could translate into higher electricity costs because many power plants are fueled by natural gas, Hawiger said. Any cost increases likely would be passed along to consumers. 

Carl Wood, a PUC commissioner, said he opposed the order because it was based on information gathered before natural gas prices soared last winter. 

“I don’t think this is the time to be radically remaking the structure of natural gas regulation without understanding the world of 2002. This is not the world of 1998,” Wood said. 

Commissioner Richard Bilas praised the order, and said it should make gas operations in Southern California more efficient since customers only will pay for services they actually use. 


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