Out of Gas?

California's power crisis promises to balloon

Californias electricity shortage has wreaked havoc, but a looming natural gas shortage may be even more calamitous.

If current rates of withdrawal continue, Pacific Gas & Electrics gas storage facilities will be empty by the end of February — a month earlier than the utility expected. If demand increases and the utility runs out of stored gas, PG&E may be forced to cut off industrial customers and power plants, a move that would further weaken the states already crippled electric power grid.

The growing gas supply problem is more bad news for California technology companies.

"If the gas goes off, wed be shut down. Itd be a major disaster," said Steve Lane, a senior facilities engineer at SDLs San Jose laser production plant. The company, which recently completed its merger with optical equipment giant JDS Uniphase, uses gas for space heating and pollution abatement.

SDL lost more than $3 million during a rolling blackout last June. Unlike the blackouts which last only a few hours, PG&E has warned SDL that if its gas is cut off, it will stay off for several days, Lane said.

PG&E, now teetering on the brink of bankruptcy, has been unable to convince most of its gas suppliers that they will be paid for their product. Although 11 gas companies are still selling to the utility, PG&E has been pulling about 600 million cubic feet of gas per day from storage to make up the shortfall. By the third week in February, the utility had just 7 billion cubic feet of gas in reserve, or enough for less than two weeks.

"Its very serious," said Staci Homrig, a PG&E spokeswoman. In the event that the utility has to cut gas flows to power plants, she said, "California will be propelled into an even worse crisis."

Even if PG&E is able to find enough gas suppliers and replenish its storage, existing interstate gas pipelines may not be able to meet the states growing demand. The main pipelines into the state are all running at or near capacity. Given the lack of pipeline space, "I dont think they will be able to satisfy their needs and fill their storage reservoirs," said Danny McCarty, chief commercial officer at Enron Transportation Services, a pipeline giant.

The states thirst for gas has already caused interruptions in service. Since mid-November, San Diego Gas & Electric has limited gas sales to its industrial customers — including one power plant — on 12 different days.

Last month, Secretary of Energy Bill Richardson and his successor, Spencer Abraham, ordered gas companies to continue supplying PG&E with fuel. The orders expired Feb 7. PG&E has asked the California Public Utility Commission to order Southern California Gas to provide fuel. But the gas utility is fighting the request and is promising court action if ordered to buy fuel for PG&E.

Richard Baxter, a senior analyst at The Yankee Group, believes the state should create a program like the $10 billion state-backed fund approved by the California Legislature to buy electricity. California should "launch another fund to start buying gas," Baxter said. "And it has to be done quickly because they are running out of time."