PG&E granted bargaining power in natural gas market : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Wednesday January 31 10:48 PM EST

Pg&E Granted Bargaining Power in Natural Gas Market


Electricity has been the focus of the current energy crisis, but today the California Public Utilities Commission addressed the other part of Pacific Gas and Electric Co.'s problem -- natural gas. The price of natural gas has been going up, and utilities like PG&E say they are too cash-strapped to purchase it for customers. And unlike electricity, once the gas is turned off, it can take days or weeks to come back on.

Commissioners dealt with this latest wrinkle in the energy crunch, which they blamed on the "predatory practices" of gas suppliers, by unanimously approving a PG&E proposal that the company says should help keep the gas running for now.

The so-called "securitization proposal" gives PG&E "authority to pledge its gas accounts receivable and core inventory to procure gas supplies" -- apparently allowing the company to transfer gas payments made by customers straight into the hands of gas suppliers.

This added flexibility is intended to give suppliers more confidence in PG&E's ability to pay for the gas and the company more leverage in dealing with suppliers. The proposal is scheduled to expire after 90 days.

PG&E spokeswoman Staci Homrig said the company's newfound "authority to pledge" should bolster its position when bargaining with gas suppliers.

Until now, she said, suppliers "have shown great concern with doing business with us because of our financial situation ... We're hopeful now that we can go back to them with this authority and cut some deals."

No one spoke more harshly of the gas suppliers than commission President Loretta Lynch, who accused them of capitalizing on the utility's financial troubles.

"I believe all the gas suppliers frankly have been jamming PG&E," she said.

Lynch would not comment on the audit of PG&E, requested by the commission and released yesterday, or on whether recent state or PUC actions will increase energy rates once more. "I'm going to look at the facts. The audits are the first part of the facts," she said.

The audit found that the utility has transferred $4 billion to its parent company, PG&E Corp., between 1997 and 1999, and millions more in the past few months -- a finding which seems to undermine the utility's claim that only rate hikes and possibly a state bailout will save it from bankruptcy.

Before voting, Commissioner Carl Wood said he hoped state leaders, who are currently deep in negotiations with power brokers, would provide a solution to the crisis. He said the state Legislature was trying to hatch a deal whereby power is sold at 7.8 cents per kilowatt-hour in California.

All five commissioners agreed that if state leaders fail to cut a deal soon, the problem will be in their laps. "My feeling is if the Legislature is unable to come up with a solution in the next two or three days, then I agree with Mr. Wood, we have got to act," said Commissioner Henry Duque.

In a letter to two U.S. senators sitting on the Energy and Natural Resources Committee, Gov. Gray Davis outlined what the state is doing to deal with the crisis, including upping power supply and lowering demand, firming up the state's energy contracts, and keeping the state's utilities afloat.

For her part, Sen. Dianne Feinstein has introduced legislation in Washington, D.C., giving the U.S. Secretary of Energy the authority to institute a price cap on state energy, given certain conditions.

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-- Swissrose (, February 01, 2001

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