El Paso Natural Gas Sums it Up for California

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El Paso Natural Gas Sums it Up for California

LCG, Feb. 27, 2001—Stung by what it considers "misinformation," El Paso Corp. yesterday protested that it was not part of California's energy problem and, in fact, has tried to be a part of the solution.

In response to charges that it has manipulated natural gas prices by withholding capacity on its El Paso Natural Gas pipeline, the company contends that high gas prices have been caused more by high demand for electricity and bad forward planning.

The company notes that it is just about impossible to withhold capacity on the pipeline system because the pipeline is required by law to post publicly any unused capacity and must sell that capacity for no more than existing published rates.

El Paso said there were "significant quantities" of unused capacity on the pipeline last year, which could have been used to build reserves for future use. "If California had taken advantage of the opportunity in 2000 to store the same volumes of natural gas that had been stored in 1999, reliance on the spot market would have been reduced and the steep rise in prices at the California border could have been substantially mitigated or avoided," the company said.

Having got that off its chest, El Paso proceeded to outline how those beyond California's borders view the state's power crisis.

First, the construction of new power plants in California is a slow, difficult, and heavily regulated process. As a result, the growing demand has far outstripped in-state generating capabilities.

Second, abnormally low rainfall and increased out-of-state demand caused some of the hydroelectric power normally relied on by California to become unavailable.

Third, increased demand for power in the western United States drove up prices that California had to pay to out-of-state generators.

Fourth, state policies deregulated wholesale power prices but capped the rates paid by consumers, leaving demand unrestrained and preventing utilities from recovering their costs.

Fifth, because rate caps prevented utilities from passing increased costs to consumers, the utilities' creditworthiness was impaired, causing supplemental power needed during peak periods to become more difficult and expensive to purchase.

Sixth, the early and greater-than-normal use of peaking units-plants that are designed to only operate under peak demand conditions-necessitated unscheduled maintenance, rendering them unavailable at critical times.

Seventh, during the final months of 2000, some power plants were forced to shut down because increased usage exhausted their air emissions credits.

Eighth, a warm summer followed by an early onset of cold weather further drove up demand for power.

Finally, the increased power costs in California could have been substantially mitigated through long- term power contracts and less reliance on the volatile short-term power market.

Not everybody will agree with what El Paso has to say – but everybody ought to pay attention.


-- Martin Thompson (mthom1927@aol.com), February 27, 2001


GOSH! The unspun, naked truth! How politically incorrect can EPNG be?

Here's hoping that Calif. & its grossly irresponsible elected [& appointed] officials can get past their hang ups, stop trying to blame everyone but themselves for the mess they're in, and do whatever it takes to solve THEIR problems. Frankly, the rest of the country is fed up with the whines and complaints.

-- CaliforniaFruit (And@Nuts.com), February 28, 2001.

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