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Natural gas tax could worsen electricity shortage

LOS ANGELES (AP) -- Plans to increase the capacity of the state's natural gas pipelines are stumbling over a six-year-old tax that industry leaders and experts say could worsen California's critical electricity shortage.

The tax, established by the Public Utilities Commission, requires electricity generators to pay an extra fee if they use lines owned by companies other than Southern California Gas Co., or if they switch from SoCal Gas to a competitor.

At its birth, the tax was strongly supported by a broad base of activists and officials, who hoped the tariff would protect smaller customers of SoCal Gas. Otherwise, they thought, SoCal Gas would pass on the costs of business lost to competing pipelines.

But now the tax is preventing the state from increasing line capacity and from building desperately needed power plants, according to industry officials.

Two companies, Questar and Williams Co., are trying to increase the gas pipeline capacity, a goal the state has called necessary to solving the power crisis.

Questar is working on an upgrade of an old pipe running 700 miles from New Mexico to Long Beach. Williams hopes to extend its Kern River-Mojave pipeline farther west, also to Long Beach.

But both companies say they are having trouble signing up customers because of the tax.

Watson Cogeneration Co., for example, told the Los Angeles Times in Monday's editions that it wants to use Questar's lines but won't act until the tariff issue is resolved.

Questar, Williams and other companies have been trying to sway the PUC against the tax, and last year, the regulators acknowledged that the tariff might be hindering new electricity generation projects. It also asked SoCal Gas to come up with a new pricing system.

But the issue has since been reassigned to a new administrative law judge who says she has no timetable in mind for resolving the issue.

Meanwhile, SoCal Gas is defending the tariff. Otherwise, the company argues, power plants would shop around for the best deal, only to turn to SoCal Gas during emergencies. That, in turn, could interrupt service to paying customers.

Pipeline companies reply that they're open to some kind of tariff, but nothing as large as the current one. They point out that there has not been a single company willing to pay the price of switching gas lines because the tariff is so huge.

SoCal Gas has introduced two new rate structures, but the matter is still open for debate.

Administrative law judge Carol Brown told the Times that the issue is a "daunting project" for her that will not receive priority unless regulators tell her to put it high on her list of cases.

-- Martin Thompson (, April 16, 2001

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