Gas suppliers refusing sales, Pacific Gas & Electric says

Jan. 2, 2001à‚–The cash and credit squeeze created by the electricity crisis in California has prompted 15-20 natural gas suppliers to decline to sell gas to the company beyond current commitments, Pacific Gas and Electric Co., a unit of PG&E Corp. said.

The California utility also said it could have kept gas prices down, if the California Public Utilities Commission (PUC) had permitted the company to build more in-state storage and lock in capacity rights on various pipelines that deliver gas to California.

The company said Friday it has purchased enough gas for its customers’ projected use in January, as long as temperatures do not drop, increasing demand above forecast levels. The utility delivers natural gas to 3.8 million customers, including residential consumers.

January gas bills will be 60% higher than December, the company reported. Market prices in January are expected to reach record levels, following dramatic increases in November and December due to cold weather and record demand by natural-gas fueled power plants.

The average residential bill will rise to $125 in January, compared with a December average of $77. In January 2000, before prices began to spike, the average residential bill was $50.

Gordon R. Smith, CEO of the utility, said it will not be able to finance the high cost of natural gas spreading it out over several months because of the company’s present financial position, resulting from the “outrageous” wholesale electric prices the company is paying on behalf of its customers.

“What should be noted is that many of the companies who have declined to sell us natural gas are the same companies who own power plants in California and are currently charging as much as 30 times what it costs them to generate the power,” Smith said in a prepared statement.

If Pacific Gas and Electric Co. had not taken mitigating measures such as storing gas in the summer, average January residential bills could have been as high as $162, the company said. In the past, the PUC discouraged investment in gas pipeline assets. If the utility had been able to take other mitigating steps, customers’ bills would have required a small surcharge, but compared to today’s astronomical market prices, the surcharge would have seemed minuscule, it said.

Pacific Gas and Electric also reported has asked the Federal Energy Regulatory Commission (FERC) impose price caps on gas delivered to the California border and points within the state. And the company has requested FERC to suspend contracts between El Paso Natural Gas Co. and its wholly-owned affiliate, which Pacific Gas and Electric Co. alleges have allowed those companies to manipulate prices in the California gas market.

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