Posted at 11:14 a.m. PST Wednesday, Jan. 10, 2001

PG&E asks Calif. Gov. to intervene on natgas shortage

LOS ANGELES (Reuters) - Pacific Gas and Electric, California's largest utility, said Wednesday it has asked Calif. Gov. Gray Davis to use his emergency powers to enable it to obtain natural gas for its customers.

The utility, a unit of PG&E Corp , said it faces an imminent shortage of natural gas for its core customers due to its worsening credit situation. The company asked Davis to use his power to permit the state to either become an interim purchaser of natural gas or to provide credit.

``The utility's deteriorating credit situation is causing many of its gas suppliers to decline to sell the utility any more gas, even under existing gas contracts, in the absence of accelerated payments,'' Pacific Gas and Electric said.

The nation's most populous state has been pushed to the brink of power blackouts in recent weeks due to tight supplies of electricity. To meet demand, California utilities have been forced to pay skyrocketing prices for wholesale electricity on the spot market and are not permitted to pass costs through to consumers under the state's 1996 deregulation law.

The utility, in a filing with the Securities and Exchange Commission (SEC), said some suppliers have refused to sell gas for future periods starting as early as Friday.

San Francisco-based Pacific Gas & Electric, a unit of PG&E Corp. , also said that an electricity hike approved by state regulators last week will not generate enough cash to pay its ongoing bills.

The utility's cash reserves were $500 million, as of Wednesday. It has a payment due to the California Independent System Operator of $583 million for power purchases on February 1 and a payment due two weeks later to the California Power Exchange of $431 million, also for power purchases.

It also faces a bill of $1.2 billion on March 2 to the California ISO, which operates most of the state's power grid, for electricity purchases.

The utility said the recently approved rate hike would raise only around $70 million in cash per month.

``The rate increase does not raise enough cash for the utility to pay its ongoing procurement bills or make further borrowing possible,'' the utility said.

Pacific Gas and Electric and another California utility, Edison International unit Southern California Edison, have been the two most severely hurt by a customer rate freeze imposed under the state's electricity deregulation laws.

The shortfall at the end of December stood at $6.6 billion for Pacific Gas and Electric and around $4.9 billion for Southern California Edison.

http://www.bayarea.com/c/breaking/docs/005375.htm

-- Cave Man (caves@are.us), January 10, 2001

Answers

Let them freeze in the dark.

-- Marie Antoinette (home@versailles.palace), January 10, 2001.

Apres moi, le deluge

-- (Madame_de_Pompadour@Chateau.de_Versailles), January 10, 2001.

There is no energy crisis in CA. Out of the 52 states, what state is in a "energy crisis?" Only CA? This is a concerted effort for the government to take over a commodity that they screwed up in the first place--or I believe was planned from the beginning. The CA government has totally manipulated this situation inhand with the utilities for a takeover. It is true that the power generating facilities in CA are old. But, that's the price we all have to suffer with, because the environmentally ill stopped the development of new generating facilities. New generation should be built OUTSIDE of CA for transportion back into CA. Pollute other states so Californians can consume, waste, and tip their hats off to you out-of-state suckers! BTW, save the flames, I'm immune to them.

-- coleman (coleman@heated.scd), January 10, 2001.

http://dailynews.yahoo.com/h/kpix/20010110/lo/california_s_power_crisi s_affecting_natural_gas_supply_1.html

Wednesday January 10 07:17 PM EST

California's Power Crisis Affecting Natural Gas Supply

By KPIX - BCN

Pacific Gas & Electric Company sent a letter to Gov. Gray Davis today saying that the state's power crisis is threatening the utility's ability to provide natural gas to customers. The company says its cash reserves and credit have been exhausted by paying suppliers as much as 40 cents per kilowatt-hour for electricity while only being able to charges customers approximately 4.5 cents per kilowatt-hour, according to PG&E spokesman Jon Tremayne. Several gas companies have threatened to stop selling natural gas to PG&E when their current contracts expire because they fear it will not have the cash or credit to pay for the gas. One company, J. Aron Co., which supplies approximately 10 percent of PG&E's gas, stopped selling gas to the utility effective today, Tremayne said. "These out-of-state companies have said that beyond the current contractual obligations, 'We're not going to sell you any gas,' " Tremayne said.

Most of PG&E's gas suppliers have contracts running to the end of January or February, Tremayne said.

-- (in@energy.news), January 11, 2001.

When did we get "52 states"?

-- (PatriciaS@lasvegas.com), January 11, 2001.

This weeks issue of Time has an informative article in it about the natural gas situation. Here's an excerpt from it.

http://www.time.com/time/magazine/article/0,9171,94031,00.html

Power To The People

As California battles just to keep the lights on, heartland homeowners pay dearly to stay warm

******

California, though, isn't the only part of the country grumbling about an energy crunch. While the rest of the U.S. doesn't have to worry much about the lights going out, millions of homeowners across the country are watching their heating bills soar. With unusually cold weather and a shrinking inventory of natural gas, the wholesale price has quadrupled in the past year, saddling consumers with bills that are expected to rise 40% to 50% this year. In December alone, consumption of natural gas, which keeps more than half of all U.S. homes warm, rose 20% from the year before, according to Cambridge Energy Research Associates.

Unlike the electricity squeeze, the tight market for gas has less to do with misguided government than with classic boom-and-bust economics. In the late '90s, as the price of gas mirrored oil's downward spiral, few banks or drillers were willing to risk the capital to hunt for a practically worthless commodity. Now that the price has rebounded, the West Texas oil patch is hopping, with more rigs and prospectors hunting for gas than since the mid-'80s.

Still, all that action won't yield results in time to offset the winter chill. Bills are piling up so fast in Chicago that 3,000 residential customers a week are pleading with Peoples Energy for an assistance or installment plan. Some chemical manufacturers in the South have decided that it's more profitable to shut down temporarily and sell their contracted power back at a higher price than to use it themselves. (Which is exactly what aluminum makers in the Northwest are doing with their valuable electricity, much of which flows to California.) At a time when many fear the country is slipping into a recession, the natural-gas spike, according to Goldman Sachs, could cut economic growth by 1%.

And guess what? About half the power plants in California, and a quarter of them nationwide, are fueled by natural gas. A price increase in one commodity just triggers another elsewhere. Some natural-gas providers have even balked at selling to the cash- strapped utilities. Governor Gray Davis, who has been criticized for acting too slowly, admits that "deregulation is broken and needs to be fixed."

The question, of course, is how. Initially, California's hastily implemented deregulation wouldn't even permit utilities to hedge their bets with long-term fixed contracts--a key ingredient of successful deregulation efforts in states such as Pennsylvania and Maryland. The fear, ironically, was that they would lock in a high sale price today at the risk of missing out on a lower one tomorrow. Instead, they've had to pay top dollar on the daily spot market.

Consumers aren't helping much either. Shielded from the vagaries of the free market by an artificially low rate, they have had no financial incentive to conserve.

******

-- Time article (on@natural.gas), January 12, 2001.

"When did we get 52 states?"

coleman?.............coleman?..............coleman?.............

(Bueller?.............Bueller?..............Bueller?..............)

-- (PatriciaS@lasvegas.com), January 12, 2001.