Cold Spell Triggers Fears About Area’s Energy Supplies

The shortage of natural gas wasn’t the only energy hiccup in Southern California this month. Underscoring the vulnerability of the region’s energy system, the gas shortfall led to an unpublicized “system emergency” at Southern California Edison that remains in effect today.

Only the end of the cold weather defused the situation and eased concerns that a shortage of natural gas could cut deeply into Edison’s supply of electricity--and eventually create a shortage in Edison’s own backup supplies of oil. Edison uses dirtier and more expensive oil to power its turbines when natural gas supplies are cut.

Edison officials downplay the “emergency” designation as semantic, and say the utility was never close to running short of oil as a backup fuel to natural gas. Edison has managed to maintain a larger oil inventory than recommended by state regulators.

But the glitch pointed up once again the potential disruptive effects of extreme weather here and elsewhere, and some utility experts say the Edison experience shows that the safety margin is narrower than realized.

The month’s events also appear to have finally settled the long debate over whether the state needs more natural gas. The California Public Utilities Commission arrived at the conclusion Friday that it thinks the state needs a higher level of assured gas supplies, a position already taken by the California Energy Commission.

That will require extra pipeline capacity. The numerous interested pipeline developers must now sign up enough customers willing to pay the rates needed to make such a pipeline economically viable.

Currently, the daily supply of natural gas for California is not great enough to meet periods of peak demand. But the gap is supposed to be made up by drawing on stored gas reserves and by the ability of the biggest gas customers--especially electric utilities--to switch temporarily to other fuels when necessary.

Cost Considerations

While the past year’s three temporary gas shortages in the Los Angeles area have focused attention on gas inventories, Edison’s potential shortage of electric generating capacity raises the question of whether adequate oil inventories are being maintained, one critic says.

Edison’s potential oil shortage “was a chilling fact to learn about because the power plants have been the safety valve for the gas situation,” said Patrick Power, a lawyer and consultant and former administrative law judge at the California Public Utilities Commission.

Power credits Edison with keeping more oil on hand than the PUC recommended and questions the PUC’s encouragement of smaller stockpiles as a way to hold down the utility’s fuel costs--and thus electric rates.

“Running out of fuel is not allowed in the utility business,” Power says. “This is a critical question in terms of preparedness. Edison’s amount in storage exceeded what the commission said. So there is a serious question about the assumptions of the PUC.”

Michael Day, a PUC attorney, says Edison’s “emergency” declaration “alerted us to the problem” and said regulators may begin monitoring and coordinating supplies of oil and gas.

The latest gas shortage, which surfaced Feb. 7 when Southern California Gas Co. cut back deliveries to electric utilities to ensure plentiful supplies for residences during a cold spell, was the third in about a year to hit Southern California.

Alternative Arrangements

But it was the first that called into question the electric generating capacity at Edison. This resulted from SoCal Gas’s request on Feb. 8 that the PUC allow it to confiscate so-called transportation gas as part of its curtailment of gas shipments.

Deregulation of the nation’s natural gas system has allowed big gas customers to arrange their own supplies of gas and have it transported by gas utilities such as SoCal Gas. Before, the utilities had a monopoly on the gas business.

Currently, SoCal Gas pipelines deliver to electric utilities and other big customers a mix of such “transportation gas” as well as gas that it is selling to them. If overall supplies grow short, SoCal Gas can divert gas from its big customers to make sure there is enough for private homes and other small customers.

Confiscation of the transportation gas headed for independent electricity producers, notably a few big cogeneration plants, could have shut down those producers and deprived Edison of as much as 1,400 megawatts of electricity overnight, Edison officials say.

Two of Edison’s three units at the San Onofre nuclear facility were already down at the time, one to fix a problem and the other for scheduled refueling, according to spokesman Lou Phelps.

Edison fired up about 1,000 megawatts of standby, oil-burning generating facilities and hastily arranged for the delivery of about 1 million more barrels of oil beginning March 10 against the possibility that SoCal Gas would intercept gas headed for its big cogeneration suppliers, according to Vice President Harold B. Ray. Edison also halted its sales of electric power to other utilities and boosted its purchases from other sources to limit its need for oil.

Edison officials said the declaration of a “system emergency” was legally necessary to notify its many independent power suppliers that the utility would need every possible megawatt during the three to five days it took to ready its backup power plants.

As it turned out, a break in the weather prevented SoCal Gas from having to dip deeply enough into its gas reserves to trigger PUC authorization to divert the transportation gas headed for the cogeneration customers.

By last week, stepped-up flows of natural gas into the state were exceeding demand and SoCal Gas partially resumed shipments to big customers. Edison officials said they were getting all the gas they needed.

Edison says the “emergency” will remain in effect until it is certain that the transportation gas to the cogeneration suppliers--two of which are half-owned by Edison in partnership with Texaco, the big oil company--will not be cut off.

Edison’s oil use soared from 3,000 to an average of 90,000 barrels a day on Feb. 7 to Feb. 9, Ray told a legislative hearing last week. At the time, it had about 5.3 million barrels on hand. But if Edison had been forced to use the backup plants, oil usage could have hit 150,000 barrels a day, Edison told PUC officials.

In the unlikely case of a steady month of extremely cold weather nationwide and failure to line up other fuel sources, Edison would theoretically have less than 10 days’ worth of oil by the time a scheduled tanker arrived March 10 to replenish supplies.

Burning extra oil has so far boosted Edison’s fuel costs by about 20%, or $1.4 million over what it would have paid for a comparable amount of gas, Ray said Friday.

Curtailments Inevitable

Though the current gas supply situation has eased, SoCal Gas told lawmakers last week that it wants to continue to limit deliveries to electric utilities through May so it can continue to refill its storage reservoirs and avoid curtailments in the summer.

Because gas burns more cleanly than oil, the electric utilities are required to burn gas instead of oil during the peak smog and electricity demand season. Thus the gas company tries to limit such curtailments, which it calls inevitable, to the winter months.

An extension of those curtailments would not necessarily require Edison to burn large amounts of oil from now through May, according to Ray. Edison continues to buy its own gas, which SoCal Gas is delivering.