PUC Will Let the Market Select Pipelines

The California Public Utilities Commission said Wednesday that it will allow competition to determine which proposed pipelines will bring clean-burning natural gas to California from out of state, rather than making the choice itself.

California’s demand for natural gas is rising rapidly and the state needs new pipelines, said PUC Commissioner Stanley W. Hulett. Electric utilities, which can use either oil or gas to generate electricity, frequently find their natural gas transmissions cut when supplies are short because the needs of residential customers are put first.

“With the recognition that natural gas is the environmentally preferred fuel, especially for electric generation in the southern part of the state, it is obvious that new pipeline capacity will benefit this and future generations of Californians,” Hulett said.

An administrative law judge recommended last year that the commission back the pipeline proposed by Kern River Gas Transmission Co., which intends to begin building a 904-mile pipeline from Wyoming to California by the end of the year.

But the PUC found that because so much competition exists to serve the California market, the commission only needs to set conditions to “prevent the cost of the new pipelines from falling disproportionately on residential customers.” The commission said it would back all proposals that met those conditions.

A Kern River Gas Transmission spokesman said the company is “extremely delighted” with the decision because it believes its proposal will be competitive. Its pipeline, a joint venture between the Williams Cos. of Tulsa, Okla., and Tenneco Inc. of Houston, should begin operating in 1991.

The Wyoming-California Pipeline Co., known as Wycal, also said it was pleased with the ruling. Wycal, a subsidiary of Houston-based Coastal Corp., said it plans to begin construction by the end of the year.

Also covered by the decision are pipelines proposed by the Mojave Pipeline Co., Pacific Gas Transmission Co./Pacific Gas & Electric, and Transwestern Pipeline Co.

In addition, the PUC proposed restructuring the way gas is purchased and delivered to industrial customers. The intent of the restructuring is to make the natural gas market more competitive, the PUC said.

The proposals would prohibit regulated gas utilities--primarily Southern California Gas, San Diego Gas & Electric and Pacific Gas & Electric--from selling to industrial and large commercial users except at the same rates they charge residential customers. One of the proposals would require utilities to spin off non-regulated affiliates that would compete with all other gas suppliers if they want to sell to industrial customers.