PG&E; Warns of Natural Gas Shortages in March

Pacific Gas & Electric Co. warned Thursday that its Northern and Central California customers could face natural gas cutbacks by mid-March--or as soon as next week if a cold front hits--despite the utility’s limited success in lining up supplies by using customer accounts as collateral.

The utility’s chief executive, Gordon R. Smith, sent a letter to Gov. Gray Davis late Wednesday asking him to support PG&E;’s request to state regulators for a gas emergency declaration that would require Southern California Gas Co. to buy extra gas and sell it to the financially ailing utility. Smith also asked the governor to use the state’s credit to help procure gas for PG&E;’s residential users and other core customers.

“The possibility of a severe gas supply crisis over the next few weeks still remains,” he said.

The governor’s office is reviewing the request, a spokesman said.

The state Public Utilities Commission declined to take up PG&E;’s request at its meeting Thursday. Afterward, President Loretta Lynch said the commission had done enough by recently authorizing PG&E; to provide customer accounts it is owed as security for new purchases.

“That should take care of it,” she said. “PG&E; is making substantial progress.”

Using the PUC authorization, the company has enlisted eight key gas suppliers of the about 40 it normally has. Brian K. Cherry, PG&E;’s manager of regulatory relations, said that those contracts represent about 30% of the utility’s supplies and that it is seeking gas from other companies.

PG&E; has presented state officials with a “doomsday scenario” that would make electricity blackouts pale by comparison. Without adequate supplies, the utility has said, many of its 3.9 million gas customers and entire cities, from the Bay Area and Sacramento to Fresno, face potential shortages of gas for furnaces, stoves and clothes dryers.

Because electricity-generating plants that burn gas--along with hospitals and industrial users--are among the “non-core” customers whose supplies would be reduced or curtailed first, any gas crisis could affect electricity supplies.

The utility’s problems intensified when companies that supply about 10% of the company’s natural gas terminated deliveries after the expiration Tuesday of a U.S. Department of Energy order that required suppliers to continue providing gas to PG&E.;

The company projects that its gas storage inventory will be drawn down to minimum levels by mid-March. Even before then, executives said, diversions from non-core customers could occur, especially if cold weather increases demand for heat.

“I saw a weather forecast, and there is a huge cold front coming in,” Cherry said Thursday. He said projected temperatures of 39 to 40 degrees would place a core load on PG&E;’s system of 2.1 billion cubic feet--but the utility has only about 1 billion cubic feet on contract and can draw 950 million additional cubic feet from supplies.

“We are operating right on the edge,” he said. “We could have [diversions from non-core customers] as soon as next week.”

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