California Energy Crisis Drives Natural Gas Prices to Record Levels; Suppliers Declining to Sell Commodity; Crisis Threatens PG&E's Ability to Purchase Gas for Its Customers.Business Editors/Energy Writers SAN FRANCISCO--(BUSINESS WIRE)--Dec. 29, 2000 Pacific Gas and Electric Company
The Pacific Gas and Electric Company (PG&E) , (NYSE: PCG), is the utility that provides natural gas and electricity to most of Northern California. today informed the California Public Utilities Commission The California Public Utilities Commission (CPUC; also often commonly referred to as simply the PUC) [1] is a state Public Utilities Commission which regulates privately-owned utilities in the state of California, including electric power, that the cash and credit squeeze credit squeeze Restricted bank lending that is accompanied by rising short-term interest rates and a decline in economic growth. Credit squeezes are generally attributed to policy actions of the Federal Reserve. created by the electricity crisis in California has prompted 15-20 natural gas suppliers to decline to sell gas to the company beyond their current commitments. The utility delivers natural gas to 3.8 million customers, many of whom require natural gas to heat their homes. Pacific Gas and Electric Company has been able to purchase enough gas for its customers' projected use in January, as long as temperatures do not drop thereby increasing demand above forecast levels. California's energy crisis has caused a dramatic run-up in the price of natural gas, driving January gas bills 60% higher than December. 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. Gas bills are high all across the nation due to an imbalance imbalance /im·bal·ance/ (im-bal´ans) 1. lack of balance, such as between two opposing muscles or between electrolytes in the body. 2. dysequilibrium (2). in supply and demand, but California's market prices have far exceeded those in the rest of the country. 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 A burst of extra voltage in a power line that lasts only a few nanoseconds. See power surge, power swell, sag and surge suppression. (jargon) spike - To defeat a selection mechanism by introducing a (sometimes temporary) device that forces a specific result. , the average residential bill was $50. Because California's natural gas industry has been deregulated for more than a decade, consumers here pay the market price for the gas they use. "We recognize that this dramatic increase in the market price of gas will be very difficult for many of our customers, and we would like to be able to cushion the blow. However, Pacific Gas and Electric Company's current financial position, resulting from the outrageous wholesale electric prices we are being forced to pay on behalf of our customers, prevents us from being able to finance this high cost and spreading it out over a few months," said Gordon R. Smith, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of the utility. "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." Among the companies who have expressed concern about selling gas to Pacific Gas and Electric Company are companies who now own power plants that California's utilities were required to sell as part of electric deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. . The companies, which are based outside of California, saw their profits double and triple this past summer while California's consumers and utilities have been required to pay the ransom ransom, price of redemption demanded by the captor of a person, vessel, or city. In ancient times cities frequently paid ransom to prevent their plundering by captors. The custom of ransoming was formerly sanctioned by law. . While gas prices in California are extremely high, Pacific Gas and Electric Company has been able to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. the prices by planning ahead.
The company has taken a number of steps to lock in low prices for its
customers, including storing gas in the summer, signing long-term
contracts and arranging for price caps. If Pacific Gas and Electric
Company had not taken the steps it did, average January residential
bills could have been as high as $162.In the past, the California Public Utilities Commission discouraged investment in gas pipeline assets. However, if the company had been encouraged by the CPUC CPUC California Public Utilities Commission CPUC Current Procurement Unit Cost to build more in-state storage and lock in capacity rights on various pipelines that deliver gas to California, the company would have been able to keep prices lower for its customers. While it would have required a small surcharge An overcharge or additional cost. A surcharge is an added liability imposed on something that is already due, such as a tax on tax. It also refers to the penalty a court can impose on a fiduciary for breaching a duty. on customers' monthly bills, compared to today's astronomical as·tro·nom·i·cal also as·tro·nom·ic adj. 1. Of or relating to astronomy. 2. Of enormous magnitude; immense: an astronomical increase in the deficit. market prices, the surcharge would have seemed minuscule minuscule Lowercase letters in calligraphy, in contrast to majuscule, or uppercase letters. Unlike majuscules, minuscules are not fully contained between two real or hypothetical lines; their stems can go above or below the line. . Pacific Gas and Electric Company does not produce natural gas, and does not profit from the high cost of gas. The utility is like UPS in that its revenue comes from the delivery of gas. Pacific Gas and Electric Company's delivery rates have not changed significantly for several years. In addition to proactively educating customers about the high market prices and providing information about how to conserve energy and obtain financial assistance to pay bills, Pacific Gas and Electric Company has taken several steps to ensure stability in California's out-of-control gas market. Among them: -- Requested that the Federal Energy Regulatory Commission (FERC) impose price caps on gas delivered to the California border and points within the state. -- Urged FERC to suspend contracts between El Paso Natural Gas Company and its wholly-owned affiliate, which Pacific Gas and Electric Company believes have allowed the companies to manipulate prices in the California gas market. To help customers pay high gas bills, Pacific Gas and Electric Company offers two financial assistance programs, CARE and REACH. The utility recently expanded the REACH program to provide more assistance to low-income families. For more information about CARE and REACH, customers can call 1-800-743-5000. Pacific Gas and Electric Company also has a number of programs to help customers conserve energy in their homes and businesses. Information is available at www.pge.com and by calling the Smarter Energy Line at 1-800-933-9555. For more information about Pacific Gas and Electric Company, please visit our web site, www.pge.com |
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