SoCalGas locks horns with coal industry over environmental impacts of coal-fired electric generation.

LOS ANGELES--(BUSINESS WIRE)--July 23, 1996--The debate over the environmental impacts of electric industry restructuring rages on.

As California energy regulators make ready a draft environmental impact report, Southern California Gas Co. is debunking coal industry arguments that increased demand for electric end-uses and increased out-of-state generation will lead to a net environmental benefit as "inaccurate" and "irresponsible."

In comments to the California Public Utilities Commission, the Center for Energy and Economic Development (CEED) and the Western Fuels Association Inc. (WFA) argue that the lower electric rates expected from restructuring will likely lead to increased use of electricity in California.

Strict state environmental regulations will require that this increase in demand be met by increased out-of-state generation.

Thus, a net environmental benefit is realized as electricity generated outside of California replaces in-state natural-gas-fired generation, as well as end-uses of natural gas, according to the CEED and WFA comments.

"These coal industry groups suggest that electricity demand will rise because cheap coal-fired electric power -- generated in Arizona and elsewhere -- will now be available," said Lee Stewart, a SoCalGas senior vice president.

Indeed, he points out, some studies show electric industry restructuring could increase the utilization rate of Western coal by 4 billion kwh/year, with a corresponding increase in NOx emissions of 15,000 tons per year.

"We would call this a net environmental degradation, not benefit," Stewart said, adding that "air pollution out of state would be increased at a time when everyone agrees that a regional approach to cleaning up transported pollution is needed."

CEED members include coal producing companies, railroads transporting coal and several electric utilities that utilize coal-fired electric generating facilities. WFA is a member-owned cooperative company that purchases coal for use by electric utilities in the Midwest, West and in Louisiana.

In comments filed recently at the CPUC, SoCalGas charged that the CEED/WFA argument that electricity is more efficient than other types of fuels in end-use applications is "not accurate on a full fuel cycle basis, when source energy is considered."

"The U.S. Department of Energy estimates that when source energy is take into account, electric end-use appliances are 30 percent efficient, a opposed to 91 percent for natural gas end-uses," the Los Angeles-based gas distribution company said in its filing.

Furthermore, SoCalGas reminds the CPUC that stationary sources make a relatively small contribution to Southern California's air pollution compared to mobile sources, and that "the actual benefits of displacing gas with out-of-state electricity would be negligible within the state ... yet states that host increased coal generation would suffer the effects of higher NOx emissions."

The SoCalGas filing adds that it would be "wholly irresponsible" for California to advocate policies that result in increased air pollution out of state for negligible benefit in state. The filing warns that increased utilization of coal plants could hamper efforts by the Grand Canyon Visibility Transport Commission to improve visibility on the Colorado Plateau.

One electric restructuring issue that could tip the scales in favor of additional use of out-of-state facilities -- including coal -- is that of transmission pricing. Unless the cost of transmitting electricity to the customer is reflected in the transmission prices, there may be a strong economic incentive to expand the use of coal generation, according to Stewart.

The company strongly opposes the transmission pricing methodology proposed by California's electric utilities because it does not sufficiently take into account distance or transmission facilities utilized, Stewart points out.

This could result in out-of-state power sales having an advantage over in-state generation, which could lead to underutilization or shutting down of California's facilities in favor of additional use of out-of-state facilities, including coal.

CONTACT: The Gas Company, Los Angeles 

Mike Mizrahi, 213/244-2540