EDITORS: Please do not use
"Pacific Gas and Electric" or "PG&E" when
referring to PG&E Corporation or its National Energy Group.
The PG&E National Energy Group is not the same company as Pacific
Gas and Electric Company, the utility, and is not regulated by the
California Public Utilities Commission. Customers of Pacific Gas
and Electric Company do not have to buy products or services from
the National Energy Group in order to continue to receive quality
regulated services from Pacific Gas and Electric Company.
Supply Issue Reaches Crisis Level: Suppliers Have Said They May
Pull Up to Two-Thirds of Needed Gas Due to California Energy Crisis
SAN FRANCISCO - Pacific
Gas and Electric Company has been notified by six of its natural
gas suppliers, accounting for 36 percent of daily supply, that they
have stopped, or may stop delivering gas by January 23. In addition,
several other suppliers, accounting for another 30 percent of daily
supplies, have told the utility that they are considering stopping
The withdrawal of gas deliveries
brings Northern and Central California close to the brink of natural
gas shortages in the middle of winter, which could threaten the
health and safety of millions of Californians. As a result of these
withdrawals, natural gas could be cut to homes, hospitals, businesses,
refineries and power plants.
"As California continues
to struggle with an energy crisis and the financial havoc it has
created for the state's utilities, we face the very real possibility
of natural gas shortages in the coming weeks," said Gordon R. Smith,
president and CEO of Pacific Gas and Electric Company. "We have
done our best to call attention to this crisis and obtain assistance
to avert a catastrophe, and now we must wait to see if the state
and federal governments will step in to ensure that natural gas
flows to homes and businesses in Northern and Central California."
Pacific Gas and Electric
Company has taken a number of steps to try and avert the looming
crisis. The company:
Informed Governor Davis
of the problem on Jan. 9 and asked him to consider using his
emergency powers to help avert gas shortages by providing short-term
financial assistance so gas suppliers will sell to the cash-strapped
Met with its 25-30 key
suppliers on Jan. 10 to urge them to continue to deliver gas
under normal payment arrangements.
Requested on Jan. 12
that President Clinton declare a natural gas supply emergency.
The suppliers which
have withdrawn supplies as of Jan. 17, or have stated that they
may pull supplies in the coming days, include two of Pacific Gas
and Electric Company's largest suppliers, J. Aron & Co., the trading
arm of Goldman Sachs in New York, and Sempra Energy Trading of Stamford,
Connecticut. The other suppliers are Western Gas Resources, Inc.
of Denver; Duke Energy Trading of Houston; Coastal Merchant Energy
of Houston; and Natural Gas Exchange of Calgary, Alberta. The situation
has occurred because Pacific Gas and Electric Company could not
pay in advance or on delivery, a significant change in payment terms
demanded by suppliers. The company has exhausted its cash and credit
because of the high wholesale electricity prices in California.
To cover the shortfall caused
by the pulled gas supplies and the fact that other suppliers will
not sell to Pacific Gas and Electric Company, the utility is quickly
depleting its natural gas in storage. The stored gas is expected
to be depleted by early February if the current rate of withdrawal
continues. If more suppliers stop their deliveries, the utility's
stored gas will be consumed more quickly.
In addition to the immediate
crisis created by the halt in gas deliveries, the company has been
able to purchase only about 60 percent of the gas it expects customers
to need each day in February. Therefore, an even greater crisis
is expected in February once storage supplies are depleted and inadequate
supplies are flowing into the state.
If Pacific Gas and Electric
Company is not able to obtain enough gas for residential and small
business customers, the rules of the California Public Utilities
Commission require the utility to divert gas from non-core (large
industrial) consumers, among which are power plants that need natural
gas to generate electricity. However, the result will be an even
worse electricity shortage than the state is currently suffering.
Some power plant operators have stated that they will send their
gas out of California to prevent it from being used by residential
and small business customers. Other non-core customers whose gas
could be diverted include hospitals, military bases and universities.
"Diverting natural gas from
some of our customers in order to serve others is not an acceptable
solution, but we would do it in order to preserve gas for our residential
customers who need heat in the middle of winter," said Smith. "What
we need is for gas suppliers to continue to sell their gas to Pacific
Gas and Electric Company on regular terms, and with an ordinary