SRE Sempra

By Rebecca Smith 

California regulators and utility executives are staring down a natural-gas shortage in the Los Angeles area that could trigger up to two weeks of electrical blackouts this summer.

The state's electric grid operator warned Friday that it may call for emergency reductions in electricity use on Monday and Tuesday, when a heat wave in Southern California is expected to push up demand for air conditioning. Without conservation, officials fear power plants could run out of fuel and trigger rolling blackouts.

Though the U.S. is awash in natural gas, the L.A. region is short of the fuel due to the massive gas leak last winter at the state's largest underground gas-storage facility, Aliso Canyon, an event that displaced thousands of people in the nearby Porter Ranch neighborhood.

Southern California is vulnerable to energy disruptions because it relies on a complex web of electric transmission lines, gas pipelines and gas storage facilities -- all running like clockwork -- to get enough electricity. If any piece is disabled, it can mean electricity shortages. Gas is the state's chief fuel for power generation, not coal.

But the pipelines can only bring in about 3 billion cubic feet of working gas a day into Southern California, below the daily demand, which gets as high as 5.7 billion cubic feet.

An analysis by California's energy agencies said the Los Angeles area could suffer localized blackouts on as many as 14 days this summer, unless measures are able to blunt the effect of the gas reduction.

With summer arriving Monday, regulators and utility executives are taking emergency actions. They have identified 18 relief measures, including better coordination of maintenance for gas pipelines and electrical transmission lines, so vital resources aren't down when they are needed most.

Regulators have also given utilities permission to line up unconventional resources, like battery storage of electricity, to take pressure off gas-generating plants. Solar water heating is expected to receive a push in coming months, too.

Michael Picker, president of the California Public Utilities Commission, said the state is making progress on measures to avoid summer problems in L.A., but he remains concerned that the shortage could flare up in winter, when demand for the fuel is biggest.

"I'm still plenty scared about winter," Mr. Picker said.

Marcie Edwards, general manager of the Los Angeles Department of Water and Power, the nation's biggest municipal utility, said she is signing contracts for space on electrical transmission lines to import more electricity because she fears she won't be able to get enough natural gas to keep power plants running.

Ms. Edwards is critical of the region's biggest gas utility, Southern California Gas Co., the owner of Aliso Canyon, for passing the buck to electric utilities to solve the gas shortage problem. She said more should be done to encourage consumers to conserve gas and leave fuel for power generation.

"If people had the choice of getting electricity or gas, I think I know which they'd prefer," Ms. Edwards said.

SoCal Gas said it is encouraging all forms of energy conservation though an $11 million outreach effort and is intent on returning the Aliso Canyon facility to service by late summer.

Though the Aliso Canyon leak was fixed in February, the facility in Los Angeles County remains out of commission while more than a hundred wells undergo a battery of tests to see if they contain hidden defects. It is one of nearly 400 gas-storage facilities in the U.S. that occupy depleted oil fields, aquifers or underground salt caverns.

Mr. Picker said the leak has forced state officials to reconsider the state's dependence on gas and could result in a permanent reduction in the amount of gas stored in the state. He added that other underground storage facilities face more rigorous testing that could result in more wells being removed from operation, cutting overall storage capabilities.

"For planning purposes, I'm assuming Aliso Canyon never comes back," he said. "That's the worst-case scenario, so it's what we need to plan for."

As many as 8,000 Porter Ranch residents had to be relocated at the gas company's expense during the leak, which lasted from October to February.

Although most have returned home, some are refusing until their residences are scrubbed clean of leak residue. In early June, SoCal Gas, a unit of Sempra Energy, said it had lined up environmental cleaning firms to remove contamination, following protocols developed by the Los Angeles Department of Health.

Mark Morris, vice president of Save Porter Ranch, an organization formed before the leak to fight oil drilling in the area, said residents want Aliso Canyon shut down for good.

Few believe the warnings of potential blackouts, he added, saying the last time the state saw such events was during the California energy crisis of 2000-2001 and "it was caused by Enron and market manipulation, not real shortages."

Write to Rebecca Smith at rebecca.smith@wsj.com

(END) Dow Jones Newswires

June 19, 2016 16:47 ET (20:47 GMT)

Sempra (NYSE:SRE)
Historical Stock Chart
From Mar 2024 to Apr 2024

Sempra (NYSE:SRE)
Historical Stock Chart
From Apr 2023 to Apr 2024