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Enron Mail |
From today's Gas Daily:
***Breathitt wants more attention on Calif. gas Although the energy spotlight has been on California's electricity crisis, the number of California gas issues at FERC is continually increasing, signaling the need to focus on the gas side of the equation, a FERC commissioner said last week. "[T]here is volatility in the gas markets as well as the electric markets," FERC Commissioner Linda Breathitt said at the American Gas Association's FERC Natural Gas Regulatory and Market Issues Seminar last week in Washington, D.C. And the cost of gas, she said, is the component that has the biggest influence on the cost of electric generation. Two issues pending at FERC are whether to re-impose price caps on secondary market transactions and whether to cap prices on gas sales, Breathitt said. In addition, FERC recently issued an order to help remove obstacles to increased energy supplies into the West (GD 3/15). In the order, FERC sought comments on the need to provide rate incentives for projects that would make additional capacity available by this summer on constrained pipeline systems. "I believe that if the commission does provide incentives, we should be very precise regarding the activity we are encouraging and the incentives we will be willing to consider, if at all," Breathitt said. The commissioner also voiced concern over a California issue that sits at the state level -- intrastate pipeline facilities. California, she said, needs to assess whether its intrastate system is adequate to take gas from the border to its market. "I am worried that where there is insufficient takeaway capacity, FERC's actions to increase capacity to the border may result in problems, such as prorationing," Breathitt said. Meanwhile, Breathitt suggested local distribution companies in California need the ability to use risk management tools. Policies should be in place to give gas buyers an incentive to use such tools, including price hedging and the efficient use of storage, she said. But regulators should be careful in noting the difference between hedging to reduce exposure to price volatility and what Breathitt called "mere speculating." While hedging can be used to decrease uncertainty, speculating to beat the market can actually increase the possibility of risk, she said. Regulators in California and other states should look into the benefits of reducing gas buyers' dependence on the spot market. "A balanced portfolio of long- and short-term contracts makes a great deal of sense when spot prices are at the extreme levels of the past year," she said. CD
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