Gas Cutoff Next Month, PG&E Warns Utility describes a 'doomsday scenario'

Bernadette Tansey, Rachel Gordon, George Raine, Chronicle Staff Writers Sunday, January 28, 2001 ©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/01/28/MN188121.DTL

Hundreds of thousands of residents of cities including San Francisco, Sacramento and Santa Cruz are likely to have their natural gas cut off as early as mid-February, if federal or state authorities don't rescue PG&E from suppliers' refusal to provide gas, the utility warns.

Homes and businesses could lose gas deliveries for heating, cooking and manufacturing unless Pacific Gas and Electric Co. can assure suppliers of payment, PG&E said in laying out a "doomsday scenario" for state regulators.

The interruptions could last for weeks or months even after the flow of gas is restored, because PG&E workers would need to visit each home to relight pilot lights. Customers who got tired of waiting and tried to do it themselves would risk blowing up their homes, PG&E warned the California Public Utilities Commission.

This energy Armageddon has been averted so far by a temporary order issued by former Energy Secretary Bill Richardson and extended by his replacement in the Bush administration, Spencer Abraham. But the emergency order, requiring gas suppliers to continue to serve California utilities, expires Feb. 6, and the Bush administration has signaled a reluctance to extend it, saying the requirement is threatening to spread the energy crisis to other Western states.

San Francisco, Sacramento, Santa Cruz, Sonoma, Santa Rosa and Fresno would be among the first in line for the cutoffs because they are distant from the main pipelines that carry natural gas into California from the Oregon and Arizona borders, PG&E spokeswoman Staci Homrig said Friday. In the Bay Area, major branches of the pipelines run from Antioch down to Milpitas.

Comparing the pipeline system to the human body, Homrig said PG&E will clamp off peripheral regions to preserve flow to the trunk, head, arms and legs.

"We'd begin lopping off fingers and toes to protect the largest part of the system," Homrig said.

San Francisco officials were warned Tuesday, the day Abraham was considering whether to extend the order to suppliers, that the city could have its gas cut the next day. With a similar deadline coming as early as a week and a half, San Francisco is trying to figure out how it will keep the heat on at 13 public facilities for which it is directly responsible.

Those include the city's jails, hospitals, community college campuses and San Francisco International Airport. Seven hundred homes on Treasure Island are also the city's responsibility.

And no one wanted to think about the ramifications of hundreds of thousands of people losing gas to their homes.

"For residential customers who lose service, home furnaces, stoves and water heaters would shut down," PG&E gas systems director Kirk Johnson said in an emergency filing earlier this month to the state PUC. "Customers, particularly the young and elderly, would face potential health impacts from the lack of heat, hot water, cooking facilities and other services for a significant period of time."

Because PG&E has already drawn heavily on its natural gas reserves, serious shortages could result within days if major suppliers back out, or even if the weather turns cold, Johnson said.

"Even under optimistic conditions, a gas shortage is likely by the middle of February," Johnson said. Shortfalls would trigger "a downward spiral of events from which it would be extremely difficult for the state to recover."

PG&E would first impose reductions of gas use on "noncore customers" -- those who buy natural gas from suppliers other than PG&E but who rely on the utility to deliver their gas through its pipelines.

Those noncore customers include big industrial firms like power plants and refineries, which might have to halt production, causing supplies of electricity and gasoline to nose-dive.

"Restoring gas service to the system once it is lost is neither quick nor easy," Johnson told the PUC, because PG&E crews would need to go door-to-door, relighting pilot lights. Crews could restore service to only about 10,000 to 20,000 of PG&E's 3.9 million customers per day, and the process could take weeks or months.

"Customers who improperly perform these tasks instead of waiting for trained personnel risk causing explosions and seriously injuring themselves and their neighbors," Johnson said.

San Francisco and other cities would have enough to deal with even without residential customers' problems.

"This is serious," said Laurie Park, acting manager of the city utility's Hetch Hetchy Water and Power system.

The city's jails and two hospitals -- Laguna Honda and San Francisco General -- could convert their natural gas boilers to use diesel fuel. The jails couldn't use it for cooking, however, meaning inmates would have to eat cold meals.

And Laguna Honda, a long-term care hospital with a large population of seniors, would have to find an alternative to take care of 30,000 pounds of laundry a day. The hospital might use disposable diapers for the incontinent patients rather than the thick cotton padding now in use.

At the airport, "all the restaurants would lose their gas and they'd probably have to close," said Marla Jurosek, director of retail services for the San Francisco Public Utilities Commission.

Mayor Willie Brown said he thought it would be suicidal for PG&E to carry through on its threat, no matter how dire its financial condition.

"PG&E is not that stupid," he said, saying a cut would encourage creation of a municipal utilities district in the city. "Cutting the supply would be an irreparable breach that would almost ensure a vote of the people of this city to run their own power operations."

Officials in Sonoma, Santa Cruz and Sacramento counties -- all distant from main gas lines -- said they will also rely on diesel-powered backup generators for public facilities.

Sonoma County has set up diesel tanker trailers on site to serve its jail in Santa Rosa, said Chris Godley, county deputy emergency services coordinator.

But Park said converting to diesel fuel, even temporarily, is "a highly undesirable option," because of the amount of air pollution it causes.

Behind the doomsday scenario is PG&E's uncertainty over whether it will have enough gas next month. Before the Energy Department's initial order took effect Jan. 19, three of PG&E's largest suppliers that provide a total of 20 percent of its gas had stopped deliveries, and three more were threatening to follow suit unless PG&E could pay cash in advance.

Homrig said the suppliers had refused to extend routine credit because PG&E had started to default on some of its bills from electricity providers. Both PG&E and Southern California Edison say they are piling up billions in debt because the price of electricity is soaring, while rate caps are still protecting customers from paying the full cost of the power purchased by the utilities.

But Homrig said the natural gas suppliers have been paid on time, because with no rate caps in place for gas, customers are covering the full cost. Homrig said PG&E could continue to pay its bills to gas suppliers as customer payments come in. But the utility cannot come up with the $300 million to $400 million in cash to pay in advance, she said.

However, at least one supplier that halted service maintains that PG&E was in arrears.

"They had stopped paying according to the terms of the contract, and after proper notice we stopped delivery," said Ron Wirth, a spokesman for Western Gas Resources of Denver.

Western's president, Lanny Outlaw, said PG&E and state authorities should solve the problem without jeopardizing his firm's finances.

"We have difficulty understanding how our company, our employees and our shareholders can be expected to bear any loss as a result of these orders," Outlaw said.

In its application for emergency action, PG&E is asking the state PUC for permission to put gas suppliers first in line for payment ahead of other creditors, to reassure them they won't be stiffed. The utility is also asking the commission to force its more creditworthy counterpart, Southern California Gas Co., to act temporarily as its purchaser of natural gas to ensure continuing supplies.

The commission will take the matter up Wednesday.

SoCalGas is not eager to do so. It told the PUC it would go to federal court to fight any order forcing it to sell gas to PG&E, which it calls "admittedly insolvent."

Such an order would only worsen California's energy crisis "by imperiling the financial stability of SoCalGas and likely raise the cost of service to its customers," said SoCalGas spokeswoman Denise King.

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NATURAL GAS DELIVERY SYSTEM 1) Natural gas rises to the surface and is gathered via wells.2) Gas is processed to remove sand, dust and water. It is also odorized to be detectable by smell. 3) Stations compress gas for storage and transportation.4) Underground high-pressure trans-mission lines create a distribution system.5) When reaching the customer, the gas is decompressed and ready for use.

Interruption in service -- Areas farthest from a main transmission line would be first to have interruptions in gas supply. -- Restarting the system would involve repressurizing the gas lines. Utility workers would have to relight pilot lights for each customer before the gas can return. Those that lose gas first would probably be the last to regain use.

Source: PG&E

-- Martin Thompson (mthom1927@aol.com), January 28, 2001