trending Market Intelligence /marketintelligence/en/news-insights/trending/2uvzawkom_i4xvebtn4laa2 content esgSubNav
In This List

State limits on Aliso Canyon prompt federal concern over power, gas reliability


Despite turmoil, project finance remains keen on offshore wind

Case Study

An Energy Company Assesses Datacenter Demand for Renewable Energy


Japan M&A By the Numbers: Q4 2023


See the Big Picture: Energy Transition in 2024

State limits on Aliso Canyon prompt federal concern over power, gas reliability

The limits the California Public Utilities Commission has placed on the Aliso Canyon underground natural gas storage field have attracted federal attention, even after the state regulator allowed the facility operator to increase gas injections.

In light of a Federal Energy Regulatory Commission staff report on its summer energy market projections, Commissioner Robert Powelson at a May 17 meeting challenged California's approach to overseeing Aliso Canyon.

"I am deeply troubled by California policymakers' refusal to support Aliso Canyon as a reliable storage facility to deal with critical backup storage, not only at the [local distribution company] level but more towards merchant power resources in the market," Powelson said.

Aliso Canyon has been under restrictions since a multimonth leak at the field starting in late 2015. Like the FERC staff, California regulators noted in a May 7 report on summer energy reliability that limited operations at Aliso Canyon and multiple pipeline outages are expected to keep the Southern California Gas Co. system running at less than full capacity. Available pipeline capacity is 2,655 MMcf/d, down from 3,185 MMcf/d last summer, according to the report.

To address some of these reliability concerns and avoid supply disruptions in the coming months, the California Public Utilities Commission on May 10 agreed to allow SoCalGas to accelerate its procurement of gas supplies to inject into Aliso Canyon.

SoCalGas' gas acquisition department estimated that getting 8 Bcf of gas to meet its inventory targets on an accelerated basis would cost $4 million to $8 million. The company said it expects to reach the mandated maximum inventory of 24.6 Bcf of gas at Alison Canyon by June.

Even with the CPUC's move to allow increased injections, Powelson said FERC would keep a close eye on reliability issues in the region. FERC staff named Southern California as a focus for the commission's attention as summer progresses.

"In Southern California, lower-than-average hydro generation may create challenges as natural gas-fired generation, the replacement for hydro production shortfalls in past years, may be limited due to reduced gas storage capacity and local pipeline outages in the region," staff said in a presentation of its report.

The Aliso Canyon facility historically had an inventory capacity of about 86 Bcf, but after the leak from October 2015 to February 2016, California regulators limited the maximum inventory. In asking to accelerate the injections, SoCalGas also asked to raise the maximum to at least 30 Bcf, but the CPUC denied that request.

The company had also asked to be able to draw gas from the field without curtailing customers and to use the field as a supply source to build and maintain inventories at other fields, but the CPUC denied these requests as well. State regulators have required SoCalGas to treat Aliso Canyon as an asset of last resort.

Under once-in-10-year peak demand conditions, the region could see gas curtailments to electric generators, California regulators said. The report emphasized that there is no guarantee operators could import enough electricity to avoid service disruptions. Specifically, the power supply from alternative resources may be down in summer 2018 compared to 2017 because of lower-than-average hydroelectric availability.

Looking beyond summer, state regulators are concerned that gas reliability this winter will suffer if SoCalGas cannot adequately refill its storage in the coming months.

"Without sufficient storage inventory in November, Southern California could see a repetition of last winter, with energy reliability hinging on the vagaries of the weather," the CPUC, the California Energy Commission, the California Independent System Operator, and the Los Angeles Department of Water and Power said in the May 7 report. "Measures to reduce the risk therefore remain necessary."