New CPUC Rulemaking Will Look at Natural Gas Reliability and Planning Issues

Citing the need to address emerging issues affecting California’s natural gas infrastructure and markets, the California Public Utilities Commission (CPUC) has issued Rulemaking 20-01-007, to “establish policies, processes, and rules to ensure safe and reliable gas systems in California and perform long-term gas system planning.” The new rulemaking will be conducted in three phases, focusing on separate areas of concern.

The first phase (Track 1A) will examine reliability standards for the gas transmission systems to determine whether design changes are needed to address current pipeline capacity issues in Southern California and other reliability issues. Issues will include review of Southern California Gas and Pacific Gas and Electric Company’s current backbone and local transmission systems and storage capacity, and whether current standards need to be updated in light of climate change impacts on winter demand, pipeline outages, and storage leaks.

The second phase (Track 1B) will focus on market structure and regulations. Gas shortages can affect supply and prices in wholesale electricity markets, and the CPUC is concerned that the current market structure may not provide gas-fired generators sufficient incentives to pursue long-term contracts that might mitigate the potential for price spikes. The CPUC will identify and evaluate opportunities for mitigating the risk that gas supply shortages pose to electric reliability and market prices.

The third phase (Track 2) will address long-term natural gas policy and planning. California’s laws establishing greenhouse gas reduction requirements and related policy initiatives such as building decarbonization programs are expected to reduce the demand for natural gas in California over time. At the same time, the state’s gas infrastructure will continue to be used, making reliability a continuing priority. To address these expectations and needs, the Commission will evaluate demand scenarios and develop a long-term planning strategy.

Initial comments are due within 30 days after issuance of the rulemaking (February 26) and reply comments 15 days later. A prehearing conference on Tracks 1A and 1B is planned for March 2020. The jurisdictional natural gas distribution and storage companies are named as respondents, and the Commission encourages other parties, including the California Independent System Operator, the large investor owned electric utilities, and municipal utilities to participate.

Contact: Ron Liebert or Andy Brown