California repeatedly warned about spiking gas prices, fragile supply. But fixes never came
California’s power market is teetering on the verge of an unprecedented catastrophe as the nation’s No. 1 wholesale electricity market faces an imminent supply gap and the state’s utilities face a spike in costs for electricity, according to an analysis commissioned by the state and released Monday.
The analysis, conducted by the state’s Independent System Operator, says California is facing a dangerous shortage in natural gas because of a combination of factors, including a shortage in natural gas pipelines, a prolonged and severe drought in California and a dramatic drop in natural gas production around the nation. A supply gap in the next three to five years is inevitable unless the state acts now to encourage the development of new supplies.
On Friday, the California Department of Water Resources announced that it plans to seek a rate increase for its customers next month, possibly as high as 37.5%. It is a move that prompted the state’s Independent System Operator to issue a dire warning that gas prices – which had remained remarkably stable in recent years – could rise much faster than projected in coming months.
“California is facing challenges on an unprecedented scale, and it is unclear what the state’s next move will be,” the report says. “This year is critical because we have to determine whether current policy actions and solutions in response to events of the past two years are adequate to deal with the unprecedented future challenges ahead.”
The state of California doesn’t have a large, mature natural gas supply. The state’s largest utility, Southern California Gas Co., has an 875-mile natural gas pipeline linking its plants near the coast to the vast reserves of natural gas in northern California. But that pipeline has been down for nearly two weeks, and gas in the pipeline is nearly depleted.
A major reason for the gas pipeline problem is the lack of pipeline capacity, which has been a result of the construction of the gas pipeline between Mexico and the U.S., as well as