California scrambles after Aliso Canyon closure

OREANDA-NEWS. April 06, 2016. Los Angeles' municipal electric utility plans to step up use of hydropower resources and curtail physical natural gas hedging and wholesale power sales to reduce reliance on the southern California gas grid this summer in response to the loss of the Aliso Canyon storage field.

State agencies and electric utilities are scrambling to address reliability issues on the gas and power grids in southern California ahead of the summer and next winter after SoCal Gas halted a major, four-month gas leak at the Aliso Canyon site in February.

The leak resulted in state agencies ordering SoCal to end injections and withdrawals at the site until SoCal inspects all 114 wells to verify that the site can be operated safely. SoCal officials are unable to predict if the site will be unavailable for months or years.

Aliso Canyon plays a critical role in supplying gas to power plants, refiners and large agricultural processing plants in the Los Angeles basin.

The facility represents 63pc of SoCal's storage capacity and 51pc of its daily withdrawal capacity. The 86 Bcf (2.4bn m?) facility supplies gas to 17 Los Angeles-area power plants with combined capacity of 9,800MW.

Amid plentiful US gas production, California and other Pacific states are the only US region where gas in storage has fallen below prior-year levels as Aliso Canyon gas was withdrawn to reduce field pressure.

A report from four state agencies estimates potential curtailment of gas this summer could be severe enough to interrupt electric service on 14 or more days this summer for millions of California residents.

Hot weather, pipeline maintenance, power-grid problems, limited renewable generation and a myriad of other factors could increase that risk, regulators warned.

A draft plan prepared by the staff of the California Public Utilities Commission (PUC), California Energy Commission, the California Independent System Operator (ISO) and the Los Angeles Department of Water and Power (LADWP) offers 18 measures to bolster reliability this summer.

The actions will not eliminate the risk of rotating power outages this summer, PUC president Michael Picker said on a call.

The agencies expect gas demand to peak this summer in the basin at 3.21 Bcf/d. Nearly 61pc of that amount, 1.94 Bcf/d, is needed to supply power plants, particularly in the late afternoon when electric demand continues to rise after California's abundant solar generation falls.

Refiners account for 16pc of gas demand and often sell electricity into the market.

About 40pc of the power generation in the basin is owned by LADWP. Its gas use ranges between 200mn-400mn cf/d and averaged 141mn cf/d during summer 2015. The utility, the largest US municipal, said 2pc of its power last year came from hydro as a drought continued across the state.

The report said LADWP has only limited capability to shift load from its gas-fired resources because of its limited ability to import power into the basin from other areas.

"Saving electricity is the best save gas," said LADWP general manager Marcie Edwards.

All electric utilities in the region will need to expand efficiency and demand-response programs to curb residential and commercial peak-hour power use.

Other measures in the draft report include prudent use of the remaining 15 Bcf of gas stored at Aliso Canyon, implementing tighter gas balancing rules, changing timing and modifying operational flow orders (OFO) and providing more market information.

The grid agency is working to increase electric and gas coordination and to establish specific gas allocation among power plants ahead of curtailment.

The Southern California Public Power Authority which represents small cities that own other affected generation urged regulators to consider phasing-in operation of Aliso Canyon wells that are deemed safe by the Department of Oil, Gas, and Geothermal Resources.

This approach may support "the highest priority of ensuring public safety – both safety for local residents near the facility and safety concerns associated with impacting power supply reliability for the broader region this summer and beyond," the trade group said.

On a separate call yesterday, power generators expressed concern over SoCal's proposed 5pc balancing rule. Many support use of SoCal's existing OFO procedures and daily imbalance trading, but said the best solution would be a timely return of Aliso Canyon operations.

Shippers, power-plant owners and manufacturers offered alternate proposals that SoCal officials said they would consider as part of a separate PUC proceeding.