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San Diego Gas and Electric is trying to get approval for a $600 million project to build a new natural gas pipeline across the county.
The company pitches the new pipeline as a rare chance to increase the safety and reliability of its natural gas system.
Homeowners would likely see small rate increases to pay for it while SDG&E’s large industrial customers could see steep hikes to their bills.
Beyond that, questions from environmentalists, ratepayer advocates and even other utilities will dog SDG&E as the California Public Utilities Commission weighs whether to approve the company’s plan. Those dissenters questioned whether a big new line is needed and suggest the gas company has undisclosed motivations for building it.
SDG&E argues San Diego has been overly dependent on a single major natural gas pipeline and so is uniquely vulnerable to gas outages without a second major line.
Meanwhile, the company is also locked in a sensitive discussion about pipeline safety. If a new line is needed to enhance safety, does that mean the old line it is seeking to replace is dangerous? The company says no, everything is safe now.
Because the demand for natural gas is expected to be flat or even decline in coming years, the company says this could be the last major project of its kind in San Diego.
“This is really the last time we’re going be installing gas infrastructure in this area,” said Douglas Schneider, SDG&E’s vice president of gas system integrity and gas asset management.
That has not stopped environmentalists from scratching their heads about why the company wants to build a bigger pipeline while demand for natural gas may fall.
California lawmakers keep passing stricter limits on greenhouse gas emissions. While natural gas is generally better for the environment than oil or coal, it’s still a major source of climate-changing emissions. SDG&E’s critics argue a new pipeline could end up being a long-term burden for SDG&E customers if other energy sources shove aside natural gas before the line is paid off by ratepayers decades from now.
SDG&E’s application for the new pipeline is pending with the CPUC, which oversees private utilities in California.
Safety and Money
In 2010, a Pacific Gas and Electric natural gas pipeline exploded in the San Francisco suburb of San Bruno. Eight people died and dozens more were injured.
That blast was another wakeup call about the potential dangers of poorly regulated and poorly maintained gas pipelines. The death and destruction in San Bruno prompted new California regulations meant to prevent another tragedy.
Thus, SDG&E now has to do something about a 16-inch pipeline that it installed in 1949, which runs from near the Riverside County line into the city of San Diego.
SDG&E needs to do one of three things with its old line: It needs to test the line to make sure it’s still safe. Or it could replace the line with a new, modern pipeline. Or it could find some way to take the old pipeline out of service. After all, it carries only about 10 percent of the region’s natural gas.
When the company did the math, it decided that it should build a new pipeline.
Testing the old line to make sure it’s safe would involve running water through different segments of the line at a pressure high enough to expose problems. That would cost about $120 million, according to the company’s estimates. If the pipeline turned out to have problems, fixing those and possibly replacing sections of the old line would cost even more.
The costs of building a new and bigger 36-inch line would be about $260 million. So, the company figured, it might be better to just do that. The proposed line would run about 47 miles from the near county line to Marine Corps Air Station Miramar, following the route of Interstate 15 part of the way south.
Yet, the $260 million figure for a new 36-inch line doesn’t include all the costs the company will have to pay. When you add all those up, the project is typically reported to cost about $600 million.
But even that number does not account for the actual costs to ratepayers. In fact, the project will cost gas customers about $2.1 billion over coming decades. Early estimates suggest that residential customers might see their bill increase by just 22 cents per month, but a large wholesale customer might see a particular rate they pay increase by 50 percent.
The new 36-inch line would be safer because it would have to conform to a whole bunch of safety regulations that didn’t exist in 1949.
The new line could also be bigger and serve as a backup should the company have problems with its other major San Diego gas transmission line, a 30-inch line that was built back in the 1960s from near Riverside County across North County until it drops south into the city along a somewhat coastal route.
Yet, SDG&E is straddling a fine line when it talks about the safety of 1949 line it wants to replace. The company needs to convince the CPUC that it’s worth spending hundreds of millions of dollars to build a new line because the old line might not be safe enough. But it needs to do so without freaking out the people who live near the existing pipeline. If that line is truly unsafe, why is it transporting gas now?
This causes the company to issue statements about the old line’s safety that seem to conflict with each, if not in actual substance, then surely in tone.
The CPUC’s Office of Ratepayer Advocates recently argued that there’s no need to replace the old line because it is safe. The company fired back that the ratepayer advocates’ “cavalier disregard of the safety, reliability and cost benefits of the proposed project is startling.”
SDG&E called the advocates’ position “akin to test-driving an older, used car at 120 miles per hour to conclude that it is suitable for highway driving on a daily basis, even though it lacks all the modern safety features and has limited remaining life.”
Those comments make the old pipeline sound pretty darn dangerous.
But when Voice of San Diego asked whether anyone living along the current line should feel unsafe, we got an unequivocal “no,” from Jimmie Cho, the company’s senior vice president of gas operations and system integrity.
“I want to make that very clear,” he said.
The CPUC recently ordered SDG&E to lower the operating pressure of the old line for reasons that have not been fully disclosed. Pipelines are safer if the gas flowing through them is doing so at low pressures.
After the regulatory agency ordered the company to lower pressure on the old line over the summer, it said available safety information about the line “does not show conclusively that (the old line) is unsafe for any purpose, nor does it show conclusively that it is safe as it is currently being used.”
Reliability and Flexibility
Although outages with its current gas system are rare, SDG&E says another benefit of a new and bigger line is increased reliability for the region. Not only is gas here used in stoves and water heaters, but it’s a major source of electricity.
SDG&E says San Diego is overly reliant on its 30-inch line, the one that delivers 90 percent of the region’s gas. So, a new 36-inch line could come in handy.
The company offers a counterintuitive argument that San Diego will need gas now more than ever because gas is now being used less than ever. Gas-fired power plants provide a backup for wind and solar energy when the sun isn’t out or the wind isn’t blowing. Since we’ll rely more on renewable power, their thinking goes, we also need a more reliable backup plan.
With a new, bigger pipeline, “You gain the flexibility to move more gas during the time periods when you need it,” said Estela de Llanos, SDG&E’s director of major project development.
Environmentalists and ratepayer advocates are not buying this argument.
The Sierra Club argued in one CPUC filing that SDG&E “grossly skews the cost-benefit analysis” it did that found it would be a better to build a new line than to try to keep its smaller, older line in service. The environmental group said “the need for additional gas transmission is highly unlikely given California’s aggressive greenhouse gas reduction trajectory.”
Major gas customers are concerned that the expensive new line will jack up rates even as demand for gas goes down.
“We do not want to see the construction of assets that are going to be extremely expensive and are most likely going to be white elephants – stranded assets – if they are to be constructed,” said Norman Pedersen, an attorney for the Southern California Generation Coalition.
The coalition is a front group for the Imperial Irrigation District and the Los Angeles Department of Water and Power, among other public entities that use energy. The Los Angeles public utility, for instance, is a large customer of Southern California Gas Company, which operates major pipelines in the region, including SDG&E’s. SoCalGas and SDG&E have the same parent company, San Diego-based Sempra Energy. If SDG&E and SoCalGas build a new pipeline, Los Angeles will pay higher rates.
SDG&E and SoCalGas say that San Diego is the only major metropolitan area in the country so reliant on just one major gas line – the existing 30-inch line, which was built back in the 1960s.
The critics of a new 36-inch line project say there are other ways to get gas into the region, including an existing series of pipelines that would allow SDG&E to bring natural gas up from across the Mexican border. The company says it could get gas that way, but the gas is more expensive.
Several opponents of the new line speculate that it’s actually designed to help move gas the other way across the border: They have suggested that SDG&E’s parent, Sempra, wants to ship natural gas to Mexico.
Sempra has been talking about converting a natural gas importing facility it has on the outskirts of Tijuana into a facility it can use to export gas. Because of a natural gas boom in the United States that has created cheap and abundant supplies, there’s currently little reason to bring gas into the country from abroad and perhaps quite bit of profit to be made exporting gas to other countries.
“Certainly in this instance I think you can speculate that the Sempra family of companies would be interested in augmented transportation to get gas to Mexico,” Pedersen said.
That “augmented transportation” could mean bigger gas pipelines in Southern California, pipelines like the new one SDG&E wants here or another pipeline that it and SoCalGas recently tried to build that was rejected by the CPUC.
SDG&E officials have dismissed the Mexico speculation as an unfounded conspiracy theory. They note they are legally prevented from doing such a thing unless it is carefully scrutinized, thus a secret plan for a pipeline path to Mexico would be “impossible.”
“As a practical matter, SoCalGas and SDG&E know nothing more about what Sempra may be planning for Mexico” than anyone else, the two companies said in a filing in another CPUC case where the same speculation came up. The two companies said they only know “just what we read in the newspapers and trade press.”
Even though SDG&E considered and rejected other gas and battery projects before it proposed the new 36-inch pipeline, it says it’s open to other ideas and is looking forward to hearing what the CPUC thinks about its proposal.
“It’s not on us to just say, ‘We’re going to do this,” de Llanos, SDG&E’s director of major project development, said. “The commission has to review, interveners need to weigh in, the public needs to weigh in to make sure that is the prudent thing to do. We know it’s the right thing to do, but it has to go through a process.”
Andrew Keatts contributed to this story.