Horses in Diapers Help Mexico's Beach Clean-Up

About half of you now will be enjoying reductions in your electricity bills, while us poor souls in the PG&E area are looking at high rates for the next 9 years if the proposed bankruptcy settlement is adopted, for exactly the same circumstances. Southern California Edison will cut it’s rates by an average of 13% on Aug. 1, eliminating more than half the increase in electricity costs that resulted from the state's energy crisis of 2000-2001.

Edison incurred more than $3 billion in extraordinary costs purchasing electricity on behalf of its 12 million customers during the energy crisis and raised rates substantially in mid-2001. As a result of a settlement with state officials late that year, the company has been permitted to slowly recover $3.6 billion from consumers through their monthly bills. With that task now complete, the utility is in a position to reduce rates by an annualized $1.2 billion. The company hopes to restore shareholder dividends in 2004.

Rate reductions will range from 7.6% for some residential customers to as much as 25.7% for big users including oil refineries and steel mills. The average reduction for big electricity users will be 19%, eliminating more than half the run-up in rates created by the crisis. Still keeping prices up is the fact that the state signed billions of dollars in power contracts that are having the effect of keeping rates at a high level.

Once the reductions take place, many big users will pay about seven cents per kilowatt hour for service from the LADWP, eight cents for Edison service and more than 12 cents for Pacific Gas & Electric service.

Other moves also could affect ratepayers, including an Edison proposal to hike rates 3%, or $286 million; a $1-billion rate cut proposal by Davis, which would include about $400 million for Edison ratepayers; and pending claims against power-generating companies accused of illegally manipulating the state's energy market.

Utilities Back Into Generation Construction- Edison/Mountainview

Southern California Edison announced a plan to build its first power plant in 25 years. Edison has signed an option to acquire a partly built, 1,054-megawatt plant near Redlands. If the purchase wins approval from state and federal regulators, Edison would finish building the plant, which could come on line by late 2005.

Construction was begun by AES Corp., which also owns the power plant on Pacific Coast Highway in Huntington Beach. AES Corp. began construction of the Mountainview plant in 2001 at a projected cost of $800 million. But the Virginia company halted work last year and sold the project to InterGen of Bethesda, Md., a joint venture between Royal Dutch/Shell Group and Bechtel Group Inc. Work on the Redlands plant ceased after AES ran into financial difficulties.

            However, Edison has proposed a rate structure that, guess what, advantages them over the ratepayers. The structure proposed by Edison that would keep the power plant out of ratepayers' hands and the electricity sales away from state regulatory control for 30 years. In addition, all of the costs associated with the recently announced project are being held confidential for now, making it difficult for outsiders to judge what the price of the electricity might be and whether it would mean lower bills for customers.
            The plant, called Mountainview, would be financed by Southern California Edison but built and owned by a utility subsidiary that would contract to sell electricity to Edison for three decades. Such wholesale power deals fall under the authority of the Federal Energy Regulatory Commission, which critics say is often ineffective when it comes to protecting California consumers.
            According to Edison, the proposed deal's unique structure is intended to compensate for the utility's poor credit rating, which tumbled into junk-bond territory during the energy crisis of 2000-01. Edison plans to sell bonds to finance the deal, and says Wall Street skittishness over Edison's credit and the California energy business could squelch sales. By establishing a firm 30-year contract, approved by the state but overseen by federal regulators, Edison believes investor concerns would be eliminated. But for this to happen the contract would have to be administered by a subsidiary, because Edison by law is regulated by the California PUC. Both the PUC and FERC must approve Edison's plans for Mountainview.
          Under its proposal, Edison would finance construction with debt securities that already have been authorized by the PUC. After the plant is built, an Edison subsidiary would sell the power under a contract to the utility, with the price tied to the cost of producing the electricity plus a return on investment for Edison. As a result, Mountainview would not become part of the collection of utility assets known as Edison's "rate base," which means that state regulators, after an initial review and approval of contract terms, would not be able to change the price of electricity paid by Edison customers or the rate of return for Edison shareholders.
            Smutny-Jones, executive director of the Independent Energy Producers Assn., said independent generators have proved that they can build plants more cheaply than regulated utilities. What's more, he said, a 30-year contract such as the one that Edison is proposing for its subsidiary would allow any developer to complete the numerous power plants that have been put on hold since 2001. "It seems to me that every step of the way it's the ratepayer that is bearing the risk" of building and operating Mountainview, Smutny-Jones said.

Utilities Back Into Generation Construction-SDG&E/Otay Mesa?

The president of the California Public Utilities Commission encouraged San Diego Gas & Electric to consider buying a stalled Otay Mesa power plant project being developed by Calpine Corp. CPUC President Michael Peevey said the San Diego utility should seriously consider buying new power plants in the county as an option to securing more electricity for the region, along with simply buying power produced by other companies. Peevey noted that San Diego's existing plants are aging and in need of replacement. He also underscored recent commission decisions allowing utilities back into the business of generating electricity.

The facility's planning and construction began during California's deregulation experiment. Calpine assumed it would compete in the new market and sell electricity into a statewide power pool. But with the collapse of deregulation, Calpine found itself building a plant with only one logical buyer SDG&E. The San Jose company, moreover, has been unable to secure the roughly $300 million in financing needed to complete the project without having an agreement to sell the facility's electricity.

To secure that power sale agreement, Calpine this year asked the CPUC to order SDG&E to enter into expedited negotiations. SDG&E, however, chose to satisfy its expected shortfall about 69 megawatts in 2005 by putting out an open request for proposals for additional power.

The Otay plant is seen by consumer advocates and environmentalists as a possible replacement for the South Bay Power Plant in Chula Vista.

New Power Plants Operational

Sempra Energy Resources, the power generation subsidiary of Sempra Energy, announced that the company's three new, state-of-the-art power plant projects in Arizona, California and Mexico, are now operational. Together, they produce about 1,500 megawatts (MW) of power to help meet the energy needs of the Pacific Southwest. The natural gas-fueled plants, which represent a total combined Sempra Energy Resources' investment of more than $1 billion, include: Mesquite Power near Phoenix, which is sending the first 625 MW of its total 1,250 MW of production into the grid; Elk Hills Power, a 550 MW facility near Bakersfield, Calif., jointly owned by Sempra Energy Resources and Occidential Petroleum Corporation; and Termoelectrica de Mexicali (TDM), a 600 MW facility near Mexicali, Mexico. The second half of Mesquite Power is expected to go into operation in late 2003.
Kern County's 550-megawatt Elk Hills power plant recently finished final testing and is now injecting electricity into California's power grid. The $400 million project located near Taft is a joint venture of Sempra Energy Resources and Occidental Petroleum Corp. Official operation began July 24. Some 23 full-time workers operate the facility.

The Elk Hills plant is one of several power facilities in various stages around Kern County.

--Earlier this year, the 1,124-megawatt La Paloma plant near McKittrick fired up. La Paloma is a project of PG&E National Energy Group.

--The Sunrise Combined Cycle plant near McKittrick, developed by ChevronTexaco and Edison Mission Energy, recently finished its second phase of construction and is now pumping out 585 megawatts.

--Calpine's 750-megawatt Pastoria plant near Lebec is almost half finished and is expected to be operational in June 2005.

--The 500 megawatt Midway-Sunset plant being developed by Aera Energy and Edison Mission near McKittrick is on hold, but is scheduled to go on line in early 2006.

Deal to Use Seawater at Diablo Canyon Collapses

A deal to allow the continued use of seawater to cool Diablo Canyon nuclear power plant has collapsed. The Central Coast Regional Water Quality Control Board withdrew its support for a settlement with the utility to offset the damage the plant does to the marine environment in exchange for a renewal of its license for the next five years. The nuclear plant will continue to operate under the old license.

In March, the nine-member board approved a settlement, called a consent judgment, that would have required PG&E to conserve 2,000 acres of land north of the plant and pay more than $4 million toward marine restoration projects. However, support for that plan deteriorated significantly after many experts, including a panel of three marine biologists the board had hired as consultants, said the deal is not sufficient to make up for the damage the plant does to the ocean.

The board voted unanimously to postpone action on the item to an unspecified future meeting, in effect withdrawing its support. The board members also told staff members to investigate other ways to offset the damage of the cooling system as well as possible enforcement action against PG&E. They also said they want a working group convened to advise them on the technical issues.

The plant's huge cooling system sucks in and discharges more than 2 billion gallons of seawater a day. The water is 20 degrees warmer when it is released back into the ocean. Scientists said this massive flood of warm water had degraded the ecosystem of the discharge cove. The system also kills significant numbers of larvae of near-shore fish and crabs.

Board member Daniel Press of Santa Cruz said conserving nearly seven miles of coastline does nothing to replace the lost larvae and damage from the warm water.

Jeffrey Young of Santa Barbara said any benefit of a conservation easement on the parcel will not be realized for decades because the property will stay undeveloped and off-limits to the public for at least as long as the power plant is in operation. The board was unanimous in wanting to see ocean monitoring continue at the plant. Years of studying sea life near the plant has given scientists a large data- base of information.

Under the now-defunct deal, that monitoring would have ceased. Many board members said continued monitoring would be helpful in determining if future marine enhancement projects are working.

Moss Landing Fire Due To Worker's Torch

A spectacular blaze July 10^th at the Moss Landing Power Plant started when hot bits of metal from a worker's 5,000-degree torch ignited 1.2 million gallons of oil.

A team of workers was using a propylene torch to cut away sections of the oil tank's metal roof, even though Duke Energy's permits for demolishing the tank specifically forbade the use of welding tools on oily surfaces. A Duke spokesman said the company is investigating whether its contractor on the job, Earth Tech, was using proper procedures to dismantle the tank.

The fire started as workers scrambled on the roof of a 21-million-gallon fuel oil tank. The roof was floating atop 1.2 million gallons of heavy fuel oil that formed a thick, 18-inch paste on the bottom of the tank. The workers peeled away 6- by 12-foot sections of the roof using a cutting torch, chains and a small bulldozer. As the workers cut away the sections with the torches, the bulldozer pulled the metal plates back. Duke's own fire and safety assessment prohibited workers from using welding tools on the tank until its surfaces were cleaned thoroughly.

At some point, flaming bits of metal, called slag, dripped down from a section of roof as workers cut it away, igniting the oil below. A fire safety crew on the roof tried to put out the smoldering oil, but spraying water didn't stop the blaze's spread across the tank. What kind of a fire safety crew sprays water on an oil fire?

According to a Duke safety plan, improper use of water on fuel oil may cause a fire to spread, or "flash back." "They heard what they called a whoosh” and then the workers fled.

More than 100 firefighters worked for 24 hours to put the fire out. If Duke or Earth Tech is faulted, the companies could be required to pay for the cost of extinguishing the fire.

Judge Approves Shipments of Mexican Electricity to United States

A San Diego federal judge refused to halt shipments of electricity to the United States from two new power plants in Mexico, striking a blow to an environmental group that sought to shut off the cross-border power flow. Judge Irma E. Gonzalez said the plants near Mexicali can continue to pump power across the border while the U.S. Department of Energy works to come into compliance with the National Environmental Protection Act.

The Border Power Plant Working Group went to court seeking to stop electricity from flowing over power lines connecting the Mexicali plants to the Southern California power grid, among other measures. The group argued that the Energy Department violated federal environmental laws when it issued permits for the lines.

Gonzalez found that the group failed to prove that shipping power over the lines would do substantial environmental harm during the year she gave the Energy Department to comply with the federal law.

Gonzalez's ruling is the latest salvo in a complex battle over power plants in Mexico that supply electricity to the Southwest. Critics contend energy companies are building power plants just across the border to avoid tough U.S. environmental laws.

In January, the Border Power group sued the Department of Energy and the Bureau of Land Management, claiming they failed to comply with National Environmental Protection Act standards when they issued permits for power lines.

Environmentalists claim the plants will damage the fragile Salton Sea ecosystem and hurt air quality in Calexico and Imperial County through emissions of ammonia and carbon dioxide. Plants built in Mexico avoid the state requirement that companies offset or reduce pollution from other sources when they build new facilities. The offset requirement can be among the most difficult to satisfy for California plants.

On May 2, Gonzalez ruled that the Energy Department acted illegally by performing an inadequate environmental review when it issued permits for the power lines.

Although the Border Power group and its allies, Earthjustice and Wild Earth Advocates, wanted a litany of tough measures, Gonzalez found there was little evidence to support claims of immediate environmental harm. The May 2 order remains in effect, so the Energy Department will have to do a better job of justifying the permits for the power lines. And, Gonzalez maintained jurisdiction over the matter so if air pollution or water quality problems crop up, she can take measures to stop them.

Sempra said the company voluntarily built its Mexicali plant to meet California's tough air-quality standards. Sempra officials believe the plant's efficiency helped pave the way for the judge's ruling. If power were cut off from the plants, replacement power generated at less-efficient plants would cause more pollution, he said.

ENVIRONMENT

Appeals Court Upholds EPA Action on Farm Equipment
The ruling by the Ninth U.S. Circuit Court of Appeals in San Francisco upheld Environmental Protection Agency actions that could lead to curbs on emissions from irrigation pumps and feed lots at large farms. The decision has its greatest impact in the San Joaquin Valley, home of some of the state's dirtiest air and its highest childhood asthma rates. It also increases pressure on the Legislature to follow the federal agency's lead and repeal a decades-old state law exempting agriculture from state and regional clean-air standards. Failure to repeal the law by next spring could cost California billions of dollars in federal highway funds.

California has exempted major agricultural sources of air pollution from clean-air regulations since at least the 1950s and is the only state with such an exemption.

Because of the exemption, state and regional clean-air plans cannot include controls on sources of non-vehicle emissions from large farms, such as fumes from diesel-driven irrigation pumps and animal feed lots.

Environmentalists blame unregulated farm pollution for worsening air in the San Joaquin Valley, which, according to the American Lung Association of Central California, now includes three of the nation's four smoggiest urban areas: Bakersfield, Fresno and the Tulare-Visalia-Porterville area. A recent survey found that one in six Fresno County children suffers from asthma, the highest rate in the state.

The EPA was sued by environmental groups after it approved a California plan in December 2001 that regulated all major stationary sources of air pollution except farms. The EPA settled the suit in May 2002 by placing California agriculture under federal regulation, but it was then sued by the California Farm Bureau Federation, which claimed the federal action was illegal.

In the Appeals Court 3-0 ruling, the appeals court said the EPA's move was required by the federal Clean Air Act, which contained "Congress' unambiguously expressed intent that no major source of pollution be exempted." Although the ruling effectively ends California's agriculture exemption, it does not change state law, which still contains the exemption. The EPA has set deadlines for the state to repeal the law or face economic penalties. If a repeal is not adopted by Nov. 13, the federal government plans to order California communities that allow new industrial plants or other sources of pollution to eliminate other sources that produce twice as much pollution. Six months later, the EPA would freeze federal highway funding to the state.

Another One Bites The Dust

Merchant energy company Mirant Corp. filed for Chapter 11 protection in U.S. Bankruptcy Court in northern Texas, after failing to come to terms with its creditors before a crucial debt-repayment deadline. Mirant, based in Atlanta, and 44 subsidiaries, including its flagship Mirant Americas Generation LLC, listed $20.6 billion in assets and $11.4 billion in debt. It also said that as of July 11, it had $1.17 billion in total cash, and had secured commitments, pending court approval, for $500 million in debtor-in-possession financing.

Marce Fuller, president and chief executive of Mirant, said in an interview that the company had little choice but to seek bankruptcy protection after its lead agent banks failed to support its restructuring plan. That plan called for bondholders to swap $1.45 billion of unsecured notes maturing in the next three years for secured bonds of equal value maturing in five years. It also called for the restructuring of about $3.5 billion in bank loans coming due through 2006. Agent banks include Citigroup Inc.'s Citibank and Credit Suisse Group's Credit Suisse First Boston. Other large unsecured creditors listed in the bankruptcy-court petition are State Street Bank & Trust Co., Bear Stearns Co.'s Bear Stearns Securities Corp., J.P. Morgan Chase & Co., U.S. Bank National Association and Hypovereinsbank. Some of these institutions hold bonds on behalf of others.

The court gave Mirant interim approval to honor all its contracts through the bankruptcy process, a protection that will apply to only those counter-parties that don't terminate trading and marketing arrangements as a result of the Chapter 11 filing. Ms. Fuller said that Mirant has spoken to several of its customers and trading partners and received expressions of support.

Mirant is the just latest in a string of once high-flying vendors of electric power to be thrown into bankruptcy protection. Some, including Calpine Corp. Reliant Resources Inc. and AES Corp., have managed to refinance, but only at the cost of pledging most of their assets. Others, including PG&E Corp's National Energy Group unit and NRG, a subsidiary of Xcel Energy Inc., haven't been able to come to terms with lenders and have filed for bankruptcy court protection in recent weeks.

Why is this important for California? Because Mirant was the builder of two desperately needed power plants in the San Francisco Bay area, the 530 MW Contra Costa power plant and the 540 MW Potrero expansion. Which means no new generation for the Bay, and the old, dirty, inefficient Hunters Point and Portrero facilities will be worked even harder.

NATURAL GAS

Asian Suppliers May Fill US LNG Demand

Research by Platts Power finds that economic and political problems in the South American countries will likely lead to projects in Indonesia, Malaysia, and Russia’s Sakhalin Island fulfilling LNG demand in West Coast Mexico and California. This will occur even though Andean natural gas suppliers in Bolivia and Peru have a geographical advantage over Asian suppliers. Given their large reserves, the debate used to hinge on whether Bolivia or Peru was going to win the race to supply liquefied natural gas to California and Mexico’s, however, political indecision in Bolivia over whether to export gas from Patillos in Chile or Ilo in Peru, and the perception that Camisea missed the boat to become a major player when Shell passed on it in the late 1980’s, has opened the door for established Asian suppliers. In addition to the financial and political issues, Camisea and Bolivia’s Pacific LNG lack market options. A number of new and expansion projects are underway at sites including Australia’s North West Shelf, Tangguh in Indonesia, Butulu in Malaysia, and most recently Russia’s Sakhalin Island. All these projects are being developed on the basis of long-term deals committing part of production to buyers in the Far East markets, which are increasingly tight and could create downward price pressure, allowing US markets to offer an outlet for remaining production.

Looming Natural Gas Crunch Threatens Economy

The US will face a natural gas supply shortage of major proportions this winter, with skyrocketing consumer prices and other economic damage as an inevitable result. The fast-approaching natural gas crunch follows a decade’s worth of serious imbalance in the nation’s supply/demand equation, according to these and other experts. Natural gas has long been the fuel of choice for residential users, and demand for natural gas accelerated sharply in the 1990s. However, at the same time, many electric utilities shifted to the clean-burning fuel in order to meet tighter pollution control rules enacted by Congress. But the huge jump in natural gas consumption did not bring an accompanying increase in natural gas production, the experts say. Now, after a decade of this pattern, the inevitable has arrived: the demand for natural gas has begun to overwhelm supply.

The big crunch, the experts say, will come this winter -- in the form of soaring prices. The economic impact of a major supply crunch could extend far beyond the shock to consumers’ pocketbooks. Already, some industrial users of natural gas are closing factories or moving abroad as a result of fuel shortages and higher prices. A doubling of natural gas prices could reduce the gross domestic product by more than 2%, according to Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.

CEO Says Coal Gasification Solution for Natural Gas Crisis

J Brian Ferguson, chairman and CEO of Eastman Chemical Company has testified before the Senate Energy and Natural Resources Committee that coal gasification is one of the long-term solutions to help the nation overcome a growing natural gas crisis. Ferguson said American industries are suffering from soaring natural gas prices and need both long and short-term solutions to make them more competitive. The committee met to hear testimony on the impact of soaring natural gas prices and possible solutions.

Short-to-medium term solutions include reducing natural gas demand and increasing natural gas production, Ferguson said. Long-term, however, federal environmental, energy and economic policies must achieve better alignment. It is economically unsustainable to continue policies that drive natural gas demand while simultaneously limiting access to natural gas supplies without providing a balancing energy alternative, he said. One of the long-term alternatives to help alleviate this natural gas crisis is tapping into America’s vast coal reserves - through the use of competitive coal gasification technology - to reduce natural gas demand.

Coal gasification, which uses a chemical process to turn coal into a syngas that can be used like natural gas, promises to reduce the demands on natural gas, he testified. European chemical manufacturers derive most of their raw materials from globally traded oil feedstocks; while US manufacturers are tied primarily to natural gas. As a result, the current situation threatens the entire US chemical industry as it tries to compete with a economically disadvantageous feedstock. He explained that coal gasification technology, similar to what Eastman has operated reliably for 20 years, is not only competitive but also environmentally superior to other clean coal technologies. The power industry, however, needs incentives from Congress before commercially adopting this technology.

Rockies Natural Gas Market Faces Pipeline Problem

Although Rocky Mountain natural gas producers are eager to sell more supply out of the region, many are hesitant to increase production until they are assured that adequate pipeline space will be available. But because of the huge backlog of drilling permit applications awaiting approval, many pipeline companies do not want to commit to building new capacity without the guarantee that enough volumes will be there to fill it. It is becoming a big problem, according to the Independent Petroleum Association of Mountain States. You can't commit to transportation if you don't have production, or you're not sure if you'll have production; and you don't want to bring on production if you don’t have transportation. The dilemma has to do with permitting and with the flexibility with which producers can enter into contracts for pipeline capacity.

Action Filed To Void Sempra, Shell LNG Permits in Baja

Ensenada residents have taken the unusual step of asking Mexico's federal court to void environmental permits the government awarded Sempra Energy and Shell to build liquefied natural gas projects on Baja California's Costa Azul. Carlos González Castro, an Ensenada lawyer representing himself and several land developers, alleges Mexico's environmental agency, the Secretaría de Medio Ambiente y Recursos Naturales (Semarnat), didn't follow proper procedure when it granted permits to the companies last spring.

While scores of Ensenada residents have voiced complaints about the federal agency's granting of permits, this is the first legal action challenging the awards. It represents an escalation in widespread opposition to the projects. González hopes the action will become a class-action suit similar to those in the United States but currently not allowed in Mexico.

Federal judges in Ensenada and Mexicali are taking testimony in the related matters. Plans by at least five companies to build LNG projects along the Baja coast have generated opposition from numerous Baja California residents.

Critics of the Shell and Sempra projects say the large industrial complexes will harm plant, animal and marine life along the Baja California coast. They say the operations also will destroy the pristine character of the seaside Costa Azul plateau north of Ensenada near the Bajamar resort.

Semarnat environmental permits are among three key approvals needed for the companies to develop the multimillion-dollar LNG terminals, which are expected to supply natural gas to Baja California and California starting in 2006. Only Shell and Sempra have received environmental permits so far. The agency denied approval to El Paso-Phillips Petroleum for a regasification terminal those companies proposed at Rosarito Beach. Marathon Oil has obtained the only development permit by Mexico's energy regulatory commission. The Houston firm plans the regasification facility as part of a large energy complex south of Tijuana that would include two power plants, a wastewater treatment facility and a desalination plant.

Sempra Being Not Nice?

Energy firms are complaining that Sempra Energy's plan to upgrade its Baja California pipeline network will squeeze competitors in the multimillion-dollar race to build liquefied natural gas receiving projects along the coast. ChevronTexaco and Shell have asked Mexico's competitiveness commission to rule on the controversy, and Mexico's Energy Regulatory Commission is holding hearings and meetings to try to resolve the dispute.

Sempra Energy and PG&E Corp. triggered the controversy on March 31 when they issued an "open season" to let other companies sign up to use the cross-border pipeline network after it is upgraded. Currently, the pipelines move gas from the United States into Mexico. But the network's capacity is being expanded and made bi-directional, so gas can flow from the LNG receiving terminals being planned for the Baja California coast to consumers throughout Baja California and Southern California.

In the United States and other parts of the world, pipelines are routinely shared by several shippers, with the parties contracting for usage. But Sempra's LNG competitors say the price and other terms in the Sempra plan are grossly unfair to them. In a copy of an 18-page memo sent to the competitiveness commission in June and obtained recently by The San Diego Union-Tribune, ChevronTexaco charged that the plan would force gas shippers to sign long-term contracts requiring them to pay hundreds of millions of dollars over the life of the pact, even if they don't get the permits needed to build their LNG projects. The Sempra plan, says the memo, "suffers from grave defects and gives Sempra's LNG subsidiary an unfair advantage, . . . harming competitors and natural gas consumers."

Currently, natural gas flows into Mexico through two pipelines built in recent years:

The 220-mile Gasoducto Bajanorte begins at an interconnection with El Paso Natural Gas Co. near Ehrenberg, Ariz., and Blythe, Calif. Pacific Gas and Electric built the U.S. section. The 140-mile Mexican portion, built and operated by Sempra, goes west through Mexicali and Tecate to an interconnection with the Transportadora de Gas Natural pipeline in Tijuana.

Sempra's 23-mile Transportadora pipeline carries 50 million to 80 million cubic feet of natural gas daily from the border to the Presidente Juarez electricity generating complex at Rosarito Beach.

But the capacity of both pipelines needs to be expanded and made bi-directional to handle the 1.5 billion-2 billion cubic feet of natural gas expected to be pumped by the natural gas suppliers.

Chevron's memo to the competitiveness commission, a key agency working to ensure the fairness of Mexico's business climate, took the controversy to a higher level. "For ChevronTexaco and the other interested parties, the open season imposes exceedingly high risks," it reads.

The memo, which criticizes Sempra for printing the proposal in English rather than Spanish, said that because the plan focuses on moving natural gas to the United States, it puts Baja California at a disadvantage for gaining future access to the fuel.

"The open season is designed in a way that guarantees Sempra LNG the possibility of reserving the transport capacity for its LNG project, however its competitors (including ChevronTexaco) will be forced to abandon their LNG projects or assume obligations of hundreds of millions of dollars on severely unfavorable conditions," it says.

Interestingly, Mexico's Federal Energy Commission would suffer most under the Sempra plan. The commission has a 25-year, fixed-price contract with Sempra to deliver gas to the Presidente Juarez power complex at Rosarito Beach. The proposed changes would degrade the commission's access to the line by allowing additional shippers to gain access.

New Yolo Gas Field

A small Texas oil and natural gas exploration company reported that it had discovered a new natural gas field near Winters in Yolo County (close to Davis for you geographically challenged). The find wasn't that big, but it was notable for two reasons.

First, new natural gas field discoveries aren't common. The last find in California was in Delano a couple of years ago.

Second, though natural gas prices this year have reached their highest levels since the 2001 energy crisis, there's little new drilling for natural gas going on in the Sacramento Valley. Though there's still natural gas to be found in California, analysts say, exploration companies still feel the sting from the drop in prices late in 2001, and they're not likely to resume drilling until prices stabilize.

For years the price Pacific Gas and Electric Co. paid for one therm of natural gas was about 20 to 30 cents. In early 2001, at the peak of the state's energy crisis, the price jumped as high as $1.40 per therm. The average price PG&E paid for natural gas rose from 35 cents per therm in November to a high for the year of 62 cents in March. In June it averaged 54 cents per therm. PG&E relies on out-of-state natural gas for 90 percent of its supply. "It's not so much a supply issue as it is an infrastructure issue," Robertson said. There's plenty of natural gas available, but only four pipelines bringing it into California.

Robert Brooks, spokesman for Output Exploration LLC, the company that says it found the new gas field near Winters, said there's still opportunity for gas exploration companies with new technology. The company has leased gas rights for the entire area of farm fields and range land that they think the gas field lies under. "We were attracted to the Sacramento area for technical reasons," Brooks said. "We knew that a lot of the larger companies had left, really stopped exploring the Sacramento basin some years ago." The company said the first well in the new field is producing about 2.3 million cubic feet per day. The company hopes to hook up its first well in that new gas field to a pipeline this year and sell the gas to Calpine or PG&E. Company execs won't know how big the new gas field is until they drill more wells.

Calpine, the largest independent power producer in California, meets up to 25 percent of the company's electric plant needs through its own natural gas supplies. That helps cushion the company against volatility in the market. Calpine is the biggest natural-gas producer in Northern California. About 90 percent of its production comes from the Rio Vista Gas Field under Sacramento, Solano and Contra Costa counties. Calpine bought the gas rights in 1998 and 1999 and has boosted production from 40 million to 100 million cubic feet per day. That's roughly the amount used by one of Calpine's electricity plants near Yuba City. Calpine is also one of the biggest buyers of the fuel in Northern California, along with PG&E.

RENEWABLES

Renewable Energy Push Accelerated
California energy agencies want a fifth of the state's energy to come from renewable sources by 2010, which is seven years faster than the previous goal.

Power Authority head David Freeman said that if by year's end the Public Utilities Commission hasn't begun requiring utilities to provide more power from renewables to meet the goal, he will ask legislators to give him that authority instead. "

Commission spokeswoman Terrie Prosper said there will be no need for the authority to seek a legal change. The commission, she said, already is working to ensure the state meets the renewable energy goal jointly set this spring by the commission, the power authority -- known formally as the Consumer Power and Conservation Financing Authority -- and the Energy Resources Conservation and Development Commission.

The state's three energy agencies agreed to increase California's use of renewable energy to 20 percent by 2010, twice as fast as the previous 2017 target.

The power authority, created in the wake of the 2001 energy crisis, has up to $5 billion in bonding authority to build, buy or lease power plants, or help private companies finance the construction.

In the short term, the authority has been urging the utilities commission to order utilities to build or contract for more emergency power plants to be used at times of peak energy demand.

Here are some solar power stastics:

$125 million/year- Amount paid each year by customers of Pacific Gas and Electric Co., Southern California Edison, Southern California Gas and San Diego Gas and Electric Co. to fund a program that subsidizes solar power, wind power, fuel cells and extra-clean microturbines for large power users.

$30 million/year- Amount paid each year by electricity customers of PG&E, Southern California Edison and San Diego Gas and Electric to subsidize solar power for households and small businesses. The five-year program is administered by the state Energy Commission.

$3.3 million/year- What customers of the Sacramento Municipal Utility District are expected to pay in 2003 to support solar power.

$2.5 million/year- Amount knocked off state income tax bills of about 1,500 individuals and three corporations in 2001 because they installed solar systems and took the 15 percent state solar tax credit.

150,000 pounds/year- Amount of nitrogen oxides, a key ingredient of smog, that is kept out of the air every year because of solar power in California, according to Energy Commission estimates.

Solar Hydrogen Production?

The founder of White Rock-based Renewable Energy Corp. (RECO) says his company has successfully demonstrated a system, called Solarec, uses a system of mirrors to harness and concentrate the power of the sun to crack water molecules, thereby releasing the hydrogen. Unlike typical systems for deriving hydrogen, RECO's system at no point relies on fossil fuels, thus eliminating one of the fundamental flaws of the much-discussed fuel-cell industry -- the release into the atmosphere of carbon dioxide, which some believe contributes to global warming. And its efficiency begins to bring hydrogen production in line with other energy sources. RECO is three weeks away from a second working prototype that Jensen says could lead to commercial sales as a complete energy production system, which not only produces hydrogen for use in fuel cells, but taps off the excess heat energy to run an electricity-producing steam turbine.

Hydrogen is the most prevalent element in the universe. Called the "forever fuel" by some proponents of alternative energy, some scientists say it stores energy more effectively than conventional batteries, and it burns twice as efficiently in a fuel cell as gasoline in a regular internal combustion engine. A fuel cell's only byproducts are oxygen and heat. International events of the last couple of years have demonstrated the United States' shaky relationship with the Middle East, the source of most of the world's oil. Moreover, pollution concerns and the knowledge that fossil fuel production cannot be sustained indefinitely, at current levels, have brought a new urgency to the development of hydrogen as an alternative. Some predict a 10-fold increase in hydrogen's use as a fuel over the next two decades.

The great majority of the 10 million tons of hydrogen currently produced annually in the United States -- half of which is used to make ammonia for fertilizer -- is produced by the reformation of methane and other hydrocarbon fuels.

Another, less-popular method, electrolysis, involves the use of electricity to crack water molecules into their constituent parts -- oxygen and hydrogen. But not only is electrolysis very expensive, it depends on electricity, most of which comes from inefficient power plants that burn fossil fuels, like coal or natural gas. Electrolysis ends up producing more greenhouse gas emission per unit of energy than traditional internal combustion engines, according to a fuel company study cited by RECO.

That defeats the purpose of hydrogen fuel cells.

From 100 kilowatts of solar energy, the Solarec system produces about 20 kilowatts worth of hydrogen and 25 kilowatts of electricity, making it about 45 percent efficient, Jensen says. Existing systems that aim to generate electricity with concentrated solar power are about 30 percent efficient, he says.

The company's first dish, which measured about seven square meters and costs about $30,000, operated for about two years. The next one, components for which are being assembled at the company's small office, will measure about 20 square meters and will be located south of Santa Fe, NM. Jensen says the company is about one to two years away from commercializing its first Solarec systems. Angel investors have injected about $700,000 into the company, he says, noting that RECO is looking for a larger investment to help it market the Solarec system.

Dunlop says he has a few potential customers, including one in Hawaii who is interested in building a 1 megawatt independent power facility. Such a facility, which would comprise about 40 RECO solar concentrators, would cost about $5 million and would power roughly 300 homes or a large factory day and night. At that volume, electricity produced by such a system would cost about one third that of a similar photovoltaic system, which uses solar panels to create electricity,

INTERESTING STUFF

Horses in Diapers on Mexico Beaches

A postcard setting – a blazing orange sunset over a beautiful Mexican beach, waves gentling lapping the shore, a warm on-shore breeze blowing in your face, you riding long with your mate – and your horse needs a diaper change. Beachside entrepreneurs who rent horses on Rosarito beach in Baja California are dressing the animals in diapers as part of a countrywide effort to cut down on pollution along Mexico's nearly 7,000 miles of coastline.

It is estimated that one horse produces about 57 pounds of manure each day. When the town was small, it wasn't a serious problem. But the horse rental business boomed along with the tourist industry. Now, 20 corrals rent about 150 horses each day during the peak summer season.

Beach pollution became an issue in Mexico earlier this year when Environment Minister Victor Lichtinger issued a report revealing there was a lot more floating in Mexico's ocean waters than bikini-clad babes. Lichtinger's report listed beaches where high levels of fecal coliform and other bacteria posed sanitation risks.

The horse diapers were invented by Martha Nevarez, a Rosarito resident who became concerned a year ago when her daughter developed a rash after an afternoon of fun in the sand. Nevarez had seen large clumps of horse manure and wondered if they could have been the cause. After talking to her doctor and a local veterinarian, Nevarez learned that people can contract a range of diseases from exposure to manure and feces from animals. After months of trial and error, Nevarez came up with a fabric and leather sack that wraps around the horse's chest and rear end. There is a hole for the tail and a heavy bag that collects the manure.

For about $53, local businesses buy the sacks with the business name, address and phone number splashed across the horse's rear, then donate them to the corrals that rent horses. That way, they get some advertising and help keep the beaches clean, Nevarez said.

Somehow some of the romance is missing.

HUMOR

This 85 year old couple, having been married almost 60 years, had died in a car crash. They had been in good health the last ten years mainly due to her interest in health food, and exercise.

When they reached the pearly gates, St. Peter took them to their mansion which was decked out with a beautiful kitchen and master bath suite and Jacuzzi. As they "oohed and aahed" the old man asked Peter how much all this was going to cost.

"It's free," Peter replied, "this is Heaven."

Next they went out back to survey the championship golf course that the home backed up to. They would have golfing privileges everyday and each week the course changed to a new one representing the great golf courses on earth.

The old man asked, "what are the green fees?".

Peter's reply, "This is heaven, you play for free."

Next they went to the club house and saw the lavish buffet lunch with the cuisine's of the world laid out.

"How much to eat?" asked the old man.

"Don't you understand yet? This is heaven, it is free!" Peter replied with some exasperation.

"Well, where are the low fat and low cholesterol tables?" the old man asked timidly.

Peter lectured, "That's the best part...you can eat as much as you like of whatever you like and you never get fat and you never get sick. This is Heaven."

With that the old man went into a fit of anger, throwing down his hat and stomping on it, and shrieking wildly. Peter and his wife both tried to calm him down, asking him what was wrong.

The old man looked at his wife and said, "This is all your fault. If it weren't for your blasted bran muffins, I could have been here ten years ago!"