Southern California Utility Loses Part to PG&E; : PUC Splits Up Kern Gas Market

A ruling in a high-stakes jurisdictional squabble between the nation’s two largest gas utilities was issued Friday by the California Public Utilities Commission, leaving neither company satisfied.

The decision would cut Southern California Gas’ share of the lucrative, fast-developing natural gas market in the state’s largest oil fields, giving part of its territory to Pacific Gas & Electric.

Southern California Gas, which was hoping to retain boundaries drawn 25 years ago in Kern County that it said gave the utility 90% of the market in the Kern River oil fields, said it might appeal the decision.

Officials at the two utilities said it wasn’t yet clear how much of the market Southern California Gas would lose under the ruling, but it would keep rights to most of it. One called it a “split the baby” decision that came down somewhere between the positions staked out by the companies. PG&E; wanted access to half of the market.

“Apparently they’ve split off part of our existing system. We’re very disappointed,” said a spokesman for the Los Angeles-based utility. “They’re effectively transferring control of some of our facilities.”

The ruling has long-term ramifications for each utility’s residential customers, as the more gas they sell to the oil companies the less they have to charge everyone else. But the exact effects won’t be known for several years.

The stakes are each utility’s share of a new, potentially huge market for natural gas that wasn’t contemplated when the original jurisdictional lines were drawn. The Kern River oil fields near Bakersfield are about midway between the utilities’ regular territories.

Technology and declining natural gas prices have made it attractive to use gas to generate steam that is pumped into the oil reserves underground. The steam warms the unusually heavy Kern County oil, making it easier to pump the oil to the surface.

With the natural gas industry facing flat sales for the rest of the century, the prospect of a market of 1 billion cubic feet per day--considered the potential market California by the early 1990s--is especially attractive.

Currently, Southern California Gas is selling about 110 million cubic feet per day to help recover oil, or less than 5% of its average annual sales of 2.5 billion cubic feet daily.

San Francisco-based PG&E; has estimated that each utility could reduce residential rates by 5% if the two firms split the projected California oil-recovery market.