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Overview of Natural Gas in California
Natural gas provides almost one-third of the state's total energy requirements and will continue to be a major fuel in California's supply portfolio.
California's supplies of natural gas come from four areas: in-state production, Southwestern United States, Canada and the Rocky Mountain Region.
Natural gas from out-of-state production basins is delivered into California via the interstate natural gas pipeline system. The five major interstate pipelines that deliver out-of-state natural gas to California consumers are the Gas Transmission Northwest Pipeline, Kern River Pipeline, Transwestern Pipeline, El Paso Pipeline, and Mojave Pipeline. (Another pipeline, the North Baja Pipeline, takes gas off the El Paso Pipeline at the California/Arizona border, and delivers that gas through California into Mexico.)
Once natural gas arrives in California, it is distributed by the natural gas utility companies. The three major utilities - Southern California Gas Company, San Diego Gas & Electric, and Pacific Gas and Electric Company - collectively serve 98 percent of the state's natural gas customers. The remaining 2 percent are served by municipal and smaller or out-of-state investor-owned utilities.
In 2006, the residential sector used 22 percent of the natural gas. Of that amount, 88 percent was used by space and water heating in our homes.
Since 1970, the number of households in California has almost doubled from 6.5 million to 12.5 million, pushing total residential consumption up from about 6,500 million therms in 1970 to about 6,700 million in 2007. However, the average gas consumption per household has dropped more than 36 percent, from 845 therms to 538 therms as a result of California's building and appliance efficiency standards.
Natural Gas Costs and Prices
California spent nearly $19 billion on natural gas in 2006, with 42% for core customers (residential and commercial), 40% by non-core (industrial and electricity production), and 18 percent by non-utility (direct deliveries from interstate pipelines and California production). That's a near-tripling of the costs in ten years.
The price for natural gas has been increasing for the last ten years, and that cost is passed on to the consumer.
Source: California Energy Commission, based on Utility Annual Reports
Core is utility deliveries to residential and commercial sectors.
Noncore is utility delivieries to industrial and electric generation.
Nonutility is direct deliveries from interstate pipelines and California production.
Future Demand and LNG
Natural gas has become an increasingly important source of energy since more of the state's power plants rely on this fuel. While California's successful efficiency programs and its reliance on renewable sources of electricity should slow the demand for natural gas, competition for the state's imported supply is increasing. Our reliance on imported gas leaves the state vulnerable to price shocks and supply disruptions.
Imports of liquefied natural gas (LNG) are expected to supplement conventional supply sources and help stabilize prices. Importing LNG by tankers from foreign sources has the potential to furnish new supplies. Developers have proposed 13 terminals for the West Coast of the United States but, to date, none have been approved in California or Oregon. A newly constructed facility in Baja California, however, is expected to begin operation by the end of 2008. While 30 to 50 percent of this Sempra-owned plant is contracted for use in Mexico, the remainder should be available to California markets.