The on-going transition of California's natural gas transmission market structure from a regulated industry to a competitive services industry and the resulting changes in utility rate structures have required Pacific Gas and Electric Company (PG&E) to apply new economic models and investment criteria for gas transmission system investments. Prior to 1998, gas transportation prices and revenues were based in large part on gas transmission capital spending levels required to serve customers. When gas transmission capital spending increased, prices were adjusted accordingly and revenues increased resulting in greater earning for investors. This regulated cost-of-service market structure favored capital investment designs for serving new customers. The current competitive market structure for PG&E's gas transmission business no longer uses cost-of-service formulas based on capital rate base to set future revenues. And the revenue protection provided by various regulatory rate adjustment mechanisms has been removed placing the gas transmission portion of shareholder earnings at risk. As a result, PG&E has been actively exploring new ways to increase transmission throughput and reduce gas transmission costs to meet its financial objectives - increased return on equity and shareholder value. This paper presents a case study of various non-traditional designs PG&E has adopted to increase annual throughput without investing significant capital in new pipeline capacity in one of the fastest growing regions in California, the Sacramento Valley Region. These "non-pipe" alternative designs have saved approximately $5 million since 1994 over traditional "pipe" designs and will be considered for other local transmission systems across PG&E's service territory. The presentation will include:

  • A discussion of the Sacramento Valley local gas transmission system;

  • A summary of alternative forms of local gas transmission system reinforcement designs developed;

  • A discussion of how these alternatives were used to develop a least cost investment plan for meeting annual customer load growth. A discussion of the local gas transmission system will include;

  • A description of the local gas transmission system;

  • A description of the customer loads served;

  • A discussion of how current customer load and physical pipeline characteristics influence system performance and shape the designs for meeting load growth.

A discussion of alternative forms of local transmission system reinforcement designs used to increase throughput will include:

  • Installing parallel pipelines, or replacing existing pipelines with larger diameter pipe;

  • Uprating, or re-qualifying existing pipelines to operate at higher pressure;

  • Load shifting or load redistribution;

  • Peak load-shaving using portable compressed natural gas (CNG) trailers;

  • Peak load-shaving using portable liquefied natural gas (LNG) trailers;

  • Increasing local transmission pipeline inventory using portable compressors.

Description of the local gas transmission system

The Sacramento Valley local gas transmission system is an integrated pipeline network of several sub-systems which together form a circular, or "looped", system parallel to PG&E's northern California backbone pipelines. The local transmission system receives gas from PG&E's Line 400 and Line 401 backbone pipelines to the west at three primary delivery points and more than 200 local gas producers located throughout the Valley.

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