Stephen P. ReynoldsPresident & CEO
Pacific Gas Transmission Co.
Two or three years ago, gas-fired generation was hailed as a cure-all for everything that ailed the natural gas industry. Now it is being suggested with equal conviction that electric restructuring and/or the demise of PURPA will actually slow the growth in demand for natural gas.
What caused this shift? Part of it is uncertainty. Until we figure out who is going to own generating assets and what this new regulatory regime is going to look like, there might be a "go slow" period for new gas-fired generation.
Adding to the uncertainty is the possibility of a sell-off of old, depreciated generating assets. If the new owners repower those old clunkers and sell the electricity at cheap rates, they might dampen enthusiasm for building new gas-fired generation.
Given the current attitude in Washington, former PURPA machines with their long-term contracts face a very uncertain future. Whether they are dismantled or required to reprice their power, there won't be a lot of new PURPA plants built. That might also slow the pace of gas penetration of the electric generation market.
And then there are transition costs. The FERC NOPR on electric restructuring suggests that everyone will be invited to pay a share of whatever it costs to shake uneconomic assets out of the system. Those surcharges could be a barrier to entry for new generating assets (em gas and otherwise.
But regionally, I am quite optimistic about the future of natural gas. In the Northwest (em which up to now has only flirted with natural gas as a fuel for electric generation (em natural gas is an appropriate choice in an environmentally sensitive region. It's available, it's low cost, and the costs keep dropping all the time.