"People are starting to talk about ISOs on the gas side." So says Jerry Pfeffer, lay advisor on energy industries for Skadden, Arps, Meagher & Flom, the New York law firm well known for its work in mergers and acquisitions.
Pfeffer's comment alludes to events now unfolding in Southern California, that fount of fashion, where each round of "deregulation" only doubles the ante in billable hours. This time it's natural gas pipelines. Do they have market power too?
"It Would Not Surprise Me"
Southern California Edison Co. has now alleged that Southern California Gas Co. is manipulating capacity on natural gas pipelines. Edison accuses SoCalGas of limiting access by Edison to cheap gas for electric generation.
Edison's allegations parallel the issues at play in electric restructuring. Remember that California has formed a power exchange plus an independent system operator to ensure fair dealing over electric transmission lines. Now comes Edison, seeing the same need on the gas side. This idea carries implications for the proposed merger (actually a corporate reorganization) between Pacific Enterprises, the parent company of SoCalGas, and Enova Corp., which owns San Diego Gas & Electric Co., Edison's rival for electric sales.
None of this has escaped the attention of the Federal Energy Regulatory Commission, where the merger approval docket is stocked with "convergence mergers" between electric and gas companies.
In February, in its order approving the merger between Enron and Portland General Electric Co., the FERC asked whether the vertical consolidation of Enron's natural gas pipeline and Portland Electric's generation assets could "potentially present a problem" for competitors who rely on gas-fired generation.