Closing Aliso Canyon would only drive up already sky-high prices paid for natural gas in Los Angeles.
By Tracy Hernandez
Friday, September 23, 2016
Los Angeles Business Journal
To keep energy costs low, supply must be reliable and sufficient. According to Philip Moeller, a member of the Federal Energy Regulatory Commission, “If you take enough supply out of the system, the price is going to increase.”L.A. consumers pay significantly higher costs for natural gas than the national average, as much as 43.2 percent according to data released in July from the Bureau of Labor Statistics. California companies are saddled with an overall greater cost of doing business than the rest of the country, including the high cost of natural gas and electricity – both of which are projected to undergo high rate increases between now and 2020.
So why, in light of these projected increases, would regulators seriously consider the permanent shuttering of Aliso Canyon, provider of gas supplies to 11 million homes and businesses and the second-largest natural gas storage facility of its kind in the United States?
There are certainly overriding health and safety issues that must be addressed before Aliso Canyon is allowed to resume full operations. In January, Gov. Jerry Brown declared a state of emergency for Los Angeles County to address natural gas safety in light of a leak. That was a critical first step, and the facility must pass or surpass all state-mandated safety checks and integrity tests before any other action is taken.
When issues arise – such as a leak on Sept. 12, which was quickly identified and contained – regulators must be transparent with the public and with policymakers. But when, and only when, these issues are resolved, regulators, local residents, and business leaders need to establish a measured approach in determining a near- and long-term energy plan – and that plan must include Aliso Canyon.
First, regulatory oversight must be thorough but not duplicative. No fewer than seven distinct regulatory agencies with scores of new and overlapping roles now have jurisdiction over Aliso Canyon. These regulations should not be so complex that they unintentionally prevent the reopening of the facility, which would virtually guarantee that local businesses will pay extremely high rates for energy.
Regulations already have a chokehold on local businesses. Earlier this year, the Los Angeles County Business Federation released a poll based on 647 local business responses that found that 63 percent felt the “regulatory environment” was a reason local businesses were leaving the state. A regulatory morass that inhibits stable natural gas supplies would be an unfortunate proof point.
Second, the state should not discard a stable source of energy without ensuring that a well-vetted, secure alternative source exists. Brown’s emergency proclamation vaguely calls for energy producers to come up with nontraditional alternatives to fill projected shortfall in peak energy capacity as quickly as possible. In a mad scramble, producers are considering all manner of concepts, including batteries and thermal energy storage projects.
Those alternatives have potential, but also have many unknowns. For example, the National Fire Protection Association commissioned a report earlier this year regarding the deployment of lithium ion batteries in energy storage systems. They found a lack of clear direction on fire protection and suppression in such installations, which are often in businesses, high-rise buildings, and single- and multifamily residences.
Finally, policymakers should not assume California’s businesses can absorb increased energy costs. The state has already enacted costly climate-change policies that are directly correlated with rising energy costs for businesses. More importantly, policymakers have failed to invest in the state’s energy infrastructure at the same time they have mandated investment in renewable energy, funded by tax revenue. Southern California Gas Co. is also bearing a cost, coming to a settlement agreement last week on the Aliso Canyon link with Los Angeles County prosecutors to pay $4 million.
The Aliso Canyon facility has operated for decades as a critical part of the natural gas transmission and distribution system in the L.A. region. Our state is already implementing more than 65 energy and climate programs – for which California consumers pay higher energy rates than nearly every state. Now is the time to hunker down and do the hard work to make Aliso Canyon safe and bring it on line before businesses face costly consequences.
Tracy Hernandez is founding chief executive of the Los Angeles County Business Federation, or BizFed.
