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At least 2 gas suppliers stop deliveries to PG&E

HOUSTON, Feb. 7, 2001-With expiration of a federal order mandating gas sales to Pacific Gas & Electric Co., at least two suppliers have discontinued delivering gas to the financially strapped California utility, which warned of a “very serious gas shortage.”

A spokesman for Western Gas Resources Inc. Wednesday said the gas supplier has halted deliveries to the California utility and on Tuesday filed suit in a Denver federal court seeking payment for January deliveries. Market sources said, and Pacific Gas & Electric confirmed J. Aron & Co., the gas trading arm of Goldman Sachs & Co., is also no longer delivering gas to the utility. A spokeswoman for Goldman Sachs declined comment.

“As of today we are not currently selling them gas,” said Ron Wirth, a Western Gas spokesman. “We don’t have a contract. It was terminated based on nonpayment.”

He said Western Gas had been delivering a “small amount”-5 MMcfd-to Pacific Gas & Electric, a unit of PG&E Corp., under the Jan. 19 US Energy Department order. The two suppliers combined provide more than 10% Pacific Gas & Electric’s needs, the utility said.

Pacific Gas said any shortfalls will have to be made up by gas in storage, or by whatever other purchases the utility is able to make. The utility reported it has about 9 days’ worth of gas in storage, if it were forced to rely mainly on storage gas with only a small amount of supplies flowing into the state.

If storage gas is depleted, widespread gas curtailments that affect residential and business customers become more likely, the company warned.

Pacific Gas said five suppliers, including BP Energy Co., Texaco Natural Gas Inc., Dynegy Marketing and Trade, Texaco Canada Petroleum Inc., and Dynegy Canada Marketing and Trade, have agreed to continue selling gas to the utility as part of an arrangement giving them a security interest in future revenues collected from gas customers.

The California Public Utilities Commission allowed Pacific Gas to pledge its customers’ monthly account receivables as collateral to insure gas marketers they will get paid for continuing to supply gas to the utility. Pacific Gas said it will continue to work with its remaining 20-25 suppliers to persuade them to sign on to the utility’s proposal to avoid a shortfall.

In its lawsuit alleging nonpayment, Western Gas is seeking compensation for gas deliveries made between Jan.9-12 at the contract price of $81,550/day. The company is also seeking compensation for damages incurred when it delivered natural gas between Jan. 13-31 for “the difference between contract value and market value discounted.”

“Western Gas complied with the mandate, under protest, and supplied gas to PG&E, but has not received payment from PG&E for that gas,” the lawsuit charged.

Pacific Gas & Electric requested the federal order because nearly all of its suppliers had requested special payment arrangements that the utility said it could not accommodate because of its poor financial condition.