Thursday, September 16, 2004

Sempra monopoly play in question

In the Union Trib, Peter Asmus asks whether it is smart to allow Sempra to build an LNG terminal off Baja California:

Because LNG terminals already have been rejected off the Humboldt County coast as well as other parts of the country, Sempra Energy has proposed to site an LNG terminal off the Baja coast near Ensenada. On the surface, this Energia Costa Azul LNG facility seems like a nice solution to California's current natural gas supply crunch. Siting such a facility in Mexico gets around the NIMBY problem and, because of cheaper labor, could reduce costs.

But once one digs a little deeper, some red flags start to go up. Sempra, through its subsidiaries San Diego Gas & Electric and SoCal Gas, already dominate both the natural gas and electricity markets of the San Diego area. Does it make sense to allow them even more control of the region's energy future?

Even worse, there is no guarantee that this investment by state ratepayers will provide any near-term price benefits to San Diego. Not only will the natural gas likely come from unreliable OPEC sources such as Indonesia, but there is no guarantee that this natural gas will flow to California consumers or power plants. As the transaction is currently structured, this LNG terminal is to serve consumers in Mexico first. California will have to wait in line with Nevada and Arizona to get any residual natural gas fuel.

What's that saying about putting all your eggs in one basket?