Thursday, June 30, 2005

LADWP purchases natural gas reserves

The leadership of the Los Angeles Department of Water and Power has consistently stated that instability in natural gas prices is one of their greatest concerns. Now, they're doing something to hedge against it.

The Los Angeles Department of Water and Power has led a group of cities in buying natural gas reserves in Wyoming for $300 million to help ensure a stable supply for its power plants, officials announced Wednesday.

The DWP signed a purchase agreement with Anschutz Pinedale Corp. in Denver to buy a portion of the company's natural gas reserves in Sublette County, officials said.

The agency said the acquisition, believed to be the largest natural gas field owned by public power utilities, will help stabilize the "single most volatile component" of the DWP's operating expenses. DWP's partner in the purchase is the Southern California Public Power Authority, representing Anaheim, Colton, Glendale, Burbank and Pasadena.

Not everyone is comfortable with the purchase. Los Angeles City Councilwoman Janice Hahn voiced concern that the city has not been in the business of owning a gas field before and that the market could make the purchase a bad decision.

"It's a risky venture," she said. "You are basically banking on the price of gas going up" to justify the purchase.

It seems everyone is betting on the price of Natural Gas going up--otherwise, why the scramble to build LNG facilities up and down the California Coast?!?