REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution for the Natural Gas Service Agreement Modification and Revised Exhibits with Pacific Gas and Electric Company
Report
BACKGROUND
The City of Santa Clara Electric Department, Silicon Valley Power (SVP) currently has a Natural Gas Service Agreement (NGSA) with Pacific Gas and Electric (PG&E) to supply gas pipeline transportation to each of SVP's natural gas power plants. On a typical three (3) year cycle PG&E files a Gas Transmission and Storage (GT&S) rate case at the California Public Utilities Commission (CPUC). The current active rate proceeding, GTS 2019, started with the submission of PG&E's testimony on November 17, 2017. SVP as a member of the Northern California Gas Coalition, provided extensive testimony regarding rate design with the desire to change the current methodology that collects PG&E's relatively fixed revenue requirement through a volumetric rate (-dollars per unit of throughput).
In a competitive market, each gas fired generator, such as the City's Donald Von Raesfeld (DVR) power plant, submits bids based on its marginal cost to produce power. Volumetric gas transportation rates must be included in these marginal cost calculations. PG&E's gas transportation system is segmented into what is term as a backbone system and local system. If the generator received natural gas on a backbone system, the power plant is charged the backbone rate tariff. If a generator is served by a local system, as is the case for DVR, it pays the backbone and local system rate tariffs combined. This means that gas fired generators on the backbone system, which do not pay the local system cost component have a growing competitive advantage. This allows less efficient, higher Greenhouse Gas (GHG) emitting plants to displace more efficient cleaner plants that are connected to the local gas transportation system based on the economic dispatch process currently used to select generators to produce power in ...
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