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    With Rita & Katrina Crimping Gulf Area Gas, Would A PoLB-Located LNG Facility Mean Lower Gas Bills For LB? LB Energy Dir. Garner Tells Council...

    (September 22, 2005) -- On September 16, reported that LB Energy had agendized an item for the Sept. 20 Council meeting forewarning that due largely to the effects of Hurricane Katrina, LB gas prices for residential customers this winter may average roughly 34% higher than last year.

    "Last winter, the average residential customer paid $63 for their monthly gas bill. This winter, the forecasted average monthly residential bill will be $84. This forecast will continue to fluctuate as the longer-term market impacts of Hurricane Katrina evolve," wrote LB Energy's Director, Chris Garner, in an informational memo...sent before Hurricane Rita began bearing down on the Gulf.

    At the Sept. 20 Council meeting, Councilman Val Lerch said: "This question begs to be asked. If we had our own LNG terminal in the Port, [would we] be facing this problem?"

    Mr. Garner replied, "I would say yes, from the standpoint the price that we'll get out of the LNG terminal or any LNG source will be market priced, so it would still be tied to the same market. What we'll have to do is negotiate price ceilings, price protection for our customers a little like we have for our of state gas supplies.".

    Within a few hours of our posting our Sept. 16 story, we received a phone call from Jeff Adler, LB spokesman for LNG applicant Sound Energy Solutions (SES). Mr. Adler [in his former life a reporter] said we ought to pursue another local angle: that having diversified sources of natural gas could help protect LB from price increases and supply interruptions.

    "It clearly is in the City's best interest to have diversified, reliable sources of natural gas, so that the city doesn't get caught in a situation where the supply is interrupted and there's only one source," Mr. Adler said.

    Reached for comment, LB Citizens for Utility Reform activist Bry Myown, a critic of the proposed PoLB LNG site, said she believes the opposite is the case. "In my view, putting LNG in the Port of LB exposes us to the Katrina scenario, only worse. We'd be concentrating LNG, plus other pre-9/11 Port-located petroleum products, plus countless other goods that supply our area and the rest of the country all in one place subject to a host of natural disasters or terrorist threats. That would increase potential vulnerabilities here and nationally," she said.

    A 2003 agreement (letter of intent/MOU) between the Port of LB and SES specifies that finalizing a lease for the Port site will involve SES entering into an arrangement for the benefit of the citizens of Long Beach, the Energy Department, the Port of Long Beach and SES [presumably for discounted natural gas supplies from SES to LB Energy].

    As to whether that would directly produce reduced natural gas bills for LB consumers, Section 1502 of the LB City Charter specifies that the City Hall-operated gas utility shall charge rates "based upon the prevailing rates for similar services and commodities supplied or sold by other like utilities whether public or private, operating in the Southern California area." As a practical matter, that verbiage prevents LB residents from seeing gas bills significantly lower than So. Cal Gas and other like utilities even with a PoLB LNG facility. [LB Energy notes that its customers currently receive on average the lowest monthly natural gas bills in comparison to other Southern California gas utilities.]

    However, under the Port's 2003 agreement with SES, City Hall could negotiate an arrangement ("for the benefit of the citizens of Long Beach") with SES for a discounted rate on gas from a PoLB LNG facility to LB Energy...and LB Energy's "profit" (difference between its discounted cost and market rates) could be sent to City Hall's General Fund to pay for anything (determined by the City Council) from police and fire to travel and perks. SES has also said City Hall could receive additional revenue from pipeline fees and other taxes and has argued that adding to the natural gas supply could have the effect of helping stabilize natural gas prices generally.

    Ms. Myown commented, "I expect the costs for LNG-related first responder resources would dwarf whatever City Hall thinks it could get. In my view the human and financial costs of a potentially catastrophic event are nearly incalculable."

    On June 7, 2005, the City Council voted 5-4 (Yes: O'Donnell, Kell, Richardson, Reyes Uranga, Lerch; No: Lowenthal, Baker, Colonna, Gabelich) to direct LB Energy to pursue negotiations with SES pending release of an Environmental Impact Report on the proposed SES PoLB LNG project.

    Mr. Garner told that since the June 2005 Council vote, there have been contacts between LB Energy and SES.

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