SoCal Gas Reaches Aliso Canyon Settlement as Costs Top $1 Billion

It’s been nearly three years since the Aliso Canyon natural-gas storage facility sprung a massive leak, sickening many, evacuating thousands and forcing a shutdown of the Los Angeles region’s primary reserve for natural gas to keep homes warm in winter and supply regional power plants at times of peak grid demand.  

This week, facility owner Southern California Gas announced that the costs of containing, repairing and maintaining the underground storage site have ballooned to more than $1 billion, even as the long-term future of the site, reopened at limited capacity last summer against the protests of Los Angeles County and angry residents, remains very much in doubt. 

SoCalGas, a unit of Sempra energy, officially broke the $1.014 billion mark for Aliso Canyon costs in its quarterly earnings filing this week. The estimate is up 6.3 percent from $954 million in the previous quarter, and almost all of it ($987 million) has been largely recovered or is likely to be recovered through insurance, the company stated.

Of the total, about 55 percent was for temporary relocation of the people forced to evacuate their homes during the leak. However, SoCalGas also warned that the estimates could “rise significantly” due to still-pending lawsuits and potential fines.

On Wednesday, SoCalGas announced its $119.5 million settlement with state, county and local governments, pledging to repay their costs associated with the response effort, as well as establishing a program with the California Air Resources Board to mitigate the methane emissions from the leak, and fund local environmental benefit projects to be run by government parties, not the company itself.

The settlement did not, however, include some of the residents of the Porter Ranch neighborhood, who are vowing to continue their legal battle to close down the Aliso Canyon site. Los Angeles County, which is a party to this week’s settlement, has also opposed the CPUC’s decision to allow SoCalGas to conduct a study into whether or not facility could be kept open for the long term. 

Last July, the California Public Utilities Commission determined that Aliso Canyon could start to operate again at limited capacity of about 24.6 billion cubic feet, or about 28 percent of its pre-leak maximum capacity. But under Senate Bill 380, a law passed in 2016, the CPUC and the utility must operate the facility only as an “asset of last resort” after other options for dealing with energy shortfalls have been exhausted. 

SB 380 also requires the CPUC to study the long-term effectiveness of closing down Aliso Canyon entirely versus keeping it open. Last July, soon after the CPUC allowed Aliso Canyon to reopen, California Gov. Jerry Brown and the California Energy Commission put forward a plan to study how Aliso Canyon could be shut down completely within the next 10 years. 

According to SoCalGas, Aliso Canyon serves more than 11 million customers and provides fuel to 17 natural-gas-fired power plants with about 10,000 megawatts of generating capacity. It’s also much closer to some of Southern California’s most heavily populated regions — a critical factor for a pipeline system that can only move gas at about 20 to 30 miles per hour. While it takes only one to two hours for Aliso Canyon-stored gas to reach key Los Angeles area power plants, for example, it would take about 10 hours to supply those plants from terminals at the Arizona border, according to SoCalGas. 

Aliso Canyon’s closure in January 2016 led to fears that Southern California could be faced with energy shortages during both cold winter months, when natural gas for heating is in high demand, and hot summer months, when air conditioning drives natural-gas-fired electricity demand to peak levels. A joint state agency study in April 2016 warned of the risk of multi-day blackouts without a wide range of energy efficiency, solar power, demand response, energy storage, and other distributed energy resources to take its place. 

The threat drove the CPUC to fast-track utility deployments of DERs in record time, starting with the 2016 procurement of nearly 100 megawatts of energy storage from Tesla, Greensmith Energy and AES Energy Storage, including what is currently the country’s biggest battery — the 30-megawatt/120-megawatt-hour Escondido system that AES built for San Diego Gas & Electric. 

A law passed in 2017, SB 801, requires Los Angeles Department of Water and Power and SCE to procure additional energy storage — 100 megawatts and 20 megawatts, respectively — to meet reliability needs for Aliso Canyon.

Southern California Edison, which contracted for most of the energy storage above, also turned to Nest to enable 50 megawatts of smart-thermostat-enabled peak load reduction, tapping about 50,000 of its existing customers in the region with utility incentives to reduce air conditioning loads in summer months. 

SoCalGas has also turned to Nest and ecobee for an unusual wintertime demand response program, aimed at lowering natural-gas consumption for heating, which saw its first test in December 2017. While uptake has been “minimal” thus far, the utility and its partners are seeking to increase participation for the coming winter, according to a March letter from the CPUC that outlined how utilities have been tapping those alternatives before seeking out Aliso Canyon’s limited reserves over the winter. 

The CPUC’s letter noted that utilities SCE and the Los Angeles Department of Water and Power have also been working to re-dispatch power generation needs to plants outside the L.A. Basin in an attempt to reduce demand on the regional natural-gas supply system. The CPUC even issued a temporary moratorium on new commercial and industrial customer interconnections in parts of Los Angeles County reliant on Aliso Canyon service in December, although it lifted it in March. 

But with state grid operator CAISO facing the need for emergency demand reduction to meet late-summer electricity peaks, and the possibility of a colder-than-expected winter putting more stress on next year’s natural-gas demands, it’s likely that Aliso Canyon may be called upon again in the near future — even as agencies look at ways that it could be replaced in the long run.