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Energy

California natgas prices spike higher due Aliso Canyon outage

June 2 (Reuters) - California natural gas prices spiked to a five-month high after state regulators approved rules to help gas utilities manage the amount of fuel flowing in pipelines due to the ongoing outage of the Aliso Canyon underground storage facility.

Next-day prices at the Southern California Border W-SOBOR-IDX jumped over 35 percent so far this week to $2.28 per million British thermal units, the highest level since January.

To avoid fines, some traders said they were increasing the amount of gas they put into the system, causing the price rise.

In October, Southern California Gas, the nation’s biggest gas distribution utility, detected a major leak at Aliso Canyon. The facility, located about 30 miles (48 km) northwest of Los Angeles, is the second biggest storage field in the western United States, according to federal data.

SoCalGas is a unit of California energy company Sempra Energy.

SoCalGas plugged the leak in February, but Aliso Canyon remains shut while the company inspects all of the facility’s 114 wells. The company said in April it hopes to partially restore the facility to service by the end of the summer.

Several state agencies prepared a report in April warning that without gas from Aliso Canyon to help balance supply and demand there could be up to 14 days of gas shortages this summer severe enough to result in blackouts.

The settlement proposal California regulators adopted last week allows SoCalGas to use Operational Flow Orders (OFO) starting June 1 to control the amount of gas on its pipelines.

OFOs are issued to protect the pipelines. They can be issued if the pipeline does not have enough gas and pressure has dropped to below operational minimums, or if the pipe has too much gas and is reaching an operational maximum.

SoCalGas started issuing low OFOs on June 1, meaning the amount of gas on the pipes is too low.

OFOs requires pipeline users to closely match the amount of gas they say they will put in with what they say they will take out. Users tell pipeline operators how much gas they expect to ship in a nomination process several times a day.

If a user puts more gas into a pipe on a normal day, they can balance that by boosting nominations in a later cycle. On an OFO day, however, pipeline operators can fine users if the actual shipments do not come close to matching nominations.

Reporting by Scott DiSavino

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