SDG&E;, SoCal Gas to Bid on Building Pipeline to Baja

SAN DIEGO —  San Diego Gas & Electric Co. announced that it is forming a partnership to bid on construction of an 80-mile pipeline to take natural gas to northern Baja California, a project that could cut air pollution south of the border and diversify the utility’s business.

SDG&E; and its partner, Southern California Gas Co. of Los Angeles, filed this week for federal permission to build the transmission line from SDG&E;’s natural gas facility in southern Riverside County to the border.

The line would run south along Interstate 15 to Rancho Bernardo and then east to Santee and finally south to the U.S.-Mexico border at Otay Mesa. The pipeline would give Baja access for the first time to natural gas from fields in Canada and the western U.S.

Northern Baja now relies for its energy needs on a geothermal plant south of Mexicali and a smoke-belching power plant in Rosarito that runs on fuel oil with a high sulfur content.

SDG&E; and its partner are responding to a Mexican government request for bids from U.S. utility companies for a gas delivery system. Mexico wants to expand its Rosarito power plant, but only with equipment that burns natural gas, according to Don Felsinger, SDG&E;’s executive vice president.

If natural gas were used at the Rosarito plant, Felsinger said, the pollutants it spews out could be reduced by about 50,000 tons annually.

SDG&E; would spend about $70 million in shareholder funds to help complete the estimated $100 million pipeline project, which has been dubbed “Vecinos,” or neighbors. Southern California Gas Co. would invest about $30 million.

SDG&E; executives say that, to go forward with the project, they must be convinced that they can both recover their investment and eventually use revenues from transmission of gas to Mexico to slash natural gas rates for San Diego customers.

SDG&E; has until Jan. 15 to submit to the Mexicans its proposal to deliver the gas. The utility would only be paid a fee for delivery, not for the gas.

Within 10 years, Felsinger said, SDG&E; would have to build a new natural gas pipeline to San Diego anyway to meet growing demand here.

Felsinger expects the Mexican government to decide who will deliver the gas to Baja California within two months after U.S. utility companies submit their proposals. One of SDG&E;’s competitors in the bid to win Mexico’s business is El Paso Natural Gas Co., which wants to build a pipeline from Texas to Mexico.

If Mexico chooses SDG&E;, and the utility then wins necessary approval from federal and state agencies here, construction would begin by late next year and employ 200 or more people, Felsinger said. Some natural gas deliveries to Mexico could start as early as 1995, he said, with maximum deliveries, which would also serve the maquiladoras and other industry along the border, by 1997.

SDG&E; also is seeking a contract from the Mexican government to build the pipeline that will be needed to transport the natural gas from the border to the Rosarito power plant, Felsinger said, adding that that would cost between $15 million and $20 million.