May 04 - International Herald Tribune

High energy prices, the search for new power sources and uncertainties over future energy policies offer power companies challenges as well as opportunities. Sempra Energy, a holding company that operates two utilities in Southern California, is investing large amounts of money into a giant new natural gas pipeline extending from the Rocky Mountains to the American Midwest. The company is also building two liquefied natural gas, or LNG, terminals, one in Mexico and the other in Louisiana. Such investments mean Sempra is poised to gain as the United States hesitates to build new coal-fired power plants and embraces natural gas. But rising commodity prices and labor costs also carry risks for future profits.

Donald Felsinger, Sempra's chairman and chief executive since February 2006, has been a leader in the industry in his warnings on global warming. He recently discussed energy policy and what consumers can expect with Clifford Krauss of The New York Times.

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[Q.] How do you view the U.S. economy from your vantage point as a provider of energy for millions of people and a builder of infrastructure?

[A.] Everything we do today is at a record price. The LNG terminals we are building, because of the price of base metals and labor, are at all-time highs. The cost of building new power plants is at all-time highs. The cost of building gas pipelines is at all- time highs. This will eventually end up as higher costs for customers.

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[Q.]Has the utility industry fully accepted that humankind is a primary cause of accelerated global warming?

[[A.] I don't believe we have 100 percent agreement that mankind is, in fact, the cause. But I think there is enough scientific evidence in place that we need to take action. We can continue to debate about what is actually causing it, but we need to take all the steps we can today to mitigate impacts on the climate from greenhouse gas. Those utilities that build or would build coal- fired power plants perhaps have not made that leap yet that greenhouse gas emissions are part of global warming. But I think that most utilities have.

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[Q.] What kind of energy policy do you hope will come out of the next U.S. administration and Congress?

[A.] Just an energy policy would be a good start. We have been 25 or 30 years talking about energy but the country does not have, in my opinion, an energy policy. Our nuclear program has been dead for 20 years. It needs to be revived. We need to have spent fuel storage. And we need to have all of the electric generation in the country look at renewable energy as a way to meet future energy needs.

There are too many vested interests in people who would like to build coal plants, people who would like to build gas-fired plants, people who only want to see renewables built and nothing else. It requires real leadership to bring all the parties together and say this is what we are going to do for the following reasons and get on with it.

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[Q.] Do you believe that some form of carbon emissions restrictions, perhaps in the form of a carbon tax, is inevitable? Would it be desirable?

[A.] I believe they are inevitable. We are having debates within my own company about what is a better outcome, whether it be cap and trade or a tax. I think the most effective way to deal with carbon pollution is to have a carbon tax.

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[Q.] Liquified natural gas shipments to the United States are dropping because they are being diverted to other countries where prices are higher. How large a problem is that for national natural gas supplies?

[A.] Gas is going to flow to the place where it gets the highest price, and it just so happens that in Asia there are no alternatives and so they pay whatever they have to to get natural gas. Europe also pays higher prices. Over time, as we have more upstream liquefied natural gas available, it will start flowing down to lower- priced markets. We expect to see that happening sometime at the end of this decade.

Originally published by The New York Times Media Group.

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