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California's Bilas Offers New Competition Definition for Gas

California's Bilas Offers New Competition Definition for Gas

California's chief energy regulator, at a critical juncture in a year-long study of the state natural gas industry's market conditions, says he is not sure he will support extensive unbundling or divestiture on the gas side.

Richard Bilas, president of the California Public Utilities Commission, said in an interview he thinks the state eventually will have increased retail competition for energy, but he qualifies the definition for competition to be something other than the "textbook" one that depends on increasing the numbers of players in the marketplace. In his definition the removal of all barriers to entry into a market constitutes increased retail competition.

"This means that while incumbents (the utilities) may enjoy large market shares, there are no barriers keeping others out," Bilas said. "That I think is what we have to strive for (in both gas and electricity). Then, we will be successful, and whether or not people take advantage of it is up to them. But in time, I think they will take advantage." Bilas said in a recent meeting with FERC's chairman he recommended that the federal regulators adopt that definition of competition.

Bilas said he is not convinced that electricity and gas restructuring in the state need to follow the same paths. Even with considerable restructuring in both sectors already, the CPUC is in the midst of separate statewide efforts that could result in further changes in the year 2000 and beyond.

"The two industries are not the same," said Bilas, during a wide ranging interview March 19. "They clearly are different with different issues raised in each, so how consistent we are (in the two ongoing restructuring proceedings) is up for debate. "I am open-minded about this. One of the questions I asked staff early in the (gas restructuring) process was to look very closely at the relationship between electric and gas to see if it is necessary to do things we're embarking on in electricity in the gas industry to determine if we have to move along the same path? Until I see evidence that there are clear benefits to moving along the same path, I am going to have an open mind."

Bilas said he is not convinced that the gas utilities need to spin off their storage and transmission pipeline operations in the same manner the electrics have sold their generation assets. Southern California Gas has argued that those operations are "integral" to their overall gas delivery system and that splitting them off could impose added costs to consumers. Merchant storage advocates, Bilas said, argue just the opposite-that costs would come down and consumers would benefit. "I'm not convinced one way or the other," Bilas said. "I have heard the arguments, and I'm not convinced."

Bilas also expressed doubt that new state legislation, similar to California's 1996 electric industry reform law, will be required next year to implement further natural gas changes. He thinks the basic elements should stay in place from recent steps to unbundle the industry through Pacific Gas and Electric's Gas Accord and an earlier "Global Settlement" SoCalGas negotiated with its major suppliers, shippers and customers. "What are you going to do - undo those agreements and start all over again? It seems to me you change expectations and certainties in the marketplace if you do that, and we don't want to do that."

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