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CA Power Utility Sees Lower, Stable '07 Natural Gas Costs

In passing up an authorized 6% rate hike for some of its customers to begin the new year, Southern California Edison Co. said its latest forecasts call for lower and stabilized wholesale natural gas costs, and that is the main driver in its assessment that its retail power rates will remain unchanged in 2007. Edison's revenue/tariffs vice president, Akbar Jazayeri, outlined the utility's assessment for Daily GPI in a brief interview Wednesday.

A year ago, Edison's forecasts called for natural gas costs for this year at the $10/MMBtu level, Jazayeri said. Instead, what the large power utility has experienced are prices in the $7-8/MMBtu range, he said. As a result, retail monthly electric bills will average about $85/month next year, instead of $91/month, next year, based on the Rosemead, CA-based utility's current calculations.

For all of 2007, Jazayeri said Edison currently is forecasting its gas costs in the $7-8/MMBtu range. As a result, Edison's multi-billion-dollar annual revenue requirement will be reduced by about $235 million for the year, with the bulk of that decrease being attributable to the lower wholesale gas costs, he said.

"We're projecting our [2007] revenue needs now for purchased power and natural gas, and that total amount of money happens to be less than we needed this year," said Jazayeri, noting the reduction is also attributable to an overcollection this year due to the extremely hot mid-summer weather and the lower-than-forecast gas costs. (The rates Edison has charged most of the year were based on a much higher cost of gas than what was experienced.)

In the early part of this year, Edison's gas costs were about in the $10 area, he said, but by mid-year the prices dropped to the $7-8 range, and new projections essentially called for prices to remain in the mid-$7s range for '07.

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