Large commercial and industrial customers in Southern Californiashould experience further rate relief on their natural gas billsnext year, but the declines will be modest, according to aCalifornia Public Utilities Commission staff manager in charge oftwo pending rate cases for Southern California Gas Co., whichcontinues to keep a wary eye on new proposed interstate pipelinesthat would like to hook up directly to some of its largestcustomers.

A joint recommendation is being made in a pending rate case bySoCalGas, the CPUC’s Office of Ratepayer Advocates (ORA), theconsumer group, TURN (The Utility Reform Network) and California’slargest industrial operators, California Industrial Group and theCalifornia Manufacturers Association. Hearings are set for June8-9, at which time more details on the joint agreement will begiven. But according to an ORA Manager, R. Mark Pocta, anotherpending state regulatory case, a rehearing of a two-year-old CPUCrate decision, is likely to have the most impact because it dealswith the question of whether to reallocate $120 million away fromcore customers to the noncore.

“We can’t speculate on exactly what the commission (CPUC) isgoing to do, but in granting the rehearing they indicated thatthere are grounds to change that allocation-at least part of it, ifnot all of it,” said Marcel Hawiger, TURN’s attorney for naturalgas matters. “In that sense, the $120 million potentially is abigger change than the difference between the joint recommendationand what SoCalGas originally filed in its recent case.” (Thatamount is less than $50 million.)

The overall effect still is expected to move rates downward forall of SoCalGas’ customers, but only in small increments comparedto current rates for core commercial/industrial gas users and thelarger noncore customers. Those rates already were lowered at thestart of this year.

The crux of the issue on rehearing is whether more costs shouldbe shifted to the transportation rates of the largest (noncore)customers, all of whom buy their own gas supplies and potentiallycould bypass the utility entirely. Among the largest customerslikely impacted are the merchant power generation plants purchasedfor billions of dollars in the past two years from California’smajor investor-owned electric utilities. Therefore, the ORA’s Poctasaid for the rest of SoCalGas’ commercial/industrial customersthere should be at least a small additional decrease starting in2000, but nothing on the magnitude of what these customersexperienced at the start of 1999. The cases now pending determinehow the utility allocates its costs and designs rates for thevarious groups of residential, small business, commercial andindustrial customers. These proceedings do not deal with SoCalGas’operating expenses and profit levels, which are now handled by a”performance-based ratemaking (PBR),” or incentive-based, system.

Richard Nemec, Los Angeles

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