California Restricts Retail Unbundling
California legislators have bowed to industry pressure and
extended the state's ban on natural gas unbundling for residential
and small business customers. The new legislation (AB 1421) was
passed in a late night session in the waning days of the current
legislative session and will maintain the utilities' role as the
almost exclusive provider for small customers.
The governor is expected to sign the bill, which follows on a
similar hold on retail sales passed last year that expires Jan. 1,
2000. There is no expiration date of the new legislation which bans
choice for all but aggregations of small customers.
"We supported the bill," said a PG&E utility spokesperson.
"A key element for us was that the bill provides that [we] shall
continue to provide services to core customers (revenue cycle and
after-meter services). There are obvious safety considerations in
those services, and we wanted to be able to continue to provide
them to our core customers."
An attorney for TURN (The Utility Reform Network) said although
the group had been listed as opposed to the legislation, "we aren't
unhappy by the final outcome. The bottom line is that we support
having a cost-based gas provider of the commodity and related
services. So AB 1421 as passed we don't see as a terrible thing,"
said Marcel Hawiger.
TURN is concerned about the recovery of stranded costs and the
fact that the collection of those costs always falls on the
ratepayers. "The CPUC has been reluctant to shift any of those
costs onto the utility shareholders. So unless there is some
solution to the stranded cost problem, we don't recommend
unbundling for core retail services."
Hawiger said he was unsure that unbundling would produce lower
gas rates for small retail customers. "The existing core
aggregation program has not shown that there are actually lower
rates or savings from unbundling on the core side," Hawiger said.
In the natural gas restructuring proceedings, TURN has supported
looking at unbundling the billing function for gas customers. It
supported getting more information on the issue before making a
final decision. The new legislation, according to TURN, does not
affect the push to unbundle interstate core gas supplies, and it
has supported unbundling in that area because it would result in
savings to residential customers.
The new law is designed to ensure that the state's major
investor-owned gas utilities continue to provide bundled service
for core customers, except those who aggregate their loads under
the state's eight-year-old program, for which the rules have been
relaxed in recent years to allow any residential or small business
customer to participate. So far, less than 10% of the customers
The new law prohibits the billing/metering from being unbundled
for core customers, unless they choose aggregation. However, even
for those who choose an alternative, the law lessens the credit
customers can receive from the utility and prohibits the
after-meter services, which are viewed as safety-sensitive, being
provided by anyone other than the utility.
California's lawmakers-prompted by the utilities and the labor
unions representing gas utility employees-have expressed concerns
about natural gas unbundling going as far as it has in the
electricity sector. Thus, the new law aims at assuring that "no
customer should have to pay separate fees for utilizing services
that protect public or customer safety." With gas, those services
are viewed broadly to include a range of "basic services" from
transmission/storage through after-meter services of leak
detection, pilot relighting, carbon monoxide investigations and
even high-bill investigations (assuming that a lot of them are
related to unidentified leaks).
Observers think the new law is basically consistent with actions
earlier in the summer by the California Public Utilities Commission
that are now being worked out in settlement discussions among the
state's major gas industry participants. Those talks focus on the
Southern California Gas and Pacific Gas and Electric transmission
and storage systems, mostly as they relate to large commercial and
industrial customers and core aggregators. The new law is mainly
concerned with small customers.
Richard Nemec, Los Angeles