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CPUC OKs Sempra Storage Cost, Expansion Deal

December 8, 2008
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California regulators last Thursday approved a settlement involving Sempra Energy's two natural gas distribution utilities and 10 other stakeholders in the utilities storage programs for core and noncore customers in the southern half of the state. The agreement provides incentives to Southern California Gas Co. (SoCalGas) and San Diego Gas & Electric Co. (SDG&E) to expand storage assets under the unbundled storage and hub services programs.

In essence, the settlement covering 2009-2014 addresses the allocation of the entire 131 Bcf underground storage capacity of the two utilities, including injection (850 MMcf/d) and withdrawal (3.19 Bcf/d) capacities available for balancing purposes among both core and noncore customers. Under the agreement, core customers of wholesale storage users -- such as Southwest Gas Corp. and the City of Long Beach Gas Department -- will pay the same rates as the combined core customers of SoCalGas and SDG&E.

The decision by the California Public Utilities Commission (CPUC) also resolves the sharing mechanism between ratepayers and utility shareholders of the net revenues from the sales of unbundled storage and hub services. Future expansion of storage for the unbundled program also will be subject to the sharing mechanism.

SoCalGas agreed to "make reasonable efforts" to expand its overall capacity in its four underground storage fields by up to 7 Bcf during the six-year term of the settlement. The Sempra utility also agreed to expand its injection capacity at its largest storage facility -- Aliso Canyon -- by 145 MMcf/d, with the cost of these expansions being allocated to core customer balancing and unbundled storage programs.

The deal "strikes a fair and favorable balance among parties' competing interests and ensures that core customers of SDG&E and SoCalGas have reliable gas supplies at reasonable rates," said CPUC Commissioner Timothy Alan Simon, the assigned regulator for the case. "I'm pleased to see that the parties were able to resolve the majority of their differences in phase one of this proceeding, reaching a settlement that moves forward with a practical plan for expanding storage to both core and noncore customers."

Among the parties settling were Long Beach, Coral Energy Resources LP, the CPUC's independent consumer unit, the Division of Ratepayer Advocates, in-state gas producers, Pacific Gas and Electric Co., Southern California Edison Co., the Southern California Generation Coalition, The Utility Reform Network consumer group, Watson Cogeneration Co., the California Cogeneration Council and the Western Manufactured Housing Community Association.

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