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
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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