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 following twopending rate cases for Southern California Gas Co., which continuesto keep a wary eye on new proposed interstate pipelines that wouldlike to hook up directly to some of its largest customers.

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 theCalifornia’s largest industrial operators, California IndustrialGroup and the California Manufacturers Association. Hearings areset for June 8-9, at which time more details on the joint agreementwill be given. But according to an ORA manager, R. Mark Pocta,another pending state regulatory case, a rehearing of atwo-year-old CPUC rate decision is likely to have the most impactbecause it deals with the question of whether to reallocate $120million away from core 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.

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