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Large SoCalGas Customers May See Rate Cuts

Large SoCalGas Customers May See Rate Cuts

Large commercial and industrial customers in Southern California should experience further rate relief on their natural gas bills next year, but the declines will be modest, according to a California Public Utilities Commission staff manager following two pending rate cases for Southern California Gas Co., which continues to keep a wary eye on new proposed interstate pipelines that would like to hook up directly to some of its largest customers.

A joint recommendation is being made in a pending rate case by SoCalGas, the CPUC's Office of Ratepayer Advocates (ORA), the consumer group, TURN (The Utility Reform Network) and the California's largest industrial operators, California Industrial Group and the California Manufacturers Association. Hearings are set for June 8-9, at which time more details on the joint agreement will be given. But according to an ORA manager, R. Mark Pocta, another pending state regulatory case, a rehearing of a two-year-old CPUC rate decision is likely to have the most impact because it deals with the question of whether to reallocate $120 million away from core customers to the noncore.

"We can't speculate on exactly what the commission (CPUC) is going to do, but in granting the rehearing they indicated that there are grounds to change that allocation-at least part of it, if not all of it," said Marcel Hawiger, TURN's attorney for natural gas matters. "In that sense, the $120 million potentially is a bigger change than the difference between the joint recommendation and what SoCalGas originally filed in its recent case." (That amount is less than $50 million.)

The overall effect still is expected to move rates downward for all of SoCalGas' customers, but only in small increments compared to current rates for core commercial/industrial gas users and the larger noncore customers. Those rates already were lowered at the start of this year.

The crux of the issue on rehearing is whether more costs should be shifted to the transportation rates of the largest (noncore) customers, all of whom buy their own gas supplies and potentially could bypass the utility entirely. Among the largest customers likely impacted are the merchant power generation plants purchased for billions of dollars in the past two years from California's major investor-owned electric utilities. Therefore, the ORA's Pocta said for the rest of SoCalGas' commercial/industrial customers there should be at least a small additional decrease starting in 2000, but nothing on the magnitude of what these customers experienced at the start of 1999. The cases now pending determine how the utility allocates its costs and designs rates for the various groups of residential, small business, commercial and industrial 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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