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California Gas Restructuring Inching Along

California Gas Restructuring Inching Along

California regulators are scheduled to move natural gas industry restructuring a few more notches forward this week, but not without making still more modifications as suggested by additional comments filed last week.

The only consensus seems to be around the proposed idea to push the major stakeholders into a wide-ranging settlement on many of the biggest issues surrounding the future unbundling of the natural gas business in California. Otherwise, all of the parties are still widely divided over the issues. Everyone wants fewer barriers to competition, but no one agrees how to do it.

However, a California Public Utilities Commission (CPUC) staff member, who is sorting through the varied comments in the case, thinks the stakeholders all agree with the general direction of the proposed decision that comes before the CPUC commissioners on June 24. At the same time, each have several changes they alone would like to see slipped into the state's nearly two-year-old gas restructuring effort. It has been touted as being complementary to the state's electric restructuring, but not necessarily a mirror image of it.

A key issue for the CPUC to consider this week is whether the concerns about the restructuring's proposed timetable-assuming the state legislature does not interfere - should cause regulators to allow more time for a comprehensive settlement of the issues.

Several parties have recommended that more time be given. Las Vegas-based Southwest Gas, which is both a California-regulated local distribution utility and a wholesale customer of Southern California Gas, does not think the prescribed 60 days for parties to reach a settlement is adequate. Failing to reach such an agreement, the CPUC proposed decision calls for a series of hearings in the fall to work out the cost-benefit analyses for a number of proposed unbundling steps.

"Given the experience observed in the residential market under electric restructuring, Southwest is concerned that the proposed decision contemplates development of systems and processes that will be expensive to create, but that will provide little or no benefit to our customers," Southwest's senior state regulatory manager, Debra Jacobson, writes in its latest filing.

With concurrence from even the state's leading utility consumer group, TURN (The Utility Reform Network), Southwest supports the CPUC's proposal to keep monopoly providers as the "default procurement" provider for gas for customers who do not want to switch to a new source of supply. TURN suggested six to nine months be allowed for settlement negotiations.

Nonutility commercial interests, as represented by Calpine Corp. and Enron, urged the CPUC to go faster in opening up the industry and addressing what they allege are market power advantages of the state's three major gas monopolies, SoCalGas, Pacific Gas and Electric, and San Diego Gas and Electric.

Calpine suggests the CPUC use its current record in the 18-month gas proceeding to write a recommendation now to state lawmakers, instead of waiting for a settlement and/or cost-benefit proceedings. Then, it should require utilities "to provide sufficient information to enable parties to evaluate the unbundling of costs and rates." Finally, the regulators ultimately should consider full unbundling and divestiture in the cost-benefit phase of the ongoing gas investigation.

While contending that the current regulatory and industry structures in California "conspire to deprive consumers of the benefits of choice and competition," Enron continues to push for a date-certain settlement that follows the proposed CPUC decision and includes a requirement that the utilities bring to the table a proposal at the first settlement meeting. It further urges the CPUC to back off its requirement that a utility default procurement services option be offered.

Enron also believes the CPUC could create statewide storage and intrastate capacity markets, along with revised balancing rules this year without violating the California law which prohibits further gas unbundling until next year.

Still other opinions were offered by Southern California Edison, one of the largest gas transporters in the state, including a recommendation that the CPUC not foreclose the future option of requiring divestiture of transmission and storage assets by the utilities and creation of a gas ISO "if market and pricing abuses by the gas utilities continue to occur."

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