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CPUC Approves Additional Gas Hedging for Sempra Utilities

On the heels of similar approval for Pacific Gas and Electric Co. earlier this month, the California Public Utilities Commission Thursday unanimously approved added natural gas hedging for Sempra Energy's two utilities, Southern California Gas Co. and San Diego Gas and Electric Co. The enhanced hedging program, like the one approved for the PG&E utility, is expected to help the utilities mitigate against wholesale prices that are expected to be 30% to 40% higher this winter, CPUC President Michael Peevey said.

The CPUC announcement on the decision said the regulators expect SoCalGas and SDG&E to use the added hedging to "help safeguard the core customers" from high natural gas prices for this winter, and as a result of the commission's action, the average residential customer's monthly bill will increase by about $2. However, the CPUC determined that without the expanded hedging authority, consumers face the risk of even higher bills.

"California's utilities need the necessary tools to mitigate against the additional price increases," Peevey said. "Today's decision gives SoCalGas and SDG&E more power to reign in volatile natural gas prices and reduce customer bill impacts."

At its Oct. 6 meeting, the CPUC approved similar authority for PG&E's utility, and one regulator, Commissioner Geoffrey Brown, voted against the action, saying all the risk was carried by utility ratepayers and none by shareholders (see NGI, Oct. 7). On Thursday, Commissioner Brown voted for the Sempra utility measure, saying in retrospect he thinks his earlier opposition was a mistake.

"I have a feeling that SDG&E, as well as PG&E, operating outside of their incentive mechanisms, will do everything they can to buy at the least possible costs," Brown said.

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