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California Regulators Move Slowly Toward Gas Unbundling

August 10, 1998
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California Regulators Move Slowly Toward Gas Unbundling

California regulators took another step toward unbundling the natural gas business in the state last week, issuing proposed guidelines and saying it will remove limits on the state's seven-year core aggregation program, meaning any size core customer eventually will be able to choose a new supplier.

The California Public Utilities Commission ordered studies completed by the end of September to identify safety concerns or policy inconsistencies in eventually unbundling billing, metering and customer services provided by five investor-owned natural gas utilities, along with developing a proposed "consumer protection program" over the same two-month period. In a formal news announcement, the CPUC said it is establishing two working groups, one on the safety issued tied to unbundling billing and metering and another on statewide policy consistency - "to prepare for the ultimate natural gas industry restructuring decision (late this year or early next), along the lines of the ongoing electric market changes." Public participation hearings will be held this fall, the CPUC indicated.

California's major gas utilities generally viewed the CPUC's latest action as a sign it will move more slowly and carefully in opening up the natural gas industry to full retail competition, noting the deadline for the initial cost assignments for various functions will be pushed to the end of February from a previous deadline three months earlier.

In addition the CPUC's call for public hearings to look at the impact of potential unbundling on safety and/or utility union jobs is also viewed as an accommodation to the investor-owned utilities, all of which have been urging a cautious approach.

The utilities agree that the best way for the state to encourage a more competitive gas marketplace is through unbundling, but they question whether all of the same functions for gas can be unbundled as are being opened up in the electric industry. The utilities contend safety concerns arise when gas metering and servicing is unbundled.

Detailed cost allocations eventually will be required, the CPUC said, noting that at least eight basic functions will need to be broken out: supply procurement, transmission, hub services, balancing, public purpose programs (low-income, demand-side management, etc.), revenue cycle services (metering and billing) and distribution.

The CPUC said a lot of emphasis will be placed on consumer education and protection measures, including the need to register marketers and other gas service/commodity providers and to have third-party verification of customers' decisions to switch providers.

Richard Nemec, Los Angeles

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