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SoCalGas Plans Rate Cut To Fend Off Competitors

SoCalGas Plans Rate Cut To Fend Off Competitors

Southern California Gas Co. has filed its latest two-year cost-allocation rate proposal with California state regulators, proposing a massive $204 million rate cut, including transportation rate decreases for all customers with the largest targeted for large industrial and wholesale customers.

Coming on the heels of the start of an open season among its largest customers from two competing interstate pipeline companies (Williams and Questar), SoCalGas's proposed rate adjustments, which are to take effect Aug. 1, 1999, seem designed to keep as many as possible of its large customers from physically hooking onto proposed new gas transmission pipelines that are slated to come into the heart of SoCal's service territory in Long Beach.

Transportation rate reductions in the range of 35-55% are proposed for the largest customers. Residential customers are slated for a 3% reduction in winter gas bills, which include commodity and transportation/storage charges. The rate decreases to transportation customers are being made possible by the gas utility's so-called "global settlement" among its largest suppliers and transportation customers from 1994 and the lowering of stranded costs from its western Canadian and offshore California gas supply projects, according to a SoCalGas spokesperson. Residential rate decreases come from a colder-than-normal winter season.

The recent proposed settlement at FERC regarding SoCalGas's paper interstate pipeline affiliate, Pacific Interstate Transmission Co. (PITCO) figures to contribute longer term to the lower rates. PITCO, which is being phased out, has allowed SoCal to obtain Alberta Canada gas supplies through the western interstate pipeline systems of PG&ampE Gas Transmission-Northwest and Northwest Pipeline Co. FERC approval of the settlement is slated for Dec. 18.

Added load in 1998 to new customers served by SoCal along the California-Mexico border also is contributing to the nation's largest natural gas distribution company being able to lower its rates.

SoCalGas is proposing in its filing to the state public utilities commission that the decreases stay in effect through the year 2002 when its current performance-based rate (PBR) structure expires. This rate filing is viewed as a mid-course adjustment to the PBR mechanism that became effective Aug. 1, 1997, and SoCal is recommending that the California Public Utilities Commission continue the structure with no major changes.

As with similar past cost-allocation proceedings, SoCal, a subsidiary of the newly merged Sempra Energy in San Diego, is proposing that residential rates be adjusted to bring them more in line with the higher cost of providing service to smallest energy users. It proposes getting flatter commodity rates, which now have two tiers to penalize use over a threshold amount, and to increase the monthly demand charge from $5 to $7 for its 4.7 million residential customers.

Richard Nemec, Los Angeles

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