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CA Adopts One Gas Rate for Generators

CA Adopts One Gas Rate for Generators

California regulators last Thursday approved a series of rate adjustments for Southern California Gas and San Diego Gas and Electric that are designed to encourage future merchant natural gas pipeline and electric power plant projects, as well as result in a $248 million gas utility net rate decrease.

For SoCalGas that equals $210 million in rate cuts, the bulk of the reduction ($158.9 million) going to residential and small business customers. SDG&E's gas rates drop a total of $37 million, $18 million of which is for small, core customers.

Although voting for the rate change, Richard Bilas, the former president of the California Public Utilities Commission, cautioned that the regulators' establishment of a single rate for electric generators is another example of "central planning" that he is philosophically against. It means Los Angeles-area generators now enjoying a lower rate compared to ones in San Diego County will have to "susbsidize" the plants at the extreme southern end of the state, he said.

The CPUC took its action in response to the urging of a coalition of merchant power plant operators in San Diego that includes Reliant Energy and Duke. The combined single rate, which will vary depending on the annual volumes used, will cover the service territories of both SoCalGas and SDG&E, both of which are now part of San Diego-based Sempra Energy.

The rate decision is part of what the CPUC calls its Biennial Cost Allocation Proceeding (B-CAP), a process set up to eliminate a special gas charge labeled as "anti-competitive" for commercial/industrial customers taking at least a portion of their gas supplies from competing pipelines to SoCal's transmission/storage system. This is the "residual load service" (RLS) tariff, and a last-minute addition sponsored by Commissioner Bilas left open the question of whether the tariff should be market- or cost-based and provided more flexibility as to when it may be eliminated.

"The RLS tariff is continued for one year, or until a replacement peaking rate is adopted, whichever comes later," the CPUC said in its announcement of the decision. Gas pipeline competitors and some large customers had recommended that the CPUC eliminate the RLS tariff.

In taking its action, the CPUC noted that several of the issues dealt with in this decision are part of the board, two-year-old natural gas restructuring proceeding, including the RLS tariff, as part of ongoing major settlement talks among SoCalGas and about 75 stakeholders in California's natural gas industry. Richard Nemec, Los Angeles

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