California regulators last Thursday approved a series of rateadjustments for Southern California Gas and San Diego Gas andElectric that are designed to encourage future merchant natural gaspipeline 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 ofthe reduction ($158.9 million) going to residential and smallbusiness customers. SDG&E’s gas rates drop a total of $37million, $18 million of which is for small, core customers.

Although voting for the rate change, Richard Bilas, the formerpresident of the California Public Utilities Commission, cautionedthat the regulators’ establishment of a single rate for electricgenerators is another example of “central planning” that he isphilosophically against. It means Los Angeles-area generators nowenjoying a lower rate compared to ones in San Diego County willhave to “susbsidize” the plants at the extreme southern end of thestate, he said.

The CPUC took its action in response to the urging of acoalition of merchant power plant operators in San Diego thatincludes Reliant Energy and Duke. The combined single rate, whichwill vary depending on the annual volumes used, will cover theservice territories of both SoCalGas and SDG&E, both of whichare now part of San Diego-based Sempra Energy.

The rate decision is part of what the CPUC calls its BiennialCost Allocation Proceeding (B-CAP), a process set up to eliminate aspecial gas charge labeled as “anti-competitive” forcommercial/industrial customers taking at least a portion of theirgas supplies from competing pipelines to SoCal’stransmission/storage system. This is the “residual load service”(RLS) tariff, and a last-minute addition sponsored by CommissionerBilas left open the question of whether the tariff should bemarket- or cost-based and provided more flexibility as to when itmay be eliminated.

“The RLS tariff is continued for one year, or until areplacement peaking rate is adopted, whichever comes later,” theCPUC said in its announcement of the decision. Gas pipelinecompetitors and some large customers had recommended that the CPUCeliminate the RLS tariff.

In taking its action, the CPUC noted that several of the issuesdealt with in this decision are part of the board, two-year-oldnatural gas restructuring proceeding, including the RLS tariff, aspart of ongoing major settlement talks among SoCalGas and about 75stakeholders in California’s natural gas industry. RichardNemec, Los Angeles

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.