California regulators are scheduled to move natural gas industryrestructuring a few more notches forward this week, but not withoutmaking still more modifications as suggested by additional commentsfiled last week.

The only consensus seems to be around the proposed idea to pushthe major stakeholders into a wide-ranging settlement on many ofthe biggest issues surrounding the future unbundling of the naturalgas business in California. Otherwise, all of the parties are aswidely divided over the issues as ever. Everyone wants fewerbarriers to competition, but no one agrees on how to do it.

However, a California Public Utilities Commission staff memberhelping sort through the varied comments in the case thinks thestakeholders all agree with the general direction of the proposeddecision that comes before the CPUC commissioners on the 24th, atthe same time each has severalchanges they alone would like tosee slipped into the state’s nearly two-year-old gas restructuringeffort. It has been touted as being complementary to the state’selectric restructuring, but not necessarily a mirror image of it.

A key issue for the CPUC to consider this week is whether theconcerns about the restructuring’s proposed timetable-assuming thestate legislature does not interfere – should cause regulators toallow more time for a comprehensive settlement of the issues.

Several parties have recommended that more time be given. LasVegas-based Southwest Gas, which is both a California-regulatedlocal distribution utility and a wholesale customer of SouthernCalifornia Gas, does not think the prescribed 60 days for partiesto reach a settlement is adequate. Failing to reach such anagreement, the CPUC proposed decision calls for a series ofhearings in the fall to work out the cost-benefit analyses for anumber of proposed unbundling steps.

“Given the experience observed in the residential market underelectric restructuring, Southwest is concerned that the proposeddecision contemplates development of systems and processes thatwill be expensive to create, but that will provide little or nobenefit to our customers,” Southwest’s senior state regulatorymanager, Debra Jacobson, writes in its latest filing.

With concurrence from even the state’s leading utility consumergroup, TURN (The Utility Reform Network), Southwest supports theCPUC’s proposal to keep monopoly providers as the “defaultprocurement” provider for gas for customers who do not want toswitch to a new source of supply. TURN suggested six to nine monthsbe allowed for settlement negotiations.

Nonutility commercial interests, as represented by Calpine Corp.and Enron, urge the CPUC to go farther, faster in opening up theindustry and addressing what they allege are market poweradvantages of the state’s three major gas monopolies, SoCalGas,Pacific Gas and Electric, and San Diego Gas and Electric.

Calpine suggests the CPUC use its current record in the 18-monthgas proceeding to write a recommendation now to state lawmakers,instead of waiting for a settlement and/or cost-benefitproceedings. Then, it should require utilities “to providesufficient information to enable parties to evaluate the unbundlingof costs and rates.” Finally, the regulators ultimately shouldconsider full unbundling and divestiture in the cost-benefit phaseof the ongoing gas investigation.

While contending that the current regulatory and industrystructures in California “conspire to deprive consumers of thebenefits of choice and competition,” Enron continues to push for adate-certain settlement that follows the proposed CPUC decision andincludes a requirement that the utilities bring to the table aproposal at the first settlement meeting. It further urges the CPUCto back off its requirement that a utility default procurementservices option be offered. ]

Enron also believes the CPUC could create statewide storage andintrastate capacity markets, along with revised balancing rulesthis year without violating the California law which prohibitsfurther gas unbundling until next year.

Still other opinions were offered by Southern California Edison,one of the largest gas transporters in the state, including arecommendation that the CPUC not foreclose the future option ofrequiring divestiture of transmission and storage assets by theutilities and creation of a gas ISO “if market and pricing abusesby the gas utilities continue to occur.”

Richard Nemec, Los Angeles

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