California regulators took another step toward unbundling thenatural gas business in the state last week, issuing proposedguidelines and saying it will remove limits on the state’sseven-year core aggregation program, meaning any size core customereventually will be able to choose a new supplier.

The California Public Utilities Commission ordered studiescompleted by the end of September to identify safety concerns orpolicy inconsistencies in eventually unbundling billing, meteringand customer services provided by five investor-owned natural gasutilities, along with developing a proposed “consumer protectionprogram” over the same two-month period. In a formal newsannouncement, the CPUC said it is establishing two working groups,one on the safety issued tied to unbundling billing and meteringand another on statewide policy consistency – “to prepare for theultimate natural gas industry restructuring decision (late thisyear or early next), along the lines of the ongoing electric marketchanges.” Public participation hearings will be held this fall, theCPUC indicated.

California’s major gas utilities generally viewed the CPUC’slatest action as a sign it will move more slowly and carefully inopening up the natural gas industry to full retail competition,noting the deadline for the initial cost assignments for variousfunctions will be pushed to the end of February from a previousdeadline three months earlier.

In addition the CPUC’s call for public hearings to look at theimpact of potential unbundling on safety and/or utility union jobsis 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 encouragea more competitive gas marketplace is through unbundling, but theyquestion whether all of the same functions for gas can be unbundledas are being opened up in the electric industry. The utilitiescontend safety concerns arise when gas metering and servicing isunbundled.

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

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