After almost 18 months of detailed proceedings and negativelegislative signals, California regulators have pulled backsubstantially from original proposals to unbundle the state’snatural gas industry along the lines of the state’s electricderegulation.

The latest proposal endorsed by an administrative law judge andthe president of the California Public Utilities Commission wouldinclude a default level of bundled monopoly utility service, whilegiving the utilities and other stakeholders an opportunity to reacha settlement this summer on what services eventually should berecommended to the state legislature for unbundling. The latestscenario will be considered by the CPUC at its June 24 meeting inSan Francisco.

The most far-reaching among proposals surfacing in early 1998already have been taken out of consideration. Those include: thedivestiture of transmission and storage by California’s twodominant gas utilities, Pacific Gas and Electric and SouthernCalifornia Gas; establishment of an “independent system operator”of the gas transmission pipeline system within the state; andunbundling of the metering function.

There is continuing pressure for more transparency in thewholesale gas market in California, particularly aimed at SoCalGas’operating system for transmission and storage, which came undercriticism from many parties in the ongoing statewide gas case asbeing closed and anti-competitive.

“Essentially the proposed decision outlines a market structurethat tries to do two things at once,” according to a CPUC staffadviser closely involved in the gas restructuring case. “Itrecognizes the benefits of allowing the utility to continue toprovide the same array of bundled services (procurement,transmission, storage, revenue cycle services, etc.) and at thesame time, it really strives to introduce as many competitiveelements into that structure, recognizing that the potential foranti-competitive behavior will still exist because the utility isstill able to provide fully bundled service.

“It offers some ways to mitigate the latter, however, throughprovisions such as increased information disclosure, the utilitiesproviding more information on their operations, etc., trying toprovide a more transparent market. This is supposed to mitigate anypotential for the utilities’ distorting the marketplace.”

By the end of the year, the CPUC wants to send a formal writtenreport and recommendations to the state legislature, based on asettlement, hearings or a combination of the two.

In the meantime, the proposed decision would attempt to gainearly action from the state legislature on consumer protectionplans and a lifting of the barriers to more small residential andbusiness (core) customers choosing to aggregate their gas-buyingand related services. In addition, SoCalGas will be asked toprovide clarification on its existing use of “windows” for settingcapacity rights and rates in its transmission and storage system.

Richard Nemec, Los Angeles

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