NGI The Weekly Gas Market Report
As part of a broad-based statewide investigation the first halfof 1999, California will explore possibilities for opening upelectricity distribution to competition as an extension of thestate’s ongoing energy industry restructuring. Potential impact onthe natural gas industry will be part of the investigation orderedearlier this month by the California Public Utilities Commission.
Thus far, nationally and in California, power deregulation hasbeen confined to generation and after-meter services, with theso-called “wires business” (transmission and distribution) beingkept a tightly regulated monopoly. The California study may alterthis mindset.
By fall of next year, the CPUC intends to have a proposal forthe state legislature to address issues and potential changes inthe way distribution is regulated. The CPUC indicated it wouldconduct its study in close cooperation with the state energycommission and the oversight board for the state-charteredIndependent System Operator (ISO) that runs the transmission gridand the Power Exchange (PX) operating a nonprofit wholesaleelectricity market.
“We think the commission’s investigation is very timely, andwe’re very supportive,” said Sue Mara, an electric regulatorymanager for Enron in its San Francisco office. “We think now is thetime to think about what the wires business is going to look likeonce the stranded costs are paid off.”
Parties must file opening comments by March 17, 1999 andfollow-up replies by May 17, 1999. Some time thereafter it would bedetermined if a series of hearings will be conducted on thesubject. If so, they would probably take place in the summer.
Part of the initial questions outlined for the CPUC’sinvestigation addresses the “implications on the natural gasdelivery infrastructure,” its interrelationships and the resultingimpacts on customers, the environment and the state’s regulatorystructure.
What the CPUC calls a “confluence of events” is driving this newinvestigation, including the advent of distributed generation oron-site generation for small residential and commercialapplications and the formation of water districts which generateand distribute power on a piecemeal basis.
“At the end of the process, we plan to issue a proposaloutlining the specific steps we will undertake in cooperation withthe legislature.” Ultimately, the future role of the traditionallocal distribution utility is going to be examined in thisproceeding, not to mention the future viability of distributedpower suppliers, of which there are several major and a lot ofstart-up energy companies already actively involved.
In the new investigation, all of the issues that were addressedin opening up power generation-safety, reliability, stranded costs,etc.-will emerge in looking at the possible competition fordistribution.
Richard Nemec, Los Angeles
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