California legislators have bowed to industry pressure andextended the state’s ban on natural gas unbundling for residentialand small business customers. The new law (AB 1421) passed in alate-night session in the waning days of the current legislaturewill maintain the utilities’ role as the almost exclusive providerfor small customers.

The governor is expected to sign the bill, which follows on asimilar hold on retail sales passed last year that expires Jan. 1,2000. There is no expiration date of the new legislation, whichbans choice for all but aggregations of small customers.

“We supported the bill,” said a PG&E utility spokesperson.”A key element for us was that the bill provides that (we) shallcontinue to provide services to core customers (revenue cycle andafter-meter services). There are obvious safety considerations inthose services, and we wanted to be able to continue to providethem to our core customers.”

An attorney for TURN (The Utility Reform Network) said althoughthe group had been been listed as opposed to the legislation, “wearen’t unhappy by the final outcome. The bottom line is that wesupport having a cost-based gas provider of the commodity andrelated services. So AB 1421 as passed we don’t see as a terriblething,” said Marcel Hawiger.

TURN is concerned about the recovery of stranded costs and thefact that the collection of those costs always falls on theratepayers. “The CPUC has been reluctant to shift any of thosecosts onto the utility shareholders. So unless there is somesolution to the stranded cost problem, we don’t recommendunbundling for core retail services.”

Hawiger said he was unsure that unbundling would produce lowergas rates for small retail customers. “The existing coreaggregation program has not shown that there are actually lowerrates or savings from unbundling on the core side,” Hawiger said.

In the natural gas restructuring proceedings, TURN has supportedlooking at unbundling the billing function for gas customers. Itsupported getting more information on the issue before making afinal decision. The new legislation, according to TURN, does notaffect the push to unbundle interstate core gas supplies, and ithas supported unbundling in that area because it would result insavings to residential customers.

The new law is designed to ensure that the state’s majorinvestor-owned gas utilities continue to provide bundled servicefor core customers, except those who aggregate their loads underthe state’s eight-year-old program, for which the rules have beenrelaxed in recent years to allow any residential or small businesscustomer to participate. So far, fewer than 10% of the customershave participated.

The new law prohibits the billing/metering from being unbundledfor core customers, unless they choose aggregation. However, evenfor those who choose an alternative, the law lessens the creditcustomers can receive from the utility and prohibits theafter-meter services, which are viewed as safety-sensitive, beingprovided by anyone other than the utility.

California’s lawmakers-prompted by the utilities and the laborunions representing gas utility employees-have expressed concernsabout natural gas unbundling going as far as it has in theelectricity sector. Thus, the new law aims at assuring that “nocustomer should have to pay separate fees for utilizing servicesthat protect public or customer safety.” With gas, those servicesare viewed broadly to include a range of “basic services” fromtransmission/storage through after-meter services of leakdetection, pilot relighting, carbon monoxide investigations andeven high-bill investigations (assuming that a lot of them arerelated to unidentified leaks).

Observers think the new law is basically consistent with actionsearlier in the summer by the California Public Utilities Commissionthat are now being worked out in settlement discussions among thestate’s major gas industry participants. Those talks focus on theSouthern California Gas and Pacific Gas and Electric transmissionand storage systems, mostly as they relate to large commercial andindustrial customers and core aggregators. The new law is mainlyconcerned with small customers.

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