California’s chief energy regulator, at a critical juncture in ayear-long study of the state natural gas industry’s marketconditions, says he is not sure he will support extensiveunbundling or divestiture on the gas side.
Richard Bilas, president of the California Public UtilitiesCommission, said in an interview with NGI he thinks the stateeventually will have increased retail competition for energy, buthe qualifies the definition for competition to be something otherthan the “textbook” one that depends on increasing the numbers ofplayers in the marketplace. In his definition the removal of allbarriers to entry into a market constitutes increased retailcompetition.
“This means that while incumbents (the utilities) may enjoylarge market shares, there are no barriers keeping others out,”Bilas said. “That I think is what we have to strive for [in bothgas and electricity]. Then, we will be successful, and whether ornot people take advantage of it is up to them. But in time, I thinkthey will take advantage.” Bilas said in a recent meeting withFERC’s chairman he recommended that the federal regulators adoptthat definition of competition.
Bilas said he is not convinced that electricity and gasrestructuring in the state need to follow the same paths. Even withconsiderable restructuring in both sectors already, the CPUC is inthe midst of separate statewide efforts that could result infurther changes in the year 2000 and beyond.
“The two industries are not the same,” said Bilas, during a wideranging interview March 19. “They clearly are different withdifferent issues raised in each, so how consistent we are [in thetwo ongoing restructuring proceedings] is up for debate. “I amopen-minded about this. One of the questions I asked staff early inthe [gas restructuring] process was to look very closely at therelationship between electric and gas to see if it is necessary todo things we’re embarking on in electricity in the gas industry todetermine if we have to move along the same path? Until I seeevidence that there are clear benefits to moving along the samepath, I am going to have an open mind.”
Bilas said he is not convinced that the gas utilities need tospin off their storage and transmission pipeline operations in thesame manner the electrics have sold their generation assets.Southern California Gas has argued that those operations are”integral” to their overall gas delivery system and that splittingthem off could impose added costs to consumers. Merchant storageadvocates, Bilas said, argue just the opposite-that costs wouldcome down and consumers would benefit.”I’m not convinced one wayor the other,” Bilas said. “I have heard the arguments, and I’m notconvinced.”
Similarly, Bilas expressed doubt that new state legislation,similar to California’s 1996 electric industry reform law, will berequired next year to implement further natural gas changes. Hethinks the basic elements should stay in place from recent steps tounbundle the industry through Pacific Gas and Electric’s Gas Accordand an earlier “Global Settlement” SoCalGas negotiated with itsmajor suppliers, shippers and customers. “What are you going to do- undo those agreements and start all over again? It seems to meyou change expectations and certainties in the marketplace if youdo that, and we don’t want to do that.”
Richard Nemec, Los Angeles
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