Over the objections of its former president, the California Public Utilities Commission Thursday approved on a 4-1 vote a $6.7 million performance-based ratemaking (PBR) award for San Diego Gas and Electric Co. under its incentive mechanism for buying natural gas supplies.

Part of the calculation of the PBR is based on California-Arizona natural gas border price indices, and the CPUC noted that the amount could be “revised” in the future, depending on the outcome of some ongoing investigations.

The resolution noted that through a settlement between the utility and the CPUC’s independent consumer advocacy unit the amount of the reward was reduced from more than $38 million originally requested by SDG&E to the approved amount of less than $7 million.

Calling it a “mistake to approve this matter at this time,” Commissioner Loretta Lynch, who stepped down last month after a three-year run as the commission’s president, objected strongly to the measure because of the recent state and federal investigations about alleged wholesale market participants supplying false information to at least one of the major national gas price indices as a means of manipulating prices.

The reward was for SDG&E gas buying results for the 12-month period ending July 1, 2001, and the CPUC energy division staff and other four commissioners did not share Lynch’s concerns. The so-called PBR programs has been in effect since 1993.

“This reward amount was arrived at as a result of a Memorandum of Understanding (MOU) between SDG&E and the CPUC’s independent Office of Ratepayer Advocates (ORA),” the resolution approved by the commissioners said. “The MOU effectively increased SDG&E’s actual gas costs subject to the gas cost PBR, and substantially reduced the amount of the shareholder reward that the gas cost PBR would otherwise have allowed.

“This reward could be revised in the future depending on the outcome of our investigation into the causes of high California border prices in 2000-2001, and on the outcome of the Federal Energy Regulatory Commission’s investigation into electric and gas market price manipulation.”

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