California regulators Thursday unanimously approved a 2007-08 natural gas hedging program for Sempra Energy’s San Diego Gas and Electric Co. (SDG&E) unit and a revised allocation of firm core capacity on parts of Pacific Gas and Electric Co.’s (PG&E) backbone transmission pipeline system.

The PG&E utility will increase its firm core capacity holding on its transmission line from the California-Arizona border to its citygate from 155 MMcf/d to 348 MMcf/d, while lowering similar capacity rights on a smaller transmission path to local California producers from the current 5 MMcf/d to 1 MMcf/d.

SDG&E in early June reached an all-party settlement on its hedging plan, modifying some aspects of the plan, which is a continuation of 2006-07 hedges. While keeping the essence of the plan confidential, the California Public Utilities Commission (CPUC) authorized the utility to spend up to the lesser of $14/core customer (about $11-$12 million) or the amount requested in its hedging plan as modified by the settlement.

In approving the new plan, the CPUC approved a “one-winter” extension of last year’s winter hedges.

The CPUC’s independent Division of Ratepayer Advocate (DRA), while signing the settlement, originally protested the hedge plan, alleging that SDG&E’s operating budget for the plan was “excessive.” DRA came up with proposed ways to lower those costs and they were submitted confidentially and included in the settlement agreement submitted to the CPUC June. 14.

In other action, PG&E’s Core Procurement Incentive Mechanism will have to adjust its rate benchmarks to recognize the changed firm capacity holdings on the two transmission paths. In addition, the utility is to file an advice letter in the next two months to revise its gas rate and capacity schedules.

PG&E told regulators that it expected annual cost savings of $2-5 million from these changes, allowing it to purchase more supplies at lower costs from Southwest supply basins. There was no opposition among stakeholders to the requests.

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