The California Public Utilities Commission (CPUC) on Thursday approved a joint natural gas hedging plan for winter supply purchases by Sempra Energy’s two utilities. It is similar to plans the CPUC approved for Southern California Gas Co. (SoCalGas) the past three winters.
The plan was uncontested and terms were not disclosed. The CPUC followed the tack it took in fall 2005 after hurricanes Katrina and Rita when it expanded SoCalGas hedging activities. As a result, SoCalGas and San Diego Gas and Electric Co. now have authority to launch their joint combined core portfolio 2008-2009 winter hedging program. Six years in the making, the CPUC at the end of last year approved the concept of a joint gas-buying effort by the two utilities (see Daily GPI, Dec. 10, 2007).
The CPUC said in authorizing hedging outside of the utilities’ gas cost incentive mechanism that it will be reevaluated after three years, and it is “subject to revision pending disposition of the pending generic rulemaking regarding gas utilities’ treatment of hedging under incentive mechanisms.” The utilities will also have to file a joint annual hedging plan with the CPUC.
“The proper use of hedging provides the ability to secure price protection in case natural gas prices spike substantially and thereby mitigate the impact these higher prices would have on customer bills,” the CPUC said.
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