Seeking to stay ahead of eventual settlement developments in a state Superior Court in San Diego and at the Federal Energy Regulatory Commission, California’s state regulatory commission Thursday established a statewide regulatory proceeding to outline how to return in excess of $1 billion to private-sector natural gas and electric utility customers. The funds are what El Paso Natural Gas Corp. agreed to pay in a settlement resulting from various court and regulatory actions aimed at its alleged manipulation of wholesale gas prices at the California-Arizona border in 2000-2001.

A staff attorney for the California Public Utilities Commission told the five-member panel that a lot of the money will be allocated to the state’s former wholesale-power-buying agency, the Department of Water Resources (DWR), which will lower it revenue needs, and that in turn will trigger additional reductions in retail utility rates.

Since the court does not have jurisdiction over the utilities once they receive the payments, the regulatory agency with direct oversight — the CPUC — needs to order a statewide investigation to determine how the California utilities will deal with the funds. The proposed approach is outlined for the CPUC to make final within four months so the state regulators can file that order with the court in its expected hearing on the final approval of the settlement early next year.

In its proposed allocation that will be examined in the statewide proceeding over the next four months, a CPUC attorney on the case indicated that an estimated $425 million of the El Paso settlement would go back to DWR, $210 million and $75 million for electricity and gas customers, respectively at Pacific Gas and Electric Co.; $195 million to Southern California Edison Co. electric customers; $36 million to Southern California Gas Co. customers; and $60 million and $29 million for electricity and gas customers, respectively, at San Diego Gas and Electric Co. In addition, Las Vegas, NV-based Southwest Gas customers would be eligible for about $5 million.

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