The California Public Utilities Commission (CPUC) Thursday took a couple of actions dealing with natural gas utility rates that are footnotes to more turbulent times in the state’s evolving gas markets. On the one hand, the CPUC established a proceeding to allocate settlement monies from past lawsuits stemming from the 1999-2002 energy crisis, but it rejected a request to suspend a long-standing market-indexed capital cost adjustment mechanism.

Sempra Energy’s two gas utilities were in the center of both moves. The state’s other major gas distributors — Pacific Gas and Electric Co. (PG&E) and Las Vegas-based Southwest Gas Corp. — are involved in the court settlement funding allocation case.

The new proceeding deals with allocating $164 million in payments to the core customers of PG&E, Southwest Gas, and the two Sempra utilities, Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co. (SDG&E) that were part of a multi-case settlement reached three years ago (see Daily GPI, June 16, 2006).

It came to be known as the “Sempra settlement,” according to the CPUC, and involved Sempra and its California utilities in a multi-billion-dollar class action lawsuit. Dating back to the 2000-2001 western energy crisis, the so-called Continental Forge class alleged Sempra’s utilities conspired with El Paso Natural Gas Co. to drive up wholesale natural gas prices at the Arizona-California border.

The cash amount of the settlement — $350 million to be paid by Sempra over an eight-year period — was only made final last summer, and it has now been left to the CPUC to handle the allocation of approximately half of the funds to the respective utilities’ core customers.

In the other action, the CPUC rejected a request from SoCalGas to drop the use of a “market indexed capital adjustment mechanism” that has been used since 1997 as part of the establishment of the utility’s performance-based ratemaking plan. The Sempra utility for years has been attempting to replace the use of a 30-year U.S. Treasury Bond index with another bond index it considers more relevant.

The CPUC noted that SoCalGas did not get the mechanism change into its latest general rate case settlement last year. Given this failure and opposition to the change from various consumer interests, the CPUC denied the request even though it acknowledged that the U.S. Treasury Bond index use “may be flawed.”

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