California regulators Thursday unanimously initiated a two-phase investigation of the causes for the unprecedented wholesale natural gas price spikes at the Arizona-California border in a 14-month period covering March 2000 through May 2001. The effort is designed to be supplementary to the proceedings already underway at the Federal Energy Regulatory Commission regarding the border prices and the alleged role of El Paso Natural Gas and its affiliates in driving up those prices in the midst of the state’s energy crisis.

Characterized as “investigatory and fact-finding,” the focus will be on determining what, if any, other factors contributed to the unusually high border prices, according to Loretta Lynch, president of the California Public Utilities Commission. It will begin with a focus on Sempra Energy’s two utilities, Southern California Gas Co. and San Diego Gas and Electric Co; a second phase will deal with information from Pacific Gas and Electric Co., Southern California Edison Co. and Las Vegas, NV-based Southwest Gas Corp.

By a separate vote and Lynch’s urging the CPUC dropped from the investigation the Canadian-based merchant natural gas underground storage facility, Wild Goose Storage, in northern California about 50 miles north of Sacramento.

“The commission has already filed a complaint at FERC and litigated against El Paso Natural Gas Co. and its marketing affiliate for the manipulation of natural gas supplies to California, which was a substantial cause of the natural gas price spikes,” the order instituting the investigation stated. “In this investigation, the commission will examine if there were additional reasons for these price spikes.”

The companies ordered as respondents — and stakeholders and public sector utilities that Lynch encouraged to participate also — are directed to provide “evidence which supports all gas market activity that may have affected gas prices during the period of March 2000 through May 2001, and to submit testimony explaining the reasons for the natural gas price spikes during this same period.”

In other action, the regulators also unanimously okayed changes in the Sempra utilities’ service to power plants and other major industrial customers to avoid a repeat of the 17 days of forced curtailment of firm customers in 2000 by eliminating the option of firm contracts for these large customers. As a result, SDG&E is given a new set of protocols with limits of only offering interruptible services at an interruptible rate to these large customers.

SDG&E and SoCalGas also are ordered to hold open seasons to determine “the need, timing and location” of future capacity additions, and the San Diego utility is given a new service interruption credit to provide these customers when they are forced to an alternate fuel. The action also designated one of the major transmission pipelines (Line 6900) of SoCal-SDG&E as a “common use facility” whose costs are to be allocated among both utilities’ customers.

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