NGI The Weekly Gas Market Report
While hamstrung by a state law postponing further natural gasindustry restructuring, California regulators last week started adetailed assessment of whether the major investor-owned utilitiesthat they oversee have unfair competitive advantages that must beneutralized by future legislative and regulatory action. In initialproceedings last year, various non-utility market players allegedthe state’s three biggest gas utilities hold excessive market powerover major aspects of the industry.
Six basic activities of the gas business will be examined bypanels of witnesses in the regulatory market condition hearingsover the final two weeks of January: hub services, gas storage,balancing services, intrastate transmission, utility gas buying forthe smallest (residential and small business) “core” customers, andinformation sharing. If the facts show there is excessive marketpower in any of these activities, the hearings will develop ideasfor changes to correct the situation. However, even if theCalifornia Public Utilities Commission’s six- to nine-month inquiryconcludes changes should be made, such as divesting assets andestablishing third-party protections, nothing will be done untilstate lawmakers receive a formal report and develop the politicalwill to take the gas industry down a path similar to the one theelectric utilities are following. The gas utilities argue safetyand reliability concerns should keep gas from following the samebasic steps as electricity did.
In trying to identify for the elected officials “the mostpromising structural change options for further study,” industrycritics indicate the regulators are playing into the hands of thethree major investor-owned utilities, all of which are experiencedat managing the regulatory process in California.
Although last year the CPUC proposed implementing more gasrestructuring this year, subsequent state legislation that passedlate last summer with strong backing from regulated gas utilitiesprevents the regulators from doing anything but studying the issuesin 1999. Thus, the ultimate unbundling and divestiture of parts ofthe gas business must await state legislative action in 2000 orlater.
CPUC president Richard Bilas is heading the series of hearingson the gas business in California, which is among the mostgas-dependent states in the nation. Bilas indicated the ultimaterecommendations to lawmakers will include a comprehensive set ofconsumer protection rules and assessments of the safety/reliabilityissues that have been raised mostly by the utilities. “The CPUC’sgoal in this proceeding is to identify market structure andregulatory reforms that would enhance the positive influence ofcompetitive forces on the provision of natural gas services,” Bilassaid in a ruling late last year that established the latestregulatory process. “We want to know whether there are problemsthat must be fixed and, if so, what changes would be appropriate.”
Richard Nemec, Los Angeles
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