California’s often-fragmented five-member regulatory commission Thursday approved an extension of Southern California Gas Co.’s six-year-old gas-purchase incentive program, including slashing by more than two-thirds the amount of incentives due to shareholders through the programs recent successes in lower overall supply costs. However, it made the unanimous (5-0) vote only after a split 3-2 vote defeated a preferred option by the panel’s chief regulator.

With the president of the California Public Utilities Commission, Loretta Lynch, on the losing side of the initial vote for an alternative, the regulators decided to initiate a broad investigation of the wholesale gas price spikes in the 2000-01 winter season, rejecting an alternative from Lynch to narrow the focus of the probe solely on SoCalGas’s behavior in that extremely volatile wholesale market, particularly at the California-Arizona border.

“The record in this case so far does not provide a full understanding” of what happened in the Southern California natural gas market, Lynch said before the vote in which only Commissioner Carl Wood, a regular ally of the CPUC president voted with her.

“There is plenty of evidence that there was unusual price activity at the border, but we don’t have the record here that establishes enough to point the accusatory finger at SoCalGas in order to designate an OII (statewide investigation) that is specifically directed against them,” said Commissioner Geoffrey Brown, increasingly a swing vote on the regulatory panel. “Under these circumstances I think a broader analysis is preferred.

“To do otherwise would not only unjustly accuse SoCal, but it would also possibly endanger the settlement.”

As part of its action, the CPUC approved a settlement among SoCalGas, CPUC staff and the statewide consumer watchdog, The Utility Reform Network (TURN). Part of that settlement involved the assigning of $30 million in “rewards” for shareholders, a reduction from the utility’s original request for $106 million. Also included is the establishment of annual natural gas storage targets, with appropriate rewards or penalties based on a 70 Bcf, plus or minus 5 Bcf target.

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