California’s major natural gas industry players, some 75parties, will sit down again seeking agreement on a plan forunbundling the Southern California Gas system that has so-farresisted full opening up of intrastate and interstate transmissionand storage for all customers, large and small.

Focus is expected to shine on an alternative offered last weekby Southern California Edison and additional alternatives to anearlier proposal for partial unbundling from SoCalGas. Generally,in California full natural gas unbundling has gone at a slower pacethan the restructuring of electricity and telecommunicationsindustries with the major gas utilities dragging their feet.

Although there are a wide variety of issues in these settlementtalks prompted by California energy regulators’ two-year gasindustry restructuring, SoCalGas has stirred concerns with aproposal for a daily balancing system and for its continued refusalto unbundle intrastate transmission and storage. “The whole idea(of the latest settlement meeting) is for people to start bringingalternatives to the table and really starting to compare andcontrast them with what SoCalGas has put on the table,” said one ofthe major national participants in the settlement negotiations.”And to their credit, SoCalGas has said it is very open-mindedabout all the issues and willing to entertain any alternatives andto modify their proposal if it makes sense for everybody. So itshould be pretty lively tomorrow. “Given the fact that Edisondistributed a fairly detailed proposal, I think the likelihood ispretty great that we’ll get several other options floatedtomorrow.”

The California Public Utilities Commission earlier this summerencouraged the gas industry players in the state to seek asettlement for the additional unbundling as part of the CPUC’sidentification of 10 areas for potential gas industry changes.Absent a settlement, the regulators will hold hearings this fall todetermine the cost-benefits of the potential changes-a more costlyand time-consuming process. A prehearing conference for thehearings will be held Sept. 1, at which time SoCalGas is expectedto give a progress report on the settlement talks.

“We’re in that 60-day window for settlement discussions, so Ican’t go into any details because they are subject to theconfidentiality rules of the state regulatory commission,” saidGloria Ing, an Edison attorney, who confirmed that her company hassubmitted a proposal in the talks. A SoCalGas spokespersonconfirmed that the gas-only utility expects three or fouralternative proposals to be put on the table and that it is”cognizant of the CPUC’s Sept. 6 deadline and we will workdiligently to meet that deadline if at all possible.”

A key to the settlement is opening up SoCalGas’ tradable accessrights to transmission and storage and developing secondary marketsfor those rights. Pacific Gas and Electric, for the most partoffers these already. SoCalGas’ proposal is described as “verydifferent” from the PG&E’s system already in place. They bothinvolve auctions, but after that the similarity ends. SoCalGasproposes to auction off receipt-point interstate capacity on anannual basis but would not unbundle any of the intrastatetransmission; that tariff would still be paid in addition to thenew price set for receipt-point capacity.

In addition, SoCalGas proposes what some of the parties arecalling “a dramatic change” to a daily balancing requirement.”Almost all of the parties have expressed considerable concern withthat approach,” one of settlement participants said.

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