While pleading limited resources and the need to determine who pays for helping needy customers this winter in the face of rapidly escalating natural gas prices, a Sempra Energy senior utility executive told state regulators that the company’s Southern California Gas utility is considering tapping up to 5 Bcf of its cushion gas supplies in its extensive underground storage system as a means of tempering expected high winter gas utility bills for qualifying low-income customers.

The proposal immediately struck a chord with the president of the California Public Utilities Commission, Michael Peevey, who was conducting an afternoon hearing in Los Angeles Thursday. Peevey asked a senior executive from Pacific Gas and Electric Co. if it, too, could tap some of its cushion gas supplies, and he encouraged SoCalGas as soon as possible to make a filing to the CPUC for the rate coverage that would be needed to support such an interim step.

In addition, to the extent that it makes sense, SoCalGas and its affiliated Sempra utility, San Diego Gas and Electric Co., have financially hedged some of their gas supplies. Currently for this winter, SoCal has about 30% of its winter core (residential and small commercial) customer needs hedged, and for SDG&E, the figure is about 20%, according to Anne Smith, senior vice president for customer services at the two Sempra utilities. She said the two utilities are considering doing more with the gas they have in storage.

“What we are contemplating — and if we do move forward we will need expedited CPUC approval — is to use some cushion gas as we did during the 2000-2001 energy crisis,” Smith told the CPUC commissioners. “Cushion gas is supply that is literally embedded in the underground rock formations, and is not part of the working inventory. We are trying to see if there is a[n economic] way to tap some of that gas that has been there a long time and is very low cost. We want to see is there is some way to tap that to provide protection for the core “CARE” [low-income] customers.”

In response to a question from Peevey, Smith said that there are “definitely” some added capital costs involved, for which the Sempra utilities would seek rate authorization from the CPUC.

“If you are going to pursue that, and it sounds very promising, I would hope you would file something real soon with the commission,” said Peevey, and Sempra’s Smith indicated the company expects to do that if the economic and technical analyses mesh.

“The import of this — if it can be worked out — is that it could significantly moderate this winter’s price impacts,” Peevey said. “Presumably the cushion gas is much less expensive. I think it is a very intriguing idea.”

PG&E’s utility senior vice president for customer service, Tom Bottorff, said his utility also has cushion gas, but there is a question of whether it can be economically used this winter. “The issue is how much would it cost to make that additional gas available?”

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