The philosophical split on the California Public Utility Commission surfaced again last Monday in a year-end business wrap-up meeting in which a more than year-old order for implementing a Southern California Gas Co. settlement leading to the restructuring of its markets was effectively “nullified,” in the words of one of the state regulators.

As a result, the CPUC put off until Jan. 16 a final decision on whether SoCalGas’s market should be opened to competition, or if the utility should re-start the settlement process for a new agreement on unbundling its natural gas operations in a way similar to what Pacific Gas and Electric Co. did several years ago with its “Gas Accord.”

The SoCalGas settlement was approved in December 2001, but two commissioners dissented and proceeded to stifle implementation by forcing the utility to file nine separate informal filings (“advice letters”) totaling more than 1,000 pages. Regulators may now require SoCalGas to resubmit an application to implement an unbundling of gas operations in the southern half of the state.

Over the past year the market has changed significantly and the provisions of the settlement may no longer be relevant, according to the proponents of a refiling plan. They say the Dec. 11, 2001 order is “out of date, and needs to be refreshed,” said CPUC Commissioner Geoffrey Brown, who is sponsoring an alternative to that approach.

Brown thinks there has been “an intentional delay” designed to “kill a lawful order” passed by the commission.

Although he wasn’t prepared to support Brown’s alternative approach, Commissioner Michael Peevey said he “shares” his colleague’s concern that the original CPUC order was being subverted. Peevey asked to hold the matter until Jan. 16. “Subverting the will of the majority by a minority is inappropriate under any circumstances and in any body, including this commission,” Peevey said. “My strong inclination is to vote for [Brown’s alternative] in January.”

Carl Wood, one of the two commissioners strongly opposing the settlement, said a recent letter from state legislative leaders was a giant wake-up call to the commission to remember that the origins of the problem go back much further than 2001 to 1997 and 1998 when the state legislature was “looking very seriously” at blocking the CPUC from pushing ahead with additional “gas industry deregulation.”

Wood said that in summer 1999 the CPUC had made “promises” to the legislature for a report to allay concerns about further energy deregulation in the state. The report would give the state lawmakers some options, and “to date that report has never been submitted.” Wood supported holding over the issue, noting that he is “very much hopeful the CPUC will re-consider the direction it is going with respect to the natural gas industry and take into consideration all that has happened over the past year.”

CPUC President Loretta Lynch agreed with Wood, noting that she thought the CPUC’s earlier decision had turned into a “misuse” of the regulatory advice letter process, and that the energy staff’s recommendation to re-do the process in a formal application process before the commission is the “right approach.”

“This decision highlights the growing problem of this commission setting policy through advice letters,” Lynch added.

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