NGI's Daily Gas Price Index 
published : December 12, 2001
CA Regulators Approve Unbundling for SoCalGas Pipe/Storage System 
A comprehensive settlement among stakeholders to further unbundle Southern California Gas Co.'s in-state transmission and storage operations was approved by California regulators Tuesday. The vote on the long-delayed measure, however, was split 3-2 with one of the majority appointees of current Gov. Gray Davis joining two holdover commissioners in approving the disputed settlement. 
The two dissenting members of the California Public Utilities Commission, including the panel's president, cited market volatility that has occurred in the 18 months since the state's most recent natural gas strategy advocated unbundling. They thought the state should learn more about the fundamentals of the not-too-distant natural gas price spikes before making "such radical changes in the natural gas system." The unbundling strategy was formulated under past CPUC President and still Commissioner Richard Bilas. 
Saying "this day has been a long time in coming," Bilas pushed for his recommendation to approve the settlement among 30 stakeholders that will allow "firm tradable capacity rights" to both SoCalGas' transmission and storage systems, arguing that it would provide SoCal customers with more reliability and options to reduce costs than would the status quo. He noted that the issues being addressed do not include insufficient capacity, but rather a question of "what costs and under what terms" customers can get gas supplies. 
California's long-active statewide utility consumer watchdog group, TURN (The Utility Reform Network) in San Francisco, almost immediately issued a statement predicting the CPUC's decision "could be disastrous for consumers," setting the stage for potential "gouging that occurred under California's failed electric deregulation scheme. 
"The settlement was proposed back in April of 2000 before the full impacts of deregulation were clear, and was supported by gas marketers and Southern California Gas Co., who stand to profit from more gas deregulation," TURN said in its reaction statement. "Today's decision allows SoCalGas to sell off rights to ship gas on its transmission system to the highest bidder, rather than at rates set by the (CPUC)." 
TURN attorney Marcel Hawiger said the door is now open for "marketers and middlemen to bilk us by controlling gas flow within the state, just as FERC allowed them to do on the interstate pipeline last winter," referring to the alleged abuses by El Paso Natural Gas Co. and other interstate marketers to the California-Arizona border. 
Bilas said he recognized the concerns for small, captive core customers, and that is why he modified the comprehensive settlement to provide the protection for retail customers and against wholesale market manipulation. The protections include reducing allowable market concentrations from 40% to 30%, and putting price caps on secondary market transactions of 120% of the tariff rate, and keeping core reserved storage levels at 70 Bcf, rather than lowering as the settlement called for to 55 Bcf. In addition, core reservation levels on the SoCal pipeline system within the state will match those on the interstate pipelines of a little over 1 Bcf/d. 
Commissioners Lynch and Carl Wood, the other two Davis appointees, strongly opposed the unbundling, largely based on the electric restructuring problems of the past 18 months and the conclusion that new data on the state's natural gas industry --p ost-electricity crisis -- is needed to provide a "reliable basis to make major changes in the SoCalGas system." The action put SoCalGas' operations on the same footing as the PG&E gas transmission operations in which customers willing to provide daily balancing will not be charged for system-wide imbalances. 
Wood and Lynch thought that the action was not supportable in the regulatory case record in the current market conditions for natural gas and electricity. Regardless of the CPUC's action, Wood said the CPUC will expect SoCalGas to provide various consumer and safety protections from the "border to the burnertips." 
Lynch said the gas settlement "was a difficult case to get my arms around" because of its complexity, but she said the issues are fundamental and will impact how the CPUC staff and the market can operate in the years ahead.