PUC Tables Vote on Gas Market

Deluged with protests, the California Public Utilities Commission on Monday delayed until next year a vote on competing plans to relax regulation of the Southern California natural gas market.

Consumer groups, large gas customers and others had expressed fears that implementing new rules allowing energy marketers to buy gas pipeline capacity would invite market manipulation and higher prices.

The clincher, however, appeared to be a Dec. 20 letter from Senate President Pro Tem John Burton (D-San Francisco) to PUC President Loretta Lynch urging a delay. Burton said he wanted to afford the Legislature time to discuss with the commission the “further deregulation of Southern California’s natural gas infrastructure.”

The new rules would allow energy companies not regulated by the utilities commission to buy and sell the rights to transport gas through lines owned by Southern California Gas Co., which is part of Sempra Energy. About 65% of California’s natural gas flows through the system.

When it became clear Monday that Commissioner Jeff Brown would be on the short end of a 3-2 vote, he withdrew a resolution that would have put new rules in place by August.

Lynch and the commission’s staff had urged a more deliberate timetable in light of dozens of protests, the complexity of the issues and disclosures about manipulation of gas markets during the energy crisis of 2000-01. Their resolution would require Southern California Gas to file a new plan for the implementation of gas system rules.

Commissioner Carl Wood, a Lynch ally and a foe of deregulation, called Burton’s letter “a wake-up call” that reminded him of the commission’s commitment to consult with the Legislature before further deregulating the state’s energy markets.

Noting that the PUC endorsed the new rules in concept a year ago, Brown accused fellow commissioners of intentionally delaying implementation with intent to kill. “This thing is dead,” he said.

Brown had hoped that his resolution would be supported by Commissioner Henry Duque, a Republican appointee of former Gov. Pete Wilson, and by Michael Peevey, a supporter of deregulation appointed by Gov. Gray Davis.

But Peevey said he was troubled by the flurry of letters, including the one from Burton, and was not prepared to vote for Brown’s resolution Monday.

Peevey said he had a “strong inclination” to vote for the measure at the commission’s Jan. 19 meeting. However, Peevey is serving out the term of retired Commissioner Richard Bilas, which expires today. Duque’s term also ends today.

Davis spokesman Steven Maviglio declined to say whether Peevey was being reappointed but said Davis would have an announcement on both commission openings in the coming days.

The appointments, which must be confirmed by the Senate, would allow the governor to fill all five spots on the panel.

Opponents of Brown’s plan included the Utility Reform Network, major oil refineries, Southern California Edison and the state Department of General Services, which procures gas for the state. Some expressed fear that energy marketers could tie up enough pipeline capacity to gouge utilities and others when the system becomes congested.

“It gives intermediaries who have no vested stake in the health of California the right to control assets and profit as they wish,” said Mike Florio, senior attorney at Utility Reform Network.

Southern California Gas spokesman Richard Beamish said, “These rules contain multiple safeguards that would prevent [market manipulation] from happening.”

For example, he said, there are limitations on pipeline capacity that any entity can own on any Southern California Gas receipt point. Similar rules are in place in Northern California for the Pacific Gas & Electric Co. system. PUC officials say they are not aware of market manipulation on that system.