Pacific Gas and Electric

WHETHER YOU CALL IT "DEREGULATION" OR "re-regulation," the promised move to competition does not mean less regulation - at least not any time soon.

AS U.S. ELECTRICITY MARKETS BECOME increasingly competitive, large industrial customers will discover many new choices. These choices include the opportunity to modify the amount and timing of electricity use in response to prices that vary from hour to hour. In addition, customers can sell certain electricity services, including operating reserves and load following, to the system operator. And industrial customers with cogeneration facilities can participate fully in bulk power markets, buying and selling energy and ancillary services in response to changes in spot prices.

The California Public Utilities Commission has approved an agreement that will resolve a multifaceted case concerning pricing of services and operation of intrastate natural gas pipeline facilities by Pacific Gas and Electric Co.

The agreement, known as the "Gas Accord," also initiated significant changes in the way PG&E operates its business by increasing competition and customer choice. To mitigate the effects of market power held by the company, the commission imposed a series of discounting restrictions on PG&E.

Seeking to wrest control of public relations for electric competition from private "stakeholders," the California Public Utilities Commission has authorized the state's three largest investor-owned electric utilities (em Pacific Gas and Electric Co., San Diego Gas and Electric Co. and Southern California Edison Co. (em to spend $89.3 million for consumer education on electric restructuring, through mass media, mail, local outreach and a toll-free call center.

In a separate order, the PUC authorized PacifiCorp and Sierra Pacific Power Co.

The California Public Utilities Commission, citing restrictions that force electric utilities to buy and sell power through the state's power exchange, has rejected a request by Pacific Gas and Electric Co., to use energy-related financial derivatives (em futures, swaps and options, etc. (em to manage risk associated with volatility in gas and electric commodity markets.

According to the commission, the proposal by PG&E for blanket authority to employ derivatives would violate several aspects of its electric restructuring policy.

Pacific Gas and Electric Co.'s announcement that it wants to increase energy rates by almost $1.2 billion was met with outrage by consumer watchdog organization The Utility Reform Network.

Pacific Gas has notified the California Public Utilities Commission that it plans to file a 1999 general rate case to raise natural gas rates by $506 million to maintain gas pipeline safety and reliability. It also plans to increase electric base level rates by $703 million beginning Jan. 1, 1999 to improve service reliability.

The California Public Utilities Commission approved a performance-based ratemaking plan for Southern California Gas Co. that could yield substantial savings, which the company is required to share with customers.

The PUC said the proposed merger of the utility's parent, Pacific Enterprises, and Enova Corp., parent company of San Diego Gas & Electric Co., should improve efficiency and benefit ratepayers.

The California Public Utilities Commission issued its final order on unbundling rates for generation, transmission and distribution functions performed by the state's three largest investor-owned utilities on Aug. 1.

The commission also determined how to calculate transition costs and addressed customer billing and education issues. (Decision 97-08-056, Docket A. 96-12-009 et al.)

The utilities affected are Pacific Gas and Electric, San Diego Gas & Electric, and Southern California Edison.

Rates by Function.

The California Public Utilities Commission has valued sunk costs for the Diablo Canyon nuclear generating plant at $3.287 billion. The ruling forms the basis for future ratemaking treatment for the plant assets by its owner, Pacific Gas and Electric Co., according to industry restructuring under way in the state.

The approved rate plan includes an overall rate freeze and a bond-financed 10-percent rate reduction for residential and small commercial customers. Both are called for under the state's new electric industry restructuring law (Assembly Bill 1890).

California regulators have issued a series of important rulings this spring as they continue to move forward with restructuring the state's electric utility industry.

On May 6, the California Public Utilities Commission accelerated the pace of its industry reform by ordering all electric utilities in the state to allow direct access to alternate electricity suppliers for all customers on Jan. 1, 1998.