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NGVs -- Are Ratepayer Subsidies Appropriate?

Fortnightly Magazine - May 1 1995

run the NGV program in the service territory of one of its wholesale customers, Southwest Gas Corp. The CPUC said the LDC had failed to demonstrate that the program fit within the new LEV guidelines. While not convinced that a regulated utility should pursue NGV activities outside of its service territory, the CPUC said, the decision did not preclude SoCalGas from building, operating, and owning the proposed refueling stations if it used no ratepayer funds. Re Southern California Gas Co., 154 PUR4th 477 (Cal.P.U.C.1994).

LEV Subsidies (em

Is the Public Interested?

The issue of ratepayer subsidies for LEVs is growing more complex by the minute, at least in California. Recently, the California legislature has passed a new law designed to clear up any remaining confusion. The law, A.B. 3239, signed by Governor Wilson in September 1994, speaks to the earlier laws allowing ratepayer funding of utility research and development, including LEV programs that "the commission finds in the interests of those ratepayers." The new law defines "interests" as "direct benefits that are specific to ratepayers in the form of safer, more reliable, or less costly gas or electric service." The law was purportedly introduced by Assembly member Mickey Conroy (R-Orange) specifically to ban rate hikes enacted to fund utility LEV programs. The bill was backed by Californians Against Utility Company Abuse, a diverse coalition that includes industrial customers and consumer advocates as well as oil companies and others with a stake in the gasoline vehicle market.

Shortly after passage of A.B. 3239, the CPUC authorized SoCalGas to reallocate $9.1 million of its capital budget to its NGV capital budget. Re Southern California Gas Co., Decision No. 94-10-035, Application No. 92-11-017, Oct. 12, 1994 (Cal.P.U.C.). The CPUC had denied the request earlier in the year when setting the utility's rates, on grounds that the plan would increase NGV spending before the CPUC completed its generic review of such spending for all utilities in the state. In reversing its earlier decision, the CPUC noted that the LDC would only move money allocated for utility investments to its NGV program, with no increase to its overall revenue requirement, and that other utilities had been authorized to continue funding their LEV programs pending completion of the review.

In a separate concurring opinion, then-Commissioner Patricia M. Eckert raised a new concern. In addition to the political problems associated with raising rates for existing users, the NGV subsidy issue reveals "dueling regulatory philosophies." Eckert pointed out the unfairness of promoting NGVs while creating a new regulatory environment in which utilities have no choice but to be competitive. She characterized her vote in favor of continued NGV funding as a vote to honor prior commitments, not "to add social costs to utilities."

In a dissenting opinion, commissioners Norman D. Shumway and Jessie J. Knight focused on competition in the vehicle market and as a tool to achieve a cleaner environment. They argued that competitive markets assign shareholders 100 percent of the burden of new product risk in return for the opportunity to reap 100 percent of any rewards; therefore,