You've heard talk lately about the convergence of electricity and natural gas. That idea has grown as commodity markets have matured for gas and emerged for bulk power.
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 approved rate plan includes an indexing mechanism and base margin that allows SoCal Gas to adjust rates annually without commission approval, subject to a series of adjustments and exclusions. The plan includes an adjustment to lower rates for expected improvements in company productivity. The program also contains many features designed to "insure that high standards of service quality and safety are maintained," the commission said.
The rate adjustment index adopted by the commission consists of a weighted average of recorded indices of prices for labor, operating and maintenance costs, non-labor O&M costs, and capital-related costs. The PUC chose to adjust the base figures using a factor based on the average of gas operations for the state's three major gas distribution companies, Southern California Gas, Pacific Gas and Electric Co., and San Diego Gas and Electric Co. The PUC found that such a measure would make administration of PBR plans for all three utilities easier and more efficient. It also said that a broader-based index was consistent with its established "disinclination" toward company-specific measures.
The commission had modified the plan proposed by the LDC by adding
a mechanism specifically designed to enforce a sharing of cost savings with ratepayers, rejecting the company's claim that the use of an index and productivity offset would adequately allocate savings by exerting a downward pressure on rates.
According to the PUC, "a sharing mechanism is the ultimate 'safety net' for ratepayers, as it corrects for the possible adoption of a productivity factor that turns out to be too conservative, understating the productivity increases which the utility is actually able to achieve." Re Southern California Gas Co., r.87-11-012, Application 95-06-002, Decision 97-07-054, July 16, 1997 (Cal.P.U.C.).
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