SoCal Gas Gets Permission to Trim Its Prices

State regulators decided Tuesday to let Southern California Gas cut its prices to retain two big customers that had been threatening to start using oil instead of natural gas.

But a third large customer, San Diego Gas & Electric, said it has already switched to a source of cheap oil and quit buying gas. The San Diego utility normally buys its natural gas from Southern California Gas and said it accounted for 10% of the Los Angeles-based utility’s load.

The scramble among California utilities for the cheapest sources of energy was touched off by the collapse in world oil prices that began in December. That is driving down other prices and is expected to result in lower gas and electric bills generally.

As a result of Tuesday’s emergency action by the Public Utilities Commission, Southern California Gas can cut the rates it charges to two customers that jointly account for 25% of its business: Southern California Edison and the Los Angeles Department of Water and Power.

Cheaper Source

The two electric utilities, which can switch readily from natural gas to oil, had told Southern California Gas they could buy shipments of Indonesian oil for less than they were paying for natural gas.

The gas utility then asked the PUC to allow it to cut its rates below the floor established in the state’s formula, which ties natural-gas prices to oil prices. The commission voted 4 to 0 to permit the lower rates until March 19.

Because it burns more cleanly than oil, natural gas is the preferred fuel for electric generation as a matter of state policy.

Erik Jacobson, a technical adviser to PUC President Donald Vial, said one reason for the March 19 deadline on the reduced rates was “to put some pressure” on interstate gas pipeline firms to cut the tariffs they charge Southern California Gas.

That would tend to bring the utility’s costs in line with the reduced revenue.