PUC Grants Gas Co. Rate Hike, but Spreads It Around

The California Public Utilities Commission on Wednesday granted Southern California Gas Co. a $212.2-million rate hike but denied the utility’s controversial request that any increase be paid only by residential customers, not businesses.

The increase, expected to go into effect by the end of next week, will raise winter monthly natural gas bills for a typical residential customer using 82 therms to $37.92 from $35.65. The average monthly increase for all customers will be 6.6%.

The PUC ordered that the hike be spread among all gas customers and not just residential customers. The company had asked on Sept. 19 to exclude commercial users such as electric utilities and manufacturers, arguing that they were likely to switch to cheaper oil or other alternative fuels rather than pay higher gas prices.

As many as 67 major customers of the gas company switched to alternate fuels during 1986 amid declining oil prices, company officials said.

Less Negative Effect

However, with oil prices rising from their lows of last summer, some customers lately have been switching back to gas and thus the new gas price hike will not have as negative an effect as originally anticipated, company officials said Wednesday.

“We’re optimistic that this modest increase won’t force them (commercial users) off the system,” said Roy Rawlings, Southern California Gas vice president for regulatory affairs. “But we won’t know for sure until it goes into effect.”

Also, limiting the increase to residential users would have hiked revenues from residential users by 19.3%. The PUC on Wednesday called such a hike “unacceptable.”

The increase approved by the PUC was smaller than the $277.3-million boost originally requested by Southern California Gas last September. In rejecting the larger hike, the PUC argued that future gas-purchase costs will not be as high as the gas company has estimated.

To Recover Shortfall

The rate hike as approved will help Southern California Gas recover a $307-million revenue shortfall stemming from the unprecedented drop in oil prices last year. The oil price decline, besides prompting major customers to switch to oil from gas, also caused a decline in certain of the gas company’s rates that were tied to oil prices.

However, this latest rate increase is not the final word this year on gas rates. The PUC later this year is expected to approve a major restructuring of gas rates made necessary by deregulation of natural gas nationwide.