L.A. and San Diego Join Protest of Gas Co. Plan

The cities of Los Angeles and San Diego joined the consumer group Toward Utility Rate Normalization (TURN) on Thursday in protesting a request by Southern California Gas Co. for automatic annual cost-of-living adjustments in exchange for freezing basic rates until 1990.

In a hearing before Administrative Law Judge Al Porter of the California Public Utilities Commission, representatives of the two cities objected to the proposed cost-of-living provisions for 1988 and 1989 but supported freezing rates.

TURN called the gas company’s proposal an “unprecedented, unlawful and terrible regulatory practice.” The consumer group maintained that a thorough review of the utility’s figures would probably indicate that its basic rate should be cut.

The commission ordered this week’s hearings in Los Angeles after its public staff division, which represents utility customers, negotiated the rate proposal last month with the gas company. The commission’s public staff said a preliminary financial review indicated that consumers would not be hurt and that regulatory resources could be put to better use carrying out pending deregulation of the natural gas industry in California.

In December, the commission approved, in principle, enabling gas utilities to “unbundle” their services. The policy would allow major users of natural gas to buy gas from one company and have it transported by another firm. Users also could maintain standby service with one utility while temporarily using a cheaper fuel from another supplier. Hearings on how to implement deregulation are scheduled to begin next month, with a decision expected in June or July.

Southern California Gas argued that its rate proposal, by fixing costs, would help the company retain major gas customers that will be able to use other suppliers as deregulation is carried out over the next two years. Robert L. Ballew, manager of revenue services for Southern California Gas, cited in particular the possible loss of such “non-core customers” as large cities, major industries and other utilities, including Southern California Edison.

Without these customers, the company said, consumers and small businesses, which cannot leave the gas company network, would be stuck with higher rates.

“The natural gas industry has become increasingly competitive, from well head to burner tip, over the last two years,” Ballew said.

Before Southern California Gas reached its tentative agreement with the commission’s public staff, it had filed preliminary data requesting a general rate increase of $158 million a year. The amount was reduced to $126 million, with the company attributing the decrease to changes in the tax law. The company said that if the commission decides against the proposed freeze, or is unable to come to a decision by April 8, it will proceed with that case.