Winter Gas Bills Spur Call for New Rate System

A member of the Public Utilities Commission said Monday that the system used to set utility rates statewide must be changed to avoid the kind of huge increases in gas bills experienced by Southern California Gas Co. customers this winter.

“Today the residential ratepayers are at great risk,” PUC Commissioner Donald Vile told the Assembly Public Utilities Commission oversight subcommittee. “The problem is: How can we develop a new regulatory framework?”

Vile’s call for greater flexibility for the PUC in the state rate-setting law was supported by representatives of various utilities, who said the commission is prevented from adjusting rates to protect residential consumers, particularly those in low-income households, when energy demands skyrocket.

But Assemblywoman Gwen Moore (D-Los Angeles), who chairs the oversight subcommittee, maintained that the PUC already has enough leeway to prevent the increases of as much as five times the usual cost that heavy gas users experienced during the December cold snap.

Flexibility Seen

“There is total flexibility to keep the rates in California affordable for everyone,” Moore said. Granting the PUC more flexibility, she said, would leave residential consumers with “no protection other than good faith.”

The hearing was called to determine why 4 million customers of Southern California Gas Co. received record-high December gas bills, some of them five times the usual cost. Legislators, Vile and gas company officials all reported that they were flooded with calls from confused and furious customers.

The problem, Moore maintained, was that the PUC has essentially subsidized gas price breaks for businesses--as energy costs fell--with higher rates for households that use large amounts of gas.

Vile said the preferential treatment was necessitated by deregulation of natural gas, which has provided businesses with other options for obtaining gas. This forced the PUC to set lower rates in order to keep business customers, thus shifting a proportionately larger burden to consumers.

“Those who have market options get a better deal than those who don’t,” Vile said. He said it was inevitable that utilities “shift costs from those who have market options to those who don’t,” which means residential customers.

Optional Sources

The alternative is that large industrial customers purchase energy from competing suppliers, either in the form of electricity or oil or gas from other sellers. This could force the PUC to charge remaining customers higher rates to pay for the fixed costs of the gas delivery system now borne by all customers.

Vile said that losing industrial customers ultimately would drive up rates for residential consumers because they would have to bear a larger share of the cost of providing natural gas.

One reason for the increased costs was the cold snap that caused consumers to turn up their thermostats for several extra hours each day. A second was the 6-year-old state law that provides for substantially higher rates for households that use gas above a so-called “baseline” level. When a certain level is exceeded, additional gas costs nearly three times the usual rate.