PUC Staff Backs Conservative Plan to Cut Winter Gas Rates

The state Public Utilities Commission staff, following legislative orders to reduce winter natural gas rates that last year caused record-high bills for Southland residents, is recommending changes that would have little effect on area gas bills during cold snaps.

The PUC staff, which must still get approval from the commission, is concerned that making dramatic rate changes might backfire on some customers, and is pushing a plan that would alter most cold-spell gas bills by only a few dollars.

The staff proposal conflicts with the Southern California Gas Co., which is seeking a far more dramatic departure from the current winter rate system.

Both will submit final plans Monday to an administrative law judge who will make recommendations, probably in September, to the commission. Under a bill authored by Sen. Ralph C. Dills (D-Gardena), the commission must devise new rates by Nov. 1 that offer wintertime relief.

PUC staff members and consumer groups who support the PUC proposal are worried that although Southern California Gas Co.’s plan would significantly reduce most residential bills during severe cold spells, such as last winter’s, it could also cost some households too much during mild weather.

Current winter rates heavily favor smaller households, energy efficient homes and others who manage to stay beneath a so-called “baseline” of 62 therms of gas per month. They pay 35 cents per therm of gas used, far less than the actual cost of the gas. At the same time, larger households, older homes and others who go above the baseline are heavily penalized, paying 85 cents for each therm used beyond 62 therms.

After cold snaps last December and January, the gas company was swamped with thousands of complaints from consumers, many of whom received monthly bills of $200 and $300. Bills skyrocketed when residents kept gas heaters turned on far longer than usual, catapulting them into the second-tier gas rate.

The gas company wants to lower the current second-tier price from 85 cents to 68 cents per therm to bring it more in line with true costs and increase the subsidized baseline price of 33 cents to 40 cents per therm. Under that plan, homes that always stay below the baseline will pay higher gas bills, while those that go above the baseline will not be as heavily penalized.

Rich Puz, a gas company spokesman, said customers who never go beyond the baseline of 62 therms would face increases.

“What we are talking about here is $4 a month more for somebody who normally has a $20 bill in the winter, and that’s a small percent of our customers,” Puz said. “Even then they will still be subsidized by all the customers who have higher bills.”

However, some legislators have argued that not every penny taken from the second-tier rate needs to be replaced by customers paying baseline rates. One Democratic legislator involved in the pricing debate who has not taken a public position said it is “entirely possible that the gas company could on its own absorb any loss” created by reducing the second tier.

“The argument’s always been, do you want to sacrifice those people whose bill never goes above baseline, giving them bills that are higher year around, or do you make the group that is above baseline pay very high bills in the winter? I’m not sure either has to occur,” said the legislator, who spoke on condition that he not be named.

A legislative staff member for Sen. Herschel Rosenthal (D-Los Angeles) said consumer groups favor the less dramatic proposal by the PUC staff because raising the baseline rate to 40 cents--the equivalent of about $4 a month for anyone using exactly 62 therms--could hurt low-income people.

Under the PUC staff recommendation, the baseline would be only slightly raised, from 33 cents to 34 cents. The second-tier rate would be dropped from 85 to 81 cents per therm, compared to the gas company’s recommendation of 68 cents.

Puz of the gas company said that after studying the staff proposal from the PUC’s Division of Ratepayer Advocates, he questions “just how much they are committed to making winter gas bills more equitable.”

He predicted “no real changes, if we have a spell of cold weather, under the PUC staff plan.”

Ignores Intent

“Their position ignores the whole intent of legislation that was to relieve customers if we had another spell of very cold weather,” he said.

However, Rosenthal’s aide said the gas company “is trying to change things too quickly.”

“Until we get a safety net--a program that specifically protects low-income people who already have trouble paying the gas bill, consumer groups see a problem with raising the baseline price to 40 cents per therm,” he said.

Several Los Angeles-area residents who complained to the gas company last January about excessive bills said Friday that the more conservative proposal does not go far enough toward correcting the winter gas rate discrepancies.

Dick Somer, a retired Los Angeles-area engineer, said such reforms “won’t help me a bit.”

Somer, who is under doctor’s orders to use his gas-heated spa for a disabling back injury, received a bill of $550 for one month’s gas use last winter, most of it attributable to heating the spa.

‘Larger Families’

“Those of us who need this relief are not wealthy,” Somer said. “We are the elderly who need a lot of heat, the disabled, the people with larger families and houses with lots of children. We shouldn’t be subsidizing the people who only need a little gas in the winter.”

Peter Vilardo, a retired Woodland Hills man who wrote to his legislators to complain about his $140 gas bill, said he “cannot heat my house comfortably with the (62) therms they give you below baseline.”

“They are going to pacify the public by making these slight changes, but the public is the one that’s going to suffer,” he said.

George Montgomery, who owns a large home in the San Fernando Valley and received two bills of $2,000 apiece last winter, said everyone “should pay for what they have used, period.”

But he said, “Our gas bills were so high, and we weren’t even home for much of that time, that we were convinced we had a leak somewhere in the gas lines.”

Montgomery said he has had gas company crews to his house several times, but they never found a leak. The crews told him his bill was so high because his house was big.

HOW GAS BILLS WOULD CHANGE

A typical household might use 100-200 therms of gas per month in colder winters. Each household is charged 33 cents per therm for the first 62 or “baseline” therms--much less than the real cost of the gas. But households who go over 62 therms are penalized, paying 85 cents for every extra therm--far more than the cost of gas. The money subsidizes those below baseline. The lopsided rates, originally designed to encourage conservation, cause gas bills to suddenly triple and quadruple during very cold spells, when usage climbs well above baseline levels. The following examples show how a typical cold-weather gas bill would be affected by proposed rate changes.

WITHOUT RATE REFORM

The 62 “baseline” therms, at 33 cents each, would cost $20.46. An extra 100 therms, at 85 cents each, would cost $85.

Cost of using 162 therms: $105.46.

PUC STAFF PROPOSAL

The first 62 therms, at 34 cents each, would cost $21.08. The extra 100 therms, at 81 cents each, would cost $81.

Cost of 162 therms: $102.08.

GAS COMPANY PROPOSAL

The first 62 therms, at 40 cents each, would cost $24.80. The extra 100 therms, at 68 cents each, would cost $68.

Cost of 162 therms: $92.80.