CPUC Adopts No-Risk Gas Hedging for PG&E

By Published On: August 25, 2006

The California Public Utilities Commission ruled that ratepayers will bear the full brunt of Pacific Gas & Electric’s expanded gas-hedging strategies for the next two winters. Another commission decision issued August 24 calls for more low-income ratepayers to be able to tap into PG&E’s subsidized efficiency program. PG&E’s plan to expand its natural gas hedging was adopted on a 3-1 vote. “Hedging is a useful tool to mitigate price spikes,” said commissioner Geoffrey Brown, who dissented. He added that the plan proposed by CPUC president Mike Peevey, which was approved, forgoes a hedging review and places all the hedging risk and cost on ratepayers, instead of spreading it also to shareholders. The original hedging decision on the table by administrative law judge Kim Malcolm would have set parameters for the utilities’ hedging plans and allocated some of the cost to utility shareholders (Circuit, July 28, 2006). The Peevey alternate that was adopted – with commissioner John Bohn abstaining because of investment conflicts – caps the hedging cost at $14 per customer for the upcoming winter months. In the second move, regulators unanimously approved a $31.8 million increase – a 38 percent boost – in PG&E’s Low Income Energy Efficiency budget for its 2006-07 program to offset higher bills. Those increased costs to consumers are largely arising from the late-July heat storm. PG&E was given the authority to augment its budget by $21 million and use $12 million of unspent program funds from the previous year to reduce energy use in financially struggling ratepayers’ residences. That brings PG&E’s total budget close to $90 million. The utility’s request for additional administrative funds was denied. At the same time, the commission declined to approve increases in Southern California Gas’s or San Diego Gas & Electric’s low-income efficiency programs.

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