CPUC Eyes Hedging Expansion

By Published On: July 28, 2006

Investor-owned utilities would be allowed to expand their gas hedging for the upcoming winter and pass on the costs to ratepayers under a proposed California Public Utilities Commission decision. The proposal – an alternate decision by commission president Mike Peevey – would limit shareholder risk but cap the costs to ratepayers arising from hedging gas purchases to $14 per customer for the 2006-07 winter months. Peevey’s alternate notes that “the record does not provide clear information about the amounts of ratepayer funds the utilities propose to use for hedging.” The original proposed ruling by administrative law judge Kim Malcolm, on the other hand, would set parameters on hedging. It would require utilities to publicly report the results of their hedging strategies, be they investing in futures or call options. Peevey’s alternate would require reports on the hedging investment but keep them confidential. The Utility Reform Network backs the alternate, while the Division of Ratepayer Advocates calls it “excessive” because it would allow the utility trio to increase the percentage of their gas portfolios that they hedge and increase the amount of money spent gambling on the future price of gas. The two hedging proposals will come up for a vote before regulators. – Elizabeth McCarthy

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