SoCal Gas Avoids $29 Million Refund

By Published On: December 19, 2004

SoCal Gas won?t have to refund ratepayers $28.8 million in shareholder profits because there is no ?smoking gun? or other proof that the utility intentionally manipulated the market to drive up natural gas prices during California?s electricity crisis, regulators ruled this week. By a 3-2 vote, the California Public Utilities Commission December 16 rejected a proposed decision by an administrative law judge and outgoing commissioner Loretta Lynch finding that SoCal Gas bore responsibility for spikes in winter gas prices and volatility at the California border. Commissioner Geoffrey Brown contended instead that while SoCal Gas had ?massive ability? to manipulate the gas market, there was no evidence in the record that the utility had done so. ?The central issue here is intentionality. One cannot improperly profit from the use of a gas mechanism without intending to do so. While a smoking gun memo would be nice, the reality is that such a mechanism is rarely available,? he said. Specifically, the failed decision had found that SoCal Gas didn?t store enough gas during summer 2000, instead making after-market sales and hub loans that had to be repaid in the winter, forcing the utility to pay more for gas on the spot market and charge its noncore customers higher prices. ?Some of SoCal Gas?s financial actions were reasonable to hedge against price spikes, but some were speculative,? commissioner Loretta Lynch said. Brown said after the hearing that the issue was far from over since the CPUC is also investigating whether Sempra Energy, SoCal Gas?s unregulated parent company, manipulated the natural gas market in 2000-01. ?I want to see what discovery reveals in the Sempra investigation. The door?s not closed,? he said. ?I don?t know how open it is, but it?s not closed.? Rather than forcing SoCal Gas to refund all its profits, the CPUC should have conducted a prudence review to determine whether the utility?s actions were in the ratepayers? interest, he said. Taking a swipe at his departing CPUC colleague, Brown added that ?Loretta Lynch injected hyperbole into this decision. I think the judge would have taken a much more moderate view.? The case had been pressed by Lynch. While there?s been bad blood between Lynch and commission president Mike Peevey for years, in this instance Lynch deepened its color when she went public with allegations of sweetheart deals between Peevey and the utility (<i>Circuit</i>, Nov. 29, 2004). The CPUC president?s regret in voting against the penalties ?is that one commissioner will allege? that ?we?re dupes of SoCal gas,? growled Peevey. Both Lynch and commissioner Carl Wood voted for the fines. ?There was a level of imprudence? at the least, Wood said. Backing the minority in the decision was a powerful drive by Southern California Edison. As a noncore gas consumer for its power plants, Edison blamed SoCal Gas for spikes in gas prices along the border during the energy crisis. <i>J.A. Savage also contributed to this report.</i>

Share this story

Not a member yet?

Subscribe Now