PG&E Gas Accord Offers Rate Stability

Pacific Gas & Electric has settled with 20 parties over rates and allocation of its natural gas system. Under the Gas Accord III, filed with the California Public Utilities Commission August 27, large customers? transportation rates would decrease, but small, bundled customers would likely see a slight increase. More importantly for many of those involved, the settlement would grant rate stability for three years. ?This is a big step in the direction of cost-based rates and fair competition among electricity generators,? said Joe Karp, attorney with White and Case representing Calpine. The three-year agreement begins in January 2005. Originally, the commission asked PG&E to make a one-year rate structure and return for a new proceeding next year to reopen the market structure. ?This is a little more rational,? said Karp. ?It?s not a 20-year contract,? but it does stabilize rates for generators, he added. Transportation rates decline next year from 6 percent to 12 percent, according to Christy Dennis, PG&E spokesperson. ?Core customers will also see their transportation costs decrease. However, when factoring in the storage and backbone charges, there is a very slight increase of 0.5 percent,? or about 18.5 cents on an average monthly bill, Dennis added. While there are charges for distribution and transportation, ?PG&E does not profit from the commodity cost.? Highlights of the accord include: For noncore and transportation customers, backbone and storage costs are separated from end-use rates. Backbone-level rates adopted last year by the commission are included. This means that customers connected directly to the PG&E backbone system who do not, and never did, use PG&E?s local transmission service will no longer have to pay PG&E?s local transmssion service charge. Operating expenses are allocated with a new method, known as direct assignment. It will have backbone transmission bearing greater costs and local transmission bearing lower costs. A higher load factor than what the utility had requested was agreed upon. PG&E?s conservative estimate assumed fewer customers using the system so rates would be higher and the utility had less risk for a shortfall of revenue. A higher load factor?in the 75 percent range?was adopted, resulting in lower rates for more users. PG&E?s revenue requirement is increased to 2 percent, instead of being tied to inflation. The utility estimates that the load factor and throughput will also increase and could dampen the 2 percent rise. Also resolved was a north-south pipeline allocation where the northern, Redwood, line would have fewer costs and the southern, Baja, line would have increased costs. Canadian producers supported that part of the settlement; southern producers, such as ChevronTexaco, opposed it. Producers agreed on a two-year phase-in, in which capacity holdings could be adjusted. Duke Energy got an annual $2 million credit out of the settlement. The issue is Moss Landing, where Duke?s new units 1 and 2 would not qualify for backbone-level rates under PG&E?s proposal. Moss Landing is PG&E?s single biggest local transmission customer, paying the utility more than $5 million a year. Duke started litigation over PG&E?s proposed charges. The credit?called an economic incentive for Duke to stay on PG&E?s system?is in exchange for agreeing to the settlement instead of continuing the litigation. The settlement still has to be approved by the CPUC.

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PG&E Gas Accord Offers Rate Stability

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