SDG&E and SoCalGas
2016 Natural Gas Cost Allocation Proceeding
Phase 1: Natural Gas Rates

 

Background

Approximately every three years SDG&E and SoCalGas propose how to allocate the costs of their natural gas storage operations across various customer classes. This Triennial Cost Allocation Proceeding (TCAP) also address other policy issues related to natural gas storage.  

In December 2014, SDG&E and SoCalGas filed an Application with the CPUC requesting to increase their natural gas rates effective January 1, 2016. If approved, the average monthly household gas bill would increase by: 

SoCalGas

2016:  $0.02 (less than 0.1% increase) 
2017 - 2019:  $0.09 (0.2% increase) 
 

SDG&E

2016:  $0.07 (0.2% increase)
2017 - 2019:  $0.06 (0.3% increase)  
 

The utilities requested to modify their current allocation of gas storage costs by:  

  • Embedded costs of natural gas storage (how the utilities recover costs of their gas storage facilities).   
  • Natural gas storage cost allocation across customer groups (for example, residential/small commercial and industrial).
  • Technical functions of the utilities’ gas system operations.  
  • Set the amount of gas that can be injected into storage facilities on behalf of each customer group.  
  • The revenue-sharing percentage for the commercial storage program, which shares profits from commercial gas sales between ratepayers and utility shareholders.

 

Proposed Settlement Agreement

On August 31, 2015, ORA, SoCalGas, SDG&E, and other consumer and industry stakeholders submitted a proposed Settlement agreement, proposing a compromise that would:
 

  • Set the storage revenue-sharing percentage at 75% ratepayer, 25% utility shareholder, a midpoint between the utilities’ proposed position and the current percentage.  
  • Allocate to each customer group the right to use different proportions of utility gas storage facilities depending on the season, but with sufficient protections for residential and small commercial ratepayers. Using natural gas storage allows customer groups to store gas for critical periods and protect against price spikes. 
  • Maintain the transparency requirement for SoCalGas to post prices of commercial gas sales. 
  • Allow SoCalGas to recover the costs of running its compression turbines. 
  • Implement 8% monthly balancing, a measure of how closely gas importers must balance their predictions of imports with their actual imports into the natural gas system.
     

CPUC Proposed Decision

On May 17, 2016, the CPUC issued a Proposed Decision, which would adopt uncontested requests as well as the Settlement Agreement, which resolves contested issues.  

    

 

Evidentiary hearings were held August 3 – 5, 2015 at the CPUC in San Francisco. A final Decision is expected in 2016.

 

ORA Position

ORA supports the Settlement Agreement because it allows SoCalGas and SDG&E to operate their systems safely and reliably, as well as maintains ratepayer protections and transparency in the natural gas storage market. Additionally, the Settlement is consistent with ORA’s position and resolves other concerns. The Settlement would:  

  • Adopt ORA’s proposed percentage regarding the commercial storage revenue-sharing programs, which is good for ratepayers because it will ensure the utilities have incentives to manage sales efficiently, while providing ratepayer protections and benefits. 

 

  • Adopt the utilities’ proposal for seasonal injection periods with protections for the residential / small commercial customer group to ensure enough capacity is available when needed. 

 

  • Adopt ORA’s proposal to maintain the requirement to post natural gas sale prices, which will ensure market transparency. 

 

See ORA's June 22, 2015 Testimony. 

 

Proceeding Docket

See the CPUC’s Proceeding docket. 

Visit the docket to subscribe to updates to this proceeding.