SDG&E and SoCalGas
2016 Natural Gas Cost Allocation Proceeding
Phase 2: Demand Forecasts and Marginal Cost Updates
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 in Phase
1 Natural Gas Rates, requesting CPUC approval to increase those rates
effective January 1, 2016.
July 2015, SDG&E and SoCalGas filed their Application
in Phase 2 to update demand forecast and marginal unit costs, effective January
1, 2017. The purpose of Phase 2 is to allocate the revenue requirement
established in Phase 1 amongst rate classes (such as between residential
customers and industrial customers).
March 9, 2016, the CPUC issued a Ruling
requesting SDG&E and SoCalGas provide testimony on its previously authorized
normal operating costs associated with Aliso Canyon that it seeks to recover in
rates in this proceeding. The purpose of the ruling is to identify those
“business-as-usual” costs embedded in the utilities’ July 2015
application, not to address any costs associate with the Aliso Canyon gas leak.
March 28, 2016, SDG&E and SoCalGas issued their Supplemental
Proposed Settlement Agreement
On May 27, 2016, ORA, SoCalGas, SDG&E and several other parties submitted a proposed Settlement Agreement to the CPUC, which reaches consensus on the following issues:
- Demand forecasts which will be used to set transportation rates.
- SoCalGas curtailment penalty refunds.
- Submeter credits for mobile home customers.
- Natural Gas Vehicle compression rate adders, which would exclude subsidies from ratepayers.
- Marginal costs used to set transportation rates (See Appendix A).
- Transmission costs.
Evidentiary Hearings were held on June 6 and 7, 2016 at the CPUC to litigate unresolved issues, including the utilities’ proposals for a $10 per month residential customer charge.
On October 13, 2016, the CPUC adopted its Final Decision adopting the Settlement.
ORA supports the Settlement Agreement that largely resolves major issues on cost allocation related to transportation rates. The Settlement would provide significant relief across customer classes by mitigating the burden of cost allocation and result in more reasonable rates for residential and other customers, compared to the utilities’ initial proposals.
ORA opposed both SoCalGas’ proposal to increase its residential fixed customer charge and SDG&E’s proposal to implement a new residential fixed customer charge. Accordingly, ORA supports the CPUC's October 2013 Decision, which adopted ORA's recommendation to implement a $3.00 minimum bill requirement for SDG&E customers, rather than SDG&E's $10 fixed charge. ORA's analysis found that imposing a fixed customer charge would cause average monthly residential, multi-family gas bills to increase about 11.15% for SoCalGas and 21.85% for SDG&E. Such fixed charges do not reflect the amount of energy used by the customer and accordingly would not send any price signals to customers to influence their behavior to conserve energy.
ORA's Analysis of the Utilities' Proposals
ORA reviewed the utilities’ Application and does not oppose SDG&E’s and
SoCalGas’ proposals for:
Long Run Marginal Cost methodology and calculation for high or medium
pressure distribution marginal costs.
embedded cost method for calculation of gas transmission services and rates.
recommended modifications to the utilities’ proposal, including:
SoCalGas’ monthly residential customer charge at $5, rather than its
proposed increase to $10 per month.
an SDG&E $3 per month residential minimum bill, rather than its proposed
new $10 per month residential customer charge.
the New Customer Only method for natural gas distribution for marginal
customer costs, rather than the rental method.
the unbundled storage transaction posting requirement.
the current SoCalGas residential tier differential calculation.
ORA’s recommendations on cost allocation of gas transportation rates.
March 11, 2016 Testimony:
the CPUC’s Proceeding
the docket to subscribe to updates to this proceeding.