CCC   PPPPP   U    U    CCC       N    N  EEEEE  W  W  W   SSS
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C       P    P  U    U  C           N N  N  E      W  W  W  S
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C       P       U    U  C           N  N N  E      WW   WW      S
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CONTACT: Kyle DeVine                 May 22, 1996   CPUC - 520
         213-897-4225                             (A.96-03-017)

CPUC APPROVES SDG&E FORECASTING GAS PRICES ON A MONTHLY BASIS

    The California Public Utilities Commission (CPUC) today
approved the San Diego Gas and Electric Company (SDG&E) request
to change core customer rates depending on monthly, rather than
yearly, forecasts of gas prices.
    Currently the CPUC sets rates every three years based on
the utility's entire cost of operation.  The CPUC adjusts those
rates yearly depending on changes in the costs of capital and
yearly forecasts of gas prices.  However, because the gas
market fluctuates, the yearly forecasts are often too high or
too low.  For example, as of December 31, 1995, the forecast is
$21 million more than actual costs; the CPUC will decide in a
future proceeding how to adjust that difference.
    Customers and competition both suffer from the incorrect
forecasts.  Customers may be charged too much and, in cases
where they move or leave the utility's system, they may not
receive credit when the overcollection is refunded.
Competition is affected if rates don't accurately match market
prices; either the utility undercuts competitors or the utility
is forced into charging rates higher than the competitors.
    Today's order affects SDG&E core customers - small gas
users who depend on the utility for all their natural gas
supply.  Their gas procurement rate is currently set at 17.5
cents a therm.  Each month the rate will increase, decrease or
remain the same depending on the gas market rate. Increases,
however, will be capped for two years so they will not rise
above 25 cents a therm, a 7 cent increase.
    The gas procurement rate is collected from ratepayers as
part of their usage rates. Current residential usage rates are
61 cents a therm for the baseline allowance - which is about 43
therms a month in winter and 17 therms a month in summer - and
                            -more-

83 cents a therm for usage over the allowance.  Both baseline
and overbaseline rates will increase or decrease.  Increases
for gas procurement costs will not exceed the 7 cent cap or a
maximum of 68 cents a therm for baseline and 90 cents a therm
for overbaseline usage.  Residential customers who use the
systemwide average of 40 therms a month would, at the most, see
an increase of $2.80 a month.
    The change is effective five days after SDG&E files tariffs
specifying the rates.

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