CONTACT: Armando Rendón August 1, 1997 CPUC-082
415-703-1366 (A92-12-043)

CPUC-APPROVED ACCORD GEARED TO PROMOTE

GAS COMPETITION IN NORTHERN CALIFORNIA

The California Public Utilities Commission (CPUC) today approved a settlement between Pacific Gas & Electric (PG&E) and major players in the natural gas industry in Northern California known as the Gas Accord. The agreement resolves major issues related to PG&E's decision in October 1991 to build Line 401, the in-state portion of a pipeline from Alberta, Canada, to Kern River Station, near Bakersfield.

The Gas Accord, the Commission found, is a positive step toward "unbundling" or breaking out PG&E's intrastate transmission system into various components so as to enable competition. The agreement allows for lower rates and better services than are currently available, provides PG&E customers greater choice among more competitive resources, and resolves certain rate issues.

The Commission also found that PG&E has a conflict of interest favoring its marketing of the use of in-state pipeline that brings in Canadian gas supplies instead of pipelines accessing California producers and Southwest suppliers of natural gas. This conflict was not resolved in the original Gas Accord, but, at the urging of Commissioners Richard Bilas and Josiah Neeper, changes were made in the Accord to lessen the conflict.

To enable fair competition between Canadian, California and Southwest suppliers of natural gas, the CPUC adopted a discounting rule. Thus, whenever PG&E offers a rate discount on in-state pipeline that accesses Canadian suppliers, it must also offer the same discount on pipelines transporting Southwestern and in-state gas production.

The Commission reaffirmed its February 1994 finding that PG&E's 1991 business decision to construct Line 401 was reasonable. However, new evidence, including a corporate memo and results of an economic study, which surfaced later, caused the Administrative Law Judge in charge of the case to reopen the "reasonableness" portion of the proceeding in June 1995. Several parties claimed that PG&E had violated Rule 1 of the CPUC Rules of Practice and Procedure by concealing critical documents such as these.

In today's order, the Commission found that PG&E may have violated Rule 1 by not disclosing certain information regarding the reasons behind the company's decision to construct the pipeline. Parties to the Gas Accord had recommended a settlement of the allegations of Rule 1 violations as part of the Accord, but the Commission dismissed this, noting that only the Commission, and not private parties, can settle such allegations.

The Commission approved a later settlement between PG&E and the CPUC Consumer Services Division whereby PG&E must pay $850,000 for withholding information in the early stages of the Commission's evaluation of the company's proposal to build Line 401. For this reason, the Commission separated the Rule 1 violation provisions from the Gas Accord. The money will be paid to the State General Fund.

Besides the $850,000 fine, PG&E must require some 50-60 managers and staff who deal with the CPUC to take an ethics training course of at least four hours. The content of the course will be determined between PG&E and the CPUC's Public Advisor's Office and Consumer Services Division.

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