3. Jurisdictional Question

At hearing, the assigned Administrative Law Judge (ALJ) asked the parties to brief the question of whether this Commission will continue to have jurisdiction over SCE's gas operation in Catalina once SCE replaces its gas vaporization plant. The replacement will convert the operation from blended propane/butane liquefied gas to all-propane gas. The question arises because Pub. Util. Code § 221 defines "gas plant" in a manner that appears to exclude all-propane gas plants from Commission jurisdiction.

The Commission addressed the jurisdictional question in the 1980 general rate case, concluding that since butane at that time was the principal ingredient in the butane/propane mix, the § 221 exclusion would not apply to SCE's Catalina gas operation. Since that time, the Commission in four cases involving very small gas operations has deemed a utility's all-propane service unregulated, except for safety requirements.⁴

In response to questions raised by the Assigned Commissioner here, the ALJ questioned the parties as to the possibility that SCE's change to an all-propane operation could in the future be converted back to an LPG mix if circumstances so warrant (i.e., availability of supply of propane and butane, substantial difference in cost of propane and butane). SCE responded that it has in its new plant retained the possibility of using a propane-butane fuel mixture, although the conversion would require adjustments in the gas production plant that would take several weeks.

In analyzing the jurisdictional question, ORA notes significant policy considerations. SCE's gas operations on Catalina appear to be closer to an effective monopoly than may be the case for other propane plants. Catalina customers are unlikely to buy tanks of propane rather than accept delivery of gas through SCE's pipelines. Even if they were to do this, Edison at this time is the only retail vendor of tanks or propane refills on the island. ORA comments:

The Commission was established to protect ratepayers from market power abuses associated with monopolies. Here we have a clear monopoly. (ORA Opening Brief, at 8.)

Moreover, SCE operates electricity, water and gas services in Catalina, and it apportions its rate-based costs for manpower, construction, equipment and general expenses among those three utility operations. In this case, for example, SCE allocated the cost of a Pebbly Beach pipeline replacement between its gas operation ($200,000) and its water operation ($65,000). If in the future two of these utilities were regulated by the Commission and one utility was not, the ability to monitor the allocation of costs would be impeded.

In view of these considerations - in particular, the monopolistic nature of the utility service and the possibility that the gas plant will be converted back to an LPG mix if prices or other conditions warrant - we conclude that SCE's Catalina gas service is distinguishable from other propane operations that would be deregulated under Pub. Util. Code § 221. Therefore, we apply the reasoning of Decision 92059, 1980 Cal. PUC LEXIS 786, and find that the Commission continues to have rate jurisdiction over SCE's gas plant service on Catalina Island.