Findings of Fact
1. The utilities requested a schedule for expedited action in this proceeding that would require the Commission to make exceptions to procedural requirements of the Public Utilities Code and the Commission's Rules of Practice and Procedure.
2. The utilities have not made a compelling showing that any emergency exists that requires immediate authorization of the utilities' petitions.
3. The utilities already have authority to engage in hedging activities as long as they are accounted for within their respective incentive mechanisms.
4. Ratepayers received very little benefit from the utilities' purchase of hedging instruments in 2005-06 that were accounted for outside of the incentive mechanisms. The total amount spent on hedging instruments for which there was no monetary benefit to ratepayers was substantial.
5. The utilities provided evidence that natural gas markets have become increasingly volatile, which has increased the costs of and risks associated with purchasing hedging instruments.
6. The utilities did not provide evidence that their plans to spend large sums on hedging instruments are consistent with best practices, industry standards or financial theory or practice.
7. Compared to last winter, the utilities propose to spend much larger sums on hedging instruments and to insure much larger portions of their natural gas supply portfolios.
8. The utilities have not provided evidence that their ratepayers would be willing to pay the sums they propose on insurance against gas price spikes.
9. Exempting hedging purchases from regulatory incentive mechanisms and retrospective reasonableness reviews does not provide ratepayers with adequate protection. It is not reasonable to grant the utilities authority to spend large sums of ratepayer funds without some regulatory protections for ratepayers.
10. The hedging plans the utilities presented in this proceeding do not provide adequate detail to determine their reasonableness. Any assessment of how the utilities purchase hedging instruments according to those plans would need to be made in the context of the utilities' broader gas supply strategies and uncertain and unknowable future market conditions.
11. The Commission may not delegate to intervenors the task of overseeing and determining the reasonableness of ongoing management of utility operations.
12. The utilities state their existing incentive mechanisms are not structured in ways to motivate optimal purchases of hedging instruments on behalf of ratepayers.
13. SoCalGas and its shareholders have benefited substantially from its purchase of hedging instruments within its GCIM.
14. There is no meaningful misalignment of interests between shareholders and ratepayers with regard to the purchase of hedging instruments within existing incentive mechanisms, as long as the utility cannot influence market gas prices.
15. Including portions of hedging costs and benefits within each utility's incentive mechanism would substantially reduce shareholder liability while providing reasonable protection for ratepayers.
16. Because the utilities state their hedging programs are designed to guard against price spikes during winter 2006-07, there is no reason to authorize different accounting treatment for hedging that covers gas costs during non-winter months.
17. The record does not provide clear information about the amounts of ratepayer funds they propose to use for hedging.
18. Information about the costs, benefits and nature of each utility's hedging activities would be useful in designing future policy and ratemaking for hedging activities, and assuring utility hedging activities adequately protect ratepayers.
