Retail Unbundling - California

Status: The state allows residential customers to purchase natural gas from marketers through a “core aggregation transportation program” offered by the local distribution companies.

Overview: California has had a customer choice program for all residential and small commercial customers (referred to as core customers) since 1995 through its core aggregation transportation program (CAT). The program allows core customers to purchase gas from marketers who have met minimum aggregation levels of 120,000 therms per year. Customers must sign a one-year agreement to purchase gas from a non-LDC supplier. According to the most recent Energy Information Administration data, 38,040 residential customers in California are purchasing gas from marketers, representing about 0.4 percent of deliveries to residential consumers statewide in 2003. This level represents a 15.0 percent increase since 2002 in the number of residential participants. There were more than 28,000 residential customers of Southern California Gas (SoCal) participating in CAT in 2003, representing about 0.6 percent of SoCal’s residential market. Approximately 9,800 residential customers, 0.3 percent of Pacific Gas and Electric (PG&E) total residential market, were participating in CAT. Fewer than 50 residential customers of San Diego Gas and Electric were participating in CAT in 2003. Although legislation was passed in October 1999 which mandated that LDCs provide bundled service and be the only providers of billing and metering services, it exempted existing core aggregation programs and included the provision that consumers can choose to purchase gas from another supplier. In 2004, there was only one marketer, ACN Energy, active in California. As of December 2004, residential customers continue to have the option to select ACN Energy as their alternative supplier.

EIA State Data: In 2003, California had 9,803,306 residential and 431,182 commercial customers. They consumed 492 and 263 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies by residential and commercial customers were $9.13 and $8.15 per thousand cubic feet, respectively.In 2002, California had 9,726,642 residential and 422,403 commercial customers. About 97 percent of the state's residential and commercial customers are served by three local distribution companies: San Diego Gas & Electric, Southern California Gas Company, and Pacific Gas and Electric.

Eligibility/Participation in Retail Choice Programs:

Status as of December 2004: Estimated Number of Customers  

Customer Type

Total 2003

Eligible in 2004

Participating in 2004


Percent of 2003 Total


Percent of Eligible

Percent of 2003 Total






















Sources: Total 2003: Energy Information Administration, Natural Gas Annual 2003 (December 2004). Eligibility and Participation: Estimated based on 2003 data reported on Form EIA-176, "Annual Report of Natural and Supplemental Gas Supply and Disposition," which is the primary data source for the Natural Gas Annual 2003.

California: Regulatory and Legislative Actions on Retail Unbundling

Summary: The California Public Utilities Commission (PUC) endorsed restructuring in a collaborative settlement by Pacific Gas and Electric (PG&E) and 25 other companies on August 1, 1997, known as the Gas Accord, which gave all PG&E customers the option to purchase gas from other suppliers. In January 1998, the PUC opened a docket to investigate the possibility of restructuring gas markets statewide. After a series of hearings, the PUC identified the most promising options to consider for further study and ordered a cost/benefit analysis of these options with the intent of preparing a report of recommendations for consideration by the state legislature. Legislation was enacted in August 1998 that prohibited the PUC from taking any restructuring action before 2000. This legislation was superseded in October 1999 by Assembly Bill 1421 that mandates bundled service by utilities and requires them to be the sole providers of billing and metering services.

Regulatory and Legislative Actions



Proposal To Make CPUC an Elected Board (SCA 6). (Held in committee as of 8/29/03.) Senate’s Constitutional Amendments Committee voted to change CPUC to seven-member commission elected by district and subject to term limits of two 4-year stints. Currently CPUC has five governor-appointed members serving 6-year staggered terms. Appointments must be approved by state Senate.



Legislation Requiring Energy Policy Report Every 2 Years (Senate Bill 1389). Requires the California Energy Commission to present an Integrated Energy Policy Report to the Governor and Legislation every 2 years based on its assessment of trends in energy markets.



Legislation Mandating Bundled Service by Utilities (Assembly Bill 1421). Supersedes prior law that prohibited PUC action on restructuring before 1/1/2000. Mandates that LDCs provide bundled service and be the only providers of billing and metering services. However, it exempts existing core aggregation programs and includes a provision that consumers can choose to purchase gas from another supplier.



Legislation Allowing PUC to Investigate Restructuring but Limiting Action (Senate Bill 1602 enacted 8/28/98, creating Section 328 of Public Utility Code). Legislation allows PUC to investigate restructuring but prohibits any action until 1/1/2000 and disallows any restructuring decisions made after 7/1/98 affecting core customers.

Regulatory Action


Switching Policy Clarified for Large Industrials. PUC reaffirmed that industrial electricity customers cannot switch from non-core to core status unless supplier goes out of business.



Energy Action Plan Approved. Joint plan with the Consumer Power and Conservation Financing Authority (CPA) and the Energy Resources Conservation and Development Commission (CEC). Goal is to implement a unified state energy policy. Proposes six sets of actions, including ensuring reliable supply of reasonably priced natural gas, optimizing energy conservation and resource efficiency, and upgrading and expanding the electricity transmission and distribution infrastructure. Includes increasing storage capacity and continual monitoring of natural gas prices and trends for signs of market manipulation.



PG&E Applies to Extend Gas Accord Through 2004. Company filed proposal with PUC that would increase reliability standards and refine some operational procedures.



2003 Work Plan. PUC prepared 2003 work plan for legislature. Includes three primary objectives: (1) reasonable gas rates, (2) matching capacity to needs, and (3) maximizing participation in energy efficiency and low-income programs.



PG&E Gas Accord II Settlement Agreement Approved. PUC approved extension of Gas Accord market structure through 2003, at 2002 rates.



PG&E Requests Approval of Settlement Agreement. PG&E requested a 1-year extension of the Gas Accord, which would allow the utility to extend existing contracts for firm gas transportation and storage services. It would also fix rates for gas transmission and storage services at existing 2002 levels.



PUC Adopts Modifed Comprehensive Settlement for SoCal (see 10/01 below, 99-07-003). Decision (3-2) allows for tradable storage rights and transmission capacity on Socal and San Diego Gas & Electric Co.'s intrastate systems. These lines transport gas to smaller distribution systems within the state. The decision reduces the core aggregation transportation (CAT) program minimum size to 120,000 therms to provide statewide consistency (conforms to PG&E threshold) and removes the cap on core aggregation. Also recommends that the legislature act on consumer protection measures for those using CTAs and ESPs (providing both electricity and gas) in order to eliminate obstacles to competition. Eliminates core subscription program, so that "all noncore eligible customers must either choose a competitive provider for gas commodity service or take service from SoCal at core rates. Allows a billing credit when core aggregators include the utility's billing to their customers. Schedules upcoming proceeding re gas industry structure in post-2002 period. Requires a "market assessment report" 2 years after effective date of the tariff



Alternate Proposed Final Opinion re Restructuring Options (99-07-003) (Commissioner Carl Wood). Approves a modified interim settlement (IS) rather than the comprehensive settlement (CS) recommended by ALJ John Wong. Provisions would : (1) establish Hector Road as a formal receipt point on SoCalGas' system at which nominations may be made; (2) provide for the establishment of "pools" of gas on the SoCalGas transmission system to increase the liquidity of trading of gas supplies; (3) allow trading of imbalances to some extent. Would not unbundle core interstate transportation from rates at this time. Would eliminate core contribution to noncore interstate transition cost surcharges (ITCS) and the core subscription option as well as the caps and thresholds for core aggregation programs following PUC implementation of consumer protections. Would reduce the core aggregation program threshold and offer billing options to core aggregators.



Proposed Final Opinion re Restructuring Options (99-07-003). Approves a modified "comprehensive settlement" - one of three contested settlement proposals addressing options raised in D99-07-015 as applied to the SoCal and San Diego Gas & Electric Co. gas systems. The decision would reduce the CAT program minimum size to 120,000 therms and remove the cap on core aggregation. Would eliminate core subscription program, so that "all noncore eligible customers must either choose a competitive provider for gas commodity service or take service from SoCal at core rates."



New Docket for Considering Costs and Benefits of Various Promising Restructuring Options (99-07-003). The PUC opened a new docket to address the benefits and service costs of various "promising" restructuring options, including effects on labor, safety, consumers, and environment. The order sets a 60-day period for parties to reach consensus on a new market structure that would also allow LDCs to continue offering full service to its core customers. If no consensus is reached, testimony and hearings are scheduled for Sept - Dec 1999. At the end of hearings, the PUC intends to report its findings to the legislature.



PUC Identification of Most Promising Restructuring Options (Decision 99-07-015). The PUC identified the "most promising" options to consider for restructuring the CA gas industry and closed the Order Instituting Investigation (OIR) R.98-01-011. These options include: creation of firm, tradable intrastate transmission and storage rights; establishment of secondary markets; making utilities "at risk" for unused transmission and storage resources; cost and rate separation for balancing services; separation of utility hub services from supply purchases; unbundling supply and distribution costs for core customers; elimination of core subscription service; elimination of core aggregation transportation thresholds (after consumer protection measures are in place); competitive metering technologies and competitive billing options (like electric industry); equal access to customer-specific information, transaction details, and pipeline operator demand forecasts by customer class; and establishment of a utility electronic bulletin board for secondary market transactions.



New Inquiry Schedule and Postponement. The PUC issued D.98-10-028 establishing a new schedule for its inquiry hearings and testimony and postponing any decisions until after 1/1/2000. As per 8/98 legislation, eliminates requirement of 8/6/98 order (see "Goals of PUC Inquiry") that LDCs file unbundled tariffs by 2/26/99.



Goals of PUC Inquiry. Interim Order, D.98-08-30. The PUC set goals of inquiry and short-term steps to aid in assessing possible market reform. Stated goals are to: complement benefits of electric restructuring, eliminate unnecessary cross-subsidies, remove unnecessary market barriers, enhance competition by unbundling supply and distribution services, ensure service reliability and safety, provide sufficient consumer protection, and ensure rates reflect cost of service. As first steps in assessing possible restructuring: LDCs are to categorize costs of each service by function in unbundling tariff filings by 2/26/99; those LDCs with "core aggregation programs" are to remove threshold limits and file tariffs accordingly; and the Energy Division is charged with developing consumer protection rules.



Investigation into Restructuring Natural Gas Markets. The PUC opened Order Instituting Rulemaking (OIR) R.98-01-011 on 1/21/98 to assess existing regulatory and market structures and possible reforms that would lead to more competitive markets and energy convergence.

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File last modified: 01/31/2005