Southern California Gas Co. should not be allowed to collect its entire proposed $277-million rate increase from residential customers, the technical staff of the California Public Utilities Commission recommended Wednesday.
The staff also said the gas company should not get the whole $277 million, but has not figured out yet how much the utility deserves. A more detailed recommendation is expected to be made to the commission next week.
The gas company, complaining that it is losing industrial customers because of low oil prices, has proposed new rates for natural gas that would boost the average bill for a residential customer by about 31%, or $9 a month.
The big proposed increase has touched off a controversy because energy prices have fallen sharply this year and because Southern California Gas wants to impose the full increase on residential customers rather than spread it to industrial users as well.
The general recommendation of the PUC staff is the first public indication of how the agency views the request, which was opposed by consumer and senior citizen groups at a public hearing Wednesday in downtown Los Angeles.
As proposed by Southern California Gas, the higher rates would increase the average bill for a residential customer to $36.46 a month from the current $27.84. It would increase overall revenues for the utility by 8%.
The utility wants residential customers to make up the revenues it is losing from industrial customers, who have either switched to burn cheaper oil or have won lower gas rates by threatening to switch. Residential users do not have the capacity to switch fuels.
The gas company maintains that raising rates to industrial customers will cause more of them to quit buying natural gas, leaving residential customers to shoulder more of the utility's operating costs.
The PUC staff, however, said Wednesday an unspecified portion of the rate increase should be borne by industrial users through fixed monthly charges that would apply whether they were using natural gas or not.
The large customers would be reluctant to disconnect from the gas system altogether because of the volatility of energy prices, said Geofrrey Meloche, the regulatory specialist in charge of the Southern California Gas case.