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DUFF & PHELPS RESPONDS TO SOUTHERN CALIFORNIA GAS COMPANY'S COMPREHENSIVE SETTLEMENT PROPOSAL

 CHICAGO, Sept. 28 /PRNewswire/ -- Southern California Gas Company (SoCal Gas) has announced an agreement in principle with several parties that would resolve significant pending regulatory issues. Duff & Phelps Credit Rating Co. rates the company's first mortgage bonds and preferred stock "A+" (Single-A-Plus) and commercial paper Duff 1+ (One-Plus). Duff & Phelps is monitoring the approval and implementation processes related to the settlement.
 Duff & Phelps' preliminary views on the agreement are mainly positive and assume regulatory approval in its present form. The comprehensive settlement would resolve longstanding issues related to the company's gas purchase contracts with its pipeline affiliates by requiring that such higher-priced contracts be restructured. This would enhance the company's competitive position in its price-sensitive non- core markets, particularly against the ongoing threat of system bypass. Another provision would require that rates charged to non-core customers be based on a selected year's recorded throughput levels. SoCal Gas would be exposed to the potential risk or benefits resulting from variability of non-core deliveries from base year levels. Under the agreement, prior period gas purchase reasonableness reviews would be settled and the review process replaced with a gas cost incentive mechanism. The establishment of this mechanism would eliminate hindsight review of gas purchasing decisions.
 The agreement is subject to the approval of the California Public Utilities Commission and other conditions. Restructuring of the affiliate contracts and settlement of the gas prudency issues is not expected to have a material negative financial impact on SoCal Gas, although debt levels would increase until costs related to affiliate gas purchase contracts are recovered in rates. To the extent that these costs are recovered volumetrically, there is greater risk to SoCal Gas. SoCal Gas and parent Pacific Enterprises have established reserves covering several issues. Should the settlement be approved, SoCal Gas' financial health will be more dependent on successful management of its operating expenses, rate base growth, retaining non-core customers, and its ability to earn the authorized return on equity.
 -0- 9/28/93
 /CONTACT: Lynda A. Housa of Duff & Phelps Credit Rating Co., 312-368-3156/


CO: Southern California Gas Company ST: California IN: UTI SU: RTG

LG -- NY036 -- 6289 09/28/93 10:17 EDT
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Publication:PR Newswire
Date:Sep 28, 1993
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