Storage Market Review Likely Despite ISP Clearance; PG&E Warns Price Cap Could Create $3 Billion Liquidity Requirement
On February 12 parties filed comments responding to the CPUC's proposed decision in I.23-03-008, which addresses the winter 2022–2023 natural gas price spike.
Recall that, rather than pursuing commodity price intervention, the PD pivots toward bill-shock mitigation by defining a “gas price spike event” as a 150% increase relative to the ten-year monthly average, triggering a temporary cap on core procurement charges, amortization of under-collections, and enhanced customer notice requirements.
The PD also enhances oversight of procurement incentive mechanisms (the Core Procurement Incentive Mechanism and the Gas Cost Incentive Mechanism) by requiring formal applications for any shareholder rewards and expands transparency through standardized monthly storage inventory reporting.
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Parties broadly accept the PD's conclusion that the winter 2022–2023 gas price spike was driven by market conditions rather than misconduct by any single regulated utility or storage provider. (Although the Sierra Club argues that SoCalGas either contributed to the spike or retained 21.6 Bcf of excess storage capacity, beyond reliability needs.)
Beyond this broad consensus, parties disagree over how the Commission should respond going forward.
- The utilities argue that several proposed mitigation measures (especially a temporary cap on procurement charges and rigid notification rules) could backfire by weakening utility finances, distorting price signals, or complicating operations during volatile market periods.
- PG&E warns the temporary cap could trigger a financing scenario "not unlike events experienced in 2001" when retail rate freezes trapped utilities between soaring wholesale costs and capped retail recovery, leading to PG&E's bankruptcy. PG&E notes it would have needed over $3 billion in liquidity utilization (including $2.4 billion in collateral for gas procurement plus additional short-term debt) had the cap been in effect during winter 2022-2023.
- The utilities also seek clearer triggers for declaring a price-spike event, more workable timelines for customer alerts, and relief from requirements they say could produce inaccurate or confusing information if prices move rapidly. All three major utilities want "one business day" instead of "24 hours" for notifications to align with when customer support is available. Southwest Gas requests 45-50 days (not 30) for bill inserts due to billing cycle realities. PG&E objects to providing estimated bill impacts within 24 hours, arguing volatility makes accuracy impossible.
- Storage operators and independent storage providers emphasize that competitive storage access helped stabilize prices during the crisis, oppose further scrutiny of their market structure, and urge the CPUC to consider expanding storage capacity as a long-term safeguard against future spikes. Central Valley Gas Storage notes the Commission affirmed the ISP market remains competitive less than one year ago (in D.25-04-032) and argues the PD's plan to evaluate Independent Storage Provider market structure creates the same "unnecessary market uncertainty" the PD claims to avoid by declining a cost-of-service study.
- Consumer advocates and small-business groups focus on the severity of the bill shock experienced by customers, citing dramatic increases and arguing the decision lacks strong protections if prices surge again. They call for lower caps, stricter review of cost recovery, stronger communication requirements, and policies aimed at preventing extreme affordability impacts on households and small firms.
- The Utility Consumers Action Network (UCAN) emphasizes California's ongoing affordability crisis, noting SDG&E customers saw bills jump 114% in January 2023 and one in four customers fell into arrears. UCAN wants a 20% price increase trigger (not 150%), a disconnection moratorium during spikes, and a ban on reporting delinquencies to credit agencies. The Small Business Utility Advocates want the cap lowered to 115% above historical averages or, alternatively, require cost recovery through formal application proceedings.
- Environmental and public-interest organizations press for deeper reforms, including earlier intervention triggers, customer support resources during extreme weather, greater transparency on gas procurement and storage practices, and accelerated electrification to reduce dependence on volatile gas markets.
- The Environmental Defense Fund proposes a 100% trigger threshold and is disappointed the PD rejects community resource centers. Sierra Club requests a moratorium on GCIM/CPIM shareholder rewards until the incentive mechanisms are reformed, a 1% fuel cost sharing program to align utility and ratepayer incentives, and quarterly distribution of CPUC-provided electrification fact sheets.
- Cal Advocates concentrates on protecting its independent oversight role and revising directives it views as unrealistic or inconsistent with statute. Cal Advocates objects to PD language requiring it to issue monitoring reports within four months and in specific formats, arguing this violates language in the Public Utilities Code that establishes its independence. Cal Advocates states it needs 6-12 months to complete Core Procurement Incentive Mechanism monitoring reports and wants reporting requirements placed on the utilities, not on Cal Advocates.
INSTANT ANALYSIS
The PD offers a no-fault finding paired with new oversight tools for future gas price spikes. Utilities are trying to prevent measures that could trap them between volatile wholesale costs and capped retail recovery, while storage operators are defending the current competitive market structure.
Consumer and environmental advocates are pushing the affordability narrative to justify earlier intervention triggers, stricter safeguards, and shifting more risk away from customers. Several proposals would expand the Commission’s role from monitoring gas markets to actively managing outcomes during price shocks.
A key issue going forward is storage. Despite being cleared in the investigation, storage parties are positioning for a future conflict over storage market structure, capacity expansion, and transparency requirements. The PD proposes to evaluate ISP ownership, contract pricing, market concentration, and tariff structures "outside this proceeding" at an unspecified future time, creating exactly the regulatory uncertainty storage operators warn will increase costs and constrain capital access.
WHO SHOULD CARE?
- Gas utilities and their regulatory teams. The final version of this decision could constrain procurement flexibility, impose new notification duties, and shape how future price spikes are managed financially and operationally.
- Gas marketers, storage operators, and large noncore customers. Storage policy, market transparency rules, and potential future reviews of Independent Storage Provider market structure could affect access to capacity and price formation.
- Industrial, commercial, and small-business gas users. Consumer advocates are pushing bill-stabilization tools and cost-recovery limits that could determine who ultimately bears the cost of the next spike.
- Policymakers tracking affordability and electrification. Some parties want earlier intervention triggers and policies that reduce dependence on gas during extreme winters.
In short, anyone exposed to California gas price volatility or procurement policy should be watching this closely before the next winter event.