PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

ITEM # 17

ID# 11249

ENERGY DIVISION RESOLUTION E-4484(rev.1)

May 10, 2012

RESOLUTION

Resolution E-4484. San Diego Gas & Electric Company (SDG&E) requests to increase its electric revenue requirement by
$28.029 million over revenues authorized in SDG&E's 2008 General Rate Case (GRC) decision (D. 08-07-046) to recover unanticipated increases in liability insurance costs associated with the 2011-2012 policy period, pursuant to the Z-factor provisions of the decision.

PROPOSED OUTCOME: This resolution approves SDG&E's request to increase revenue requirement by $28.029 million above its 2008 General Rate Case authorized revenues to recover insurance costs it incurred in 2011 for the 2011-2012 policy year.

ESTIMATED COST: An increase of approximately $28.029 million above the revenue requirements authorized in SDG&E's 2008 General Rate Case, amortized over 24 months, resulting in an annual increase of $14.015 million.

By Advice Letter 2285-E filed on September 9, 2011.

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SUMMARY

This Resolution approves Advice Letter (AL) 2285-E and grants SDG&E's request to recover $28.029 million for increased insurance costs for policy year 2011-12 covering the period of June 26, 2011 to Dec 31, 2011.

D.10-12-053 granted SDG&E's request to recover unanticipated insurance cost increases for policy year 2009-2010 under the Z-factor mechanism and directed SDG&E to file a Tier 3 advice letter to recover insurance cost increases under the Z-factor mechanism for subsequent years prior to its next GRC. Resolution
E-4450 approved SDG&E's requested recovery of insurance cost increases for policy year 2010-2011, which included procurement of a reinsurance product.

SDG&E filed AL 2285-E to recover unanticipated insurance cost increases associated with policy year 2011-2012, for expenses incurred since the effective date of its 2011-2012 policy period, June 26, 2011, to the end of 2011. The cost of SDG&E's entire 2011-2012 insurance package is $80.4 million. To recover insurance costs incurred in 2011 for half of the 2011-2012 policy year, after accounting for a $5 million Z-factor deductible, SDG&E proposes to increase revenue requirement by $28.029 million above 2008 GRC authorized revenues, to be amortized over 24 months, resulting in an annual revenue requirement increase of $14.015 million.

The insurance package for policy year 2011-2012 for which AL 2285-E seeks recovery is similar to the insurance package SDG&E procured in policy year 2010-2011 and approved by the Commission in Resolution E-4450. Similar to how D.10-12-053 and Resolution E-4450 found that insurance cost increases for policy periods 2009-2010 and 2010-2011 qualify for Z-factor ratemaking treatment, this resolution also finds that the increase cost increases associated with policy year 2011-2012 also qualify for Z-factor treatment.

This resolution approves Advice Letter 2285-E, granting SDG&E an increase of $28.029 million above its 2008 GRC revenue requirement to recover unexpected increases in insurance expenses associated with policy year 2011-2012. This resolution finds that the unexpected insurance expenses meet the eight Z-factor criteria and, hence, qualify for recovery under the Z-factor mechanism.