ALJ/JSW/tcg Date of Issuance 3/14/2011

Decision 11-03-029 March 10, 2011

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

(See Appendix A for List of Appearances.)

DECISION REGARDING THE EXPANSION OF OFF-SYSTEM DELIVERY

TABLE OF CONTENTS

Title Page

DECISION REGARDING THE EXPANSION OF OFF-SYSTEM DELIVERY 11

1. Summary 22

2. Procedural Background 33

3. Discussion 44

3.1. Background 44

3.2. Should the Application be Denied? 77

3.2.1. SCGC's Position 88

3.2.2. Position of the Applicants 1111

3.2.3. Discussion 1414

3.3. Terms and Conditions of Expanded OSD 1818

3.3.1. Introduction 1818

3.3.2. Interruptible OSD 1919

3.3.2.1. No Adverse Impacts 1919

3.3.2.2. Interruptible Rates 2020

3.3.2.3. Southern System Reliability Costs 2525

3.3.2.4. Shipper Imbalances 2727

3.3.2.5. Treatment of Interruptible OSD Revenues 2929

3.3.2.6. Affiliate Transactions and Reporting 2929

3.3.3. Firm OSD 3232

3.3.3.1. Position of the Applicants 3232

3.3.3.2. Position of the Other Parties 3333

3.3.3.3. Terms and Conditions of Firm OSD Service 3636

3.4. Hinshaw Exemption Issue 3939

3.4.1. Introduction 3939

3.4.2. Discussion 4040

4. Comments on Proposed Decision 4343

5. Assignment of Proceeding 4343

Findings of Fact 4343

Conclusions of Law 4646

ORDER 4949

Appendix A - List of Appearances

DECISION REGARDING THE EXPANSION OF OFF-SYSTEM DELIVERY

1. Summary

On June 6, 2008, San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas) filed the above-captioned application. The application seeks to expand the authority of SDG&E and SoCalGas to provide off-system delivery of natural gas to all other pipeline interconnections on the same terms and conditions as authorized in Decision (D.) 06-12-031.

Today's decision authorizes SDG&E and SoCalGas to expand their interruptible off-system delivery (OSD) service to all other interconnections on the terms and conditions set forth in sections 3.3.2. and 3.4. of this decision. These terms and conditions include the following: that the offering of such service shall not result in any adverse operational impacts to on-system customers; the base rate is 5 cents per decatherm (Dth) and can be increased up to a rate cap of 15 cents per Dth, and may be discounted to as low as 1.5 cents per Dth; and any such discount is to be offered on a non-discriminatory basis.

This decision also authorizes SDG&E and SoCalGas to expand their firm OSD service to all other interconnections on the terms and conditions set forth in sections 3.3.3. and 3.4. of this decision utilizing the process proposed by the applicants and which was approved in D.06-12-031. These terms and conditions include the following: the application for firm OSD service shall provide a description of the open season process; the firm OSD rate shall consist of the two charges described in this decision; to ensure that on-system customers receive a benefit from firm OSD service, no discounting shall be allowed; the application for firm OSD service shall address how any unused firm OSD capacity a firm shipper may want to release will be traded or sold, and shall discuss the residual rights, if any, that the firm shipper might have upon the expiration of the contract for firm OSD service; and, under appropriate circumstances, the applicants may propose in the application for firm OSD service that the firm OSD rate be rolled into the overall transmission system rate, but the test for determining whether to permit a roll-in is to be addressed in that new proceeding.