ALJ/RS1/jyc Date of Issuance 4/19/2011

Decision 11-04-032 April 14, 2011

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of San Diego Gas & Electric Company (U902G) and Southern California Gas Company (U904G) Updating Firm Access Rights Service and Rates.

Application 10-03-028
(Filed March 29, 2010)

DECISION ADDRESSING APPLICATION OF SAN DIEGO GAS & ELECTRIC COMPANY AND SOUTHERN CALIFORNIA GAS COMPANY UPDATING
FIRM ACCESS RIGHTS SERVICE AND RATES

TABLE OF CONTENTS

Title Page

DECISION ADDRESSING APPLICATION OF SAN DIEGO GAS & ELECTRIC COMPANY AND SOUTHERN CALIFORNIA GAS COMPANY UPDATING FIRM ACCESS RIGHTS SERVICE AND RATES 2 2

Summary 2 2

1. Background 3 3

2. Issues Considered 5 5

3. Description of Current FAR System 6 6

4. An assessment of how the FAR system is working. 9 9

4.1. How Well Has the FAR System Addressed Scheduling Uncertainty? 10 10

4.2. Other Benefits of the FAR System 12 12

5. Structure and Operation of the Capacity Allocation Process 14 14

6. Proposals to Modify the FAR System 16 16

7. Service Offering Name Change 17 17

8. Firm Access Rights Balancing Account Name Change 18 18

9. Cost Allocation, Rate Design, and Cost Recovery 18 18

9.1. Separation of Costs between Local and Backbone Transmission 19 19

9.2. Rate Design and Cost Recovery 24 24

9.2.1. Firm Backbone Transportation Rate 24 24

9.2.2. Modified Fixed-Variable (MFV) Rate Option 27 27

9.2.2.1. Basis for Calculating the MFV Rate 28 28

9.2.2.2. Ratio of Fixed and Variable Components
of the MFV Rate 29 29

9.2.3. Interruptible Rate 30 30

9.2.4. In-Kind Fuel Charge 31 31

9.2.5. Annual Updates 32 32

9.3. Adopted Rates 33 33

10. Modifications to the Open Season Process 34 34

10.1. Revisions to Step 1 Set-Aside Eligibility Criteria 34 34

10.2. Revisions to Step 1 Qualifying Contract Eligibility Criteria 35 35

10.3. Notice of the Potential for Set-Aside Quantities 37 37

10.4. Change Step 1 Set-Aside Option from "Must-Take" to "Up-To" 38 38

10.5. Seasonal Differentiation of Step 2 Bidding Rights
for Core Customers 39 39

10.6. Elimination of Step 3B from the Open Season Process 41 41

10.7. Shorten the Re-Contracting Period to Three Days 42 42

11. Limiting FAR Sales When Capacity is Constrained 43 43

12. Revisions to Scheduling Priorities 44 44

13. Compensation or Relief for FAR Holders Unable to Schedule FARs 48 48

13.1. Reservation Charge Credits 48 48

13.2. Turn Back Option 49 49

14. Proposal to Exempt the System Operator from Paying FAR Charges. 50 50

15. Receipt Point Pools 50 50

16. Cap on Secondary Market Transactions 52 52

17. Other Proposed Modifications to the FAR system 54 54

17.1. Aggregation of Firm Capacity into a Single Contract Number 54 54

17.2. Increase Available Firm Capacity at Kramer Junction 55 55

17.3. Modifications to Regulatory Accounts 56 56

17.3.1. Information Technology Costs 56 56

17.3.2. Off-System Revenues 57 57

17.3.3. Company-Use Fuel 58 58

18. Impact of FAR Update on Shareholder Funded Programs 58 58

19. Future Changes to FAR Rates and Service 59 59

20. Joint Recommendations as Proposed Settlements 61 61

20.1. The JRO 62 62

20.2. The JRR 65 65

21. Implementation 67 67

22. Comments on Proposed Decision 68 68

23. Assignment of Proceeding 68 68

Findings of Fact 68 68

Conclusions of Law 72 72

ORDER 81 81

Attachment 1 - Exhibit JRO-1

Attachment 2 - Exhibit JRR-1

Attachment 3 - Southern California Gas Company Rate Tables

Attachment 4 - San Diego Gas & Electric Company Rate Tables

DECISION ADDRESSING APPLICATION OF SAN DIEGO GAS & ELECTRIC COMPANY AND SOUTHERN CALIFORNIA GAS COMPANY UPDATING
FIRM ACCESS RIGHTS SERVICE AND RATES

Summary

This decision assesses the performance of the firm access rights (FAR) system, adopts operational changes to improve the system, and establishes the revenue requirement, rate design, and rates for natural gas Backbone Transportation Service (BTS) for the period from October 1, 2011 until the effective date of rates established in the next San Diego Gas and Electric Company (SDG&E) and Southern California Gas Company (SoCalGas) Triennial Cost Allocation Proceeding (TCAP).

Decision (D.) 06-12-031 established the FAR system as the new receipt point access structure for southern California. The FAR system allocates and prioritizes access to the SDG&E/SoCalGas gas transmission system to reduce scheduling uncertainty for shippers. Prior to the adoption of the FAR system, customers shipping natural gas into southern California had no assurance that their gas would flow when desired through the receipt points on the SDG&E/SoCalGas gas transmission system.

When compared to the period prior to FAR system implementation, the FAR system has significantly reduced (but not eliminated) scheduling uncertainty, including during periods when access to the SDG&E/SoCalGas gas transmission system is diminished. Much of the continuing scheduling uncertainty results from receipt point or system-wide capacity constraints caused by scheduled maintenance activities and other events.

In addition to assessing the performance of the FAR system, this decision:

· Adopts operational modifications unanimously recommended by the parties to further reduce scheduling uncertainty and improve operation of the FAR system, including changes designed to improve the performance of the FAR system during periods when access to the SDG&E/SoCalGas gas transmission system is constrained;

· Adopts a revenue requirement of $135.0 million for BTS to be recovered through BTS rates for the period from October 1, 2011 until the effective date of rates established in the
2011 SDG&E/SoCalGas TCAP (i.e., until January 1, 2013). The $87.2 million increase in the BTS revenue requirement is off-set by reductions in other end-use transportation rates;

· Requires SDG&E/SoCalGas to prepare a new backbone embedded cost study to be filed with their 2011 TCAP application after conferring with interested parties;

· Adopts the rate design for BTS and related proposals jointly recommended by parties representing core customers, noncore customers, and SDG&E/SoCalGas. As a result, the firm reservation charge will increase 163-percent from the current rate, and other end-use transportation rates are reduced; and

· Includes the BTS revenue requirement, rate design issues, and proposals for future changes to the FAR system in the scope of the 2011 TCAP.