3. Issue

The issue in this second phase of the consolidated ROE proceeding was to address cost of capital mechanisms that could replace annual cost of capital applications. This issue was raised to determine whether a mechanism could be adopted to maintain fair and reasonable capital structures and ROEs for the major energy utilities while reducing ROE proceedings and simplifying workload requirements and regulatory costs.

An evidentiary hearing on Phase II was held on January 29, 2008 and submitted upon receipt of reply briefs on February 21, 2008.

Although SCE and joint intervenors Aglet Consumer Alliance, The Utility Reform Network and Utility Consumers' Action Network, collectively referred to as ATU, preferred to continue with annual cost of capital applications, they acquiesced that a CCM could be adopted. Variations of a CCM that could defer filing of complete cost of capital applications for a period of two to five years were recommended by SCE, SDG&E, PG&E, ATU, and the Division of Ratepayer Advocates (DRA). However, SDG&E recommended that it be authorized to continue with its current MICAM mechanism.