PHASE 1 HANDOUT - GAS

November 20, 2003

Agreed to by Pacific Gas and Electric Company (PG&E), Southern California Gas Company (SoCalGas), San Diego Gas & Electric Company (SDG&E), Southwest Gas Company (Southwest), Southern California Edison Company, the Western Manufactured Housing Community Association, and The Utility Reform Network.

1. Definitions.

· Common areas: facilities available for use by all tenants such as: swimming pools, buildings, recreation rooms, clubhouses, and laundry facilities.

· Distribution Main/Service Extension Allowance: Distribution main and service allowances are granted based on expected revenues from permanent loads per Rules 15 and 16 for PG&E, SDG&E, and Southwest, and Rules 20 and 21 for SoCalGas (these references hold throughout this document). The allowances for residential gas distribution and service may vary among utilities. They are set as an amount per meter or residential dwelling unit that varies by the number of gas end-use appliances installed at each residential dwelling unit.

2. Boundaries of the distribution system and services within the master-metered mobile home park (MHP) that are addressed by the discount.

Distribution system and service facilities running from the master-meter to, and including, the tenant's meter that are used to deliver natural gas to the tenant. This does not include, where applicable, the excavation and supporting substructures for required service equipment that would otherwise be owned and maintained by a directly metered MHP owner pursuant to gas Rule 16.D.1.a.

3. Utility avoided costs- Categories of costs the utility incurs when directly serving MHP tenants that are avoided by the utility when a master-metered MHP is sub-metered. These categories of costs are those for which the owner of a master-metered MHP is reimbursed through the discount provided pursuant to the utility tariff (to the extent these costs do not exceed the average costs the utility would have incurred in providing direct service), and may not be separately charged to MHP tenants by the MHP owner. The following is a general list of costs incurred in the provision of direct service that are avoided in a sub-metered MHP, i.e., utility avoided costs (gas):

· Operations and maintenance expenses including, but not limited to, meter reading, billing, maintenance, and repair of the distribution system and services, as defined in the applicable utility tariffs, e.g., Gas Rules 15 and 16.

· Administrative and general expenses.

· Uncollectibles.

· Unaccounted for gas losses

· Capital Investment Costs: Utility cost portion of initial and subsequent capital investment, including capital expenditures for replacement and improvement of the distribution system and services.

· This may include, but is not limited to:

_ capital investment for maintenance-related trenching, meters, meter set assemblies, distribution mains and service lines as specified in the applicable utility tariffs.

· Capital-investment-related cost components include:

_ depreciation

_ return on investment (rate base)

_ taxes related to capital investment (including property taxes).

· Other taxes (not related to capital investments) associated with operations and maintenance (including meter reading and billing) that are the utility's responsibility under the applicable tariffs, e.g., Gas Rules 15 and 16.

4. Costs not covered by the discount- Categories of costs related to gas utility service that are either not incurred by the utility when it directly serves MHP tenants or are not reflected in utility rates for direct service, but are incurred by the owners or operators of master-metered MHPs and are incidental to the service they directly provide to MHP tenants. The following are the categories of costs for which the owners of master-metered MHPs are not compensated through the gas sub-metering discount provided pursuant to a utility tariff. Such costs may only be separately charged to sub-metered tenants if doing so can be shown not to violate any of the following: (1) Public Utilities Code Section 739.5(a), (2) case and statutory law, that owners of sub-metered MHPs may not pass through to tenants as rent increases costs related to the repair and maintenance of their sub-metered natural gas utility systems if such cost components are covered by the sub-metering discount, or (3) other local rent control ordinances:

· Costs related to common areas,

· Trenching (excavation) for (1) service reinforcements as defined by Rule 16.F.1; and (2) expansion of sub-metered distribution and services⁵ under Rules 15.B.2. and 16.D.1.a(2).⁶

· Substructures and protective structures for (1) service reinforcements as defined by Rule 16.F.1.; and (2) expansion of sub-metered distribution and services⁷ under Rule 15.B.1. and 16.D.1.a.

· Capital investment related costs for the cost components listed in this Section 4 if not otherwise directly recovered by the MHP owner, such as:

_ depreciation

_ return on investment

_ taxes related to capital investment (including property taxes).

· Operations and maintenance expenses of the interconnection between the meter set and dwelling unit (mobile home), including associated taxes.

· Other taxes (not related to capital investments) not otherwise directly recovered by the MHP owner associated with operations and maintenance that are the customer's responsibility under the applicable tariffs, for example Gas Rules 15 and 16.

The inclusion on the above list of any cost category does not warrant automatic approval by a rent board of related rent increases for the sub-metered tenants of a master-metered MHP. The MHP owner must first demonstrate that costs incurred properly fall within the categories of costs set forth above. Then, the rent board would need to determine that any related recovery of these costs through rent is not prohibited by (1) Public Utilities Code Section 739.5(a), (2) related case and statutory law, and (3) other local rent control ordinances.

(END OF ATTACHMENT B)