ALJ/DUG/sid DRAFT Agenda ID #3936
Ratesetting
10/28/2004 Item 38
Decision PROPOSED DECISION OF ALJ LONG (Mailed 9/28/2004)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of SOUTHERN CALIFORNIA GAS COMPANY for authority to update its gas revenue requirement and base rates. (U 904 G) |
Application 02-12-027 (Filed December 20, 2002) |
|
Application of SAN DIEGO GAS & ELECTRIC COMPANY for authority to update its gas and electric revenue requirement and base rates. (U 902-M) |
Application 02-12-028 (Filed December 20, 2002) |
|
Investigation on the Commission's Own Motion into the Rates, Operations, Practices, Service and Facilities of Southern California Gas Company and San Diego Gas & Electric Company. |
Investigation 03-03-016 (Filed March 13, 2003) |
(See Appendix A for a list of appearances.)
COST OF SERVICE TEST YEAR 2004 FOR
SOUTHERN CALIFORNIA GAS COMPANY AND SAN DIEGO GAS &
ELECTRIC COMPANY
TABLE OF CONTENTS
Title Page
PHASE ONE DECISION COST OF SERVICE TEST YEAR 2004 FOR
SOUTHERN CALIFORNIA GAS COMPANY AND SAN DIEGO GAS &
ELECTRIC COMPANY 2
I. Summary 2
II. Overview of the Applications 3
III. The Framework for These Cost of Service Proceedings 4
IV. Legal Standards 8
V. Procedural History 12
VI. Partial Settlements 14
A. The Partial Settlements are not Reasonable 16
VII. Structure of this Decision 30
VIII. Test Year Forecast Methodology 31
IX. Return to the Rate Case Processing Plan 34
X. Agreement Between Litigants 36
XI. Escalation 38
XII. Employee Total Compensation 41
XIII. True Labor Cost Balancing Account (TLCBA) 45
A. SoCalGas and SDG&E Incentive Compensation 50
B. Maturing Work Force 51
C. Pension and Benefits (Account 926) 55
D. Pension (Account 926.206) 55
1. Conversion to a Cash Benefit Plan 56
2. Reorganization Impacts on Pension Expense 57
3. Other Pension Issues 58
4. Recoverability of Pension Expenses in Rates 58
5. Supplemental Pension Requests 59
6. Corporate Center Pension Expenses 59
7. Conclusion 60
E. Medical Benefits 60
F. Dental and Vision Care Benefits 63
G. Other Benefits 64
H. Supererogatory Benefits 65
XIV. Workers' Compensation - Account 925 67
XV. Rate Base 70
XVI. Capitalization Policy 71
XVII. SoCalGas Plant Additions 73
A. Gas Transmission 73
1. Gas Transmission Retrofit - Pipeline Integrity 74
2. Laboratory Equipment - Budget Category 718 76
B. Gas Engineering 77
1. Capital - Software Development Budget Category 723 77
C. Gas Distribution Operations - Capital Expenditures 78
1. Natural Gas Vehicle Project (Category 734) 78
2. New Business & Pressure Betterment 78
3. Routine Main Replacement 79
4. Routine Service Replacement 81
5. Freeway/Franchise Work 82
6. Other Capital Replacements 83
7. Cathodic Protection 84
8. Special Main Replacements 84
9. Measurement Equipment 85
10. Support Labor 88
11. Software Application - Gas Maintenance & Inspection 89
D. Information Technology Capital Expenditures 89
1. Windows 2000 90
E. Information Technology - Desktop and Laptop Computers 90
F. Customer Service 98
1. Dispatch Phase I and II 98
XVIII. SDG&E Capital Additions 98
A. Gas Distribution 99
1. Geographic Information System and Maintenance &
Inspections System 99
2. Budget Reduction Factor 101
3. Voice System Replacement Project 102
4. Otay Mesa Betterment Project 102
B. Electric Distribution 106
C. Blanket Budgets 106
D. Project 230 - Underground Cable Replacement Program 108
E. Capital Projects Other Than Blanket & Information
Technology - Electric 109
1. Escalation 109
2. Sorento Substation 110
3. Sustainable Community Energy Systems 110
a) Determining the Right Level of Capital
Additions Funding 112
F. Information Technology - Electric 114
G. Hourly Billing System (Phase II) - Electric 115
H. San Onofre Nuclear Generating Station - Electric 116
I. SONGS Costs Not In Edison's Rate Case 118
J. SDG&E Line Extension Issues 125
XIX. Working Cash - SoCalGas and SDG&E 126
A. Federal & State Tax Payment Lag 126
B. Municipal Taxes 127
C. Accrued Vacation and Withholdings 129
D. Customer Deposits 129
E. Hub and Swap Revenues 134
XX. Depreciation - SoCalGas and SDG&E 135
A. Simple Example of Depreciation 135
B. Remaining Life Estimates for SoCalGas and SDG&E 136
C. Simple Example of Net Salvage 137
D. Net Salvage Estimates for SoCalGas and SDG&E 137
XXI. Land Rights 139
XXII. Test Year 2004 Customer Forecast 140
XXIII. Operating Expenses 141
XXIV. Clearing Accounts 142
A. SDG&E Account 163 - Purchasing and Warehousing 142
B. SoCalGas Account 184.2 - Business Solutions 142
C. SDG&E Account 184.2 - Fleet 143
D. SoCalGas Account 184.3 - Capital Tool Repair
and Reconditioning 144
E. SoCalGas Account 184.4 - Customer Services 144
F. SoCalGas Account 184.6 - Tools and Uniforms 144
XXV. Operating & Maintenance - Gas Storage (SoCalGas) 146
A. SoCalGas Account 807 - Gas Acquisition Costs 147
B. FERC Account 814 - Engineering and Supervision 147
C. FERC Account 824 - Other Expenses 149
D. Other Gas Storage Adjustments 150
E. SoCalGas Account 832 - Maintenance of Reservoirs and Wells 150
F. O&M - Gas Transmission 151
XXVI. Gas Distribution Operations 157
A. SoCalGas Account 870.0 - Operation Supervision
and Engineering - Distribution 158
B. SoCalGas Accounts 870.5 & 870.7 - Operation
Supervision and Engineering 159
C. SoCalGas Account 878 - Meter and House Regulator Expense 160
D. SoCalGas Account 879 - Customer Installation Expense 160
1. Meter Replacements 160
2. Supervision 161
3. Seismic Valve Inspections 161
4. Maturing Workforce 162
5. ORA's Spreadsheets and Testimony 162
E. Fumigation Costs (Within Account 879) 163
F. SoCalGas and SDG&E CO Testing - Costs in Account 879 166
G. SoCalGas Account 880.3 - Other Expenses - Distribution Field 166
H. SoCalGas Account 880.4 - Other Expenses - Distribution Field 167
I. SoCalGas Account 880.5 - Safety & Emergency Services 168
J. SoCalGas Account 887 - Distribution Main Maintenance 169
K. SoCalGas Account 892 - Distribution Service Maintenance 172
L. SoCalGas Account 893.2 - Tin Meter Testing 173
M. SoCalGas - Information Technology Expense - Accounts 880,
903, & 923 173
N. SDG&E - Information Technology Expense - Accounts 588, 880,
903, 920, 921 and 935 175
O. SoCalGas Account 901 - Supervision (Staff Support Services) 175
P. SoCalGas Account 902 - Meter Reading Expense 177
Q. SDG&E Account 902 - Meter Reading 179
R. SoCalGas Account 903 - Customer Records and
Collection Expenses 181
1. Call Volume (1) 182
2. Multi-Language Costs (2) 184
3. Maintenance (3) 185
4. Quality Assurance and Span of Control (4 & 6) 185
5. Pay Station Technology (5) 186
6. Paper Orders & Processing - Customer Billing (7) 186
7. Credit Analysis Staff (8) 187
8. Meter Reading - $0.455 million (9) 188
9. Call Volume Related Adjustments Customer Growth - Communications Expense (10) 190
10. Unadjusted Impact for Errata Ex. 7-E (11) 190
11. Fumigation Calls (12) 191
S. SDG&E Account 903.1 - Customer Records & Collections 191
1. Customer Information Expenses 192
2. Call Volume and Customer Growth 193
3. Special Services Staff 194
T. SDG&E Account 903.3 - Credit Collection 195
U. SDG&E Account 903.1 - UCAN's Adjustments 196
1. Entertainment Expenses - Commercial
and Industrial Customers (1) 196
2. Computer Tech. Staff (2) 197
3. CO Testing - Demand-Side Management Related Costs (3) 198
4. Support of Federal Accounts (4) 198
5. Newspaper Advertising (5) 199
6. Outage Notification Staff (6) 199
7. Computers (7) & (8) 199
8. SDG&E Account 903.1 - Dynamic Tariff & Demand
Reduction (UCAN) 200
V. SDG&E Account 903.5 - Net Metering (UCAN) 201
W. SDG&E Account 903.5 - Hourly Billing (UCAN) 201
X. SDG&E Account 903.7 - Postage Expenses 202
Y. SoCalGas Account 904 - Uncollectables 202
Z. SoCalGas Account 908 - Customer Assistance 203
XXVII. SoCalGas Administrative and General Expenses 209
A. SoCalGas and SDG&E Account 920 - Administrative
and General Salaries 209
B. SoCalGas and SDG&E - Sarbanes-Oxley Act Costs 209
1. SoCalGas and SDG&E Cost Accounting Positions|
for Capital Expenditures 212
2. SoCalGas and SDG&E Results of Operations Models 213
C. SoCalGas Accounts 920 & 921 Administrative and
General - Salaries and Expenses for Regional Public Affairs 215
D. SDG&E Accounts 920 & 921 Administrative and General - Salaries
and Expenses for Regional Public Affairs 217
1. SoCalGas - Human Resources Account 920.2 218
2. SDG&E - Human Resources 218
3. SoCalGas and SDG&E Severance Payments 219
4. Other Proposed SDG&E Adjustments 220
5. Conclusion - Account 920 - A&G Salaries 220
E. SDG&E Account 920 "B" A&G Salaries - Incentive
Compensation Plan and Spot Cash Awards 220
F. SDG&E Account 920 - "C" Environmental Services 221
G. SoCalGas Account 921 - Administrative and General
Non-Labor Expense 221
H. SoCalGas Account 921.6 Administrative and General - Real
Estate & Facilities 222
I. SDG&E Account 921 "A" and "F" - A & G Office
Supplies & Expenses 223
1. SDG&E Controller's Department (2) 224
2. SDG&E Human Resources (3) 225
3. SDG&E Labor Relations (4) 226
4. Strategic Planning (5) 226
5. Long-Term Incentives (7) 227
J. SDG&E Account 921 "C" Office Supplies & Expenses - Supplies Management 227
XXVIII. Shared Services 227
A. SDG&E Account 921 "E1" and "E2" Sempra Energy Corporate
Center (Administrative & General Costs) 231
1. Undisputed Items (1, 5, 9, 12, & 13) 232
2. Employee Volunteer & Giving (2) 233
3. Accounting Shared Services (3) & Tax Services (4) 233
4. Leadership Training & Development (6) 234
5. Diversity Affairs (7) 235
6. Allocation of General Counsel (8) 236
7. Executive Dues and Events (11) 236
8. Shared Assets (11) 237
9. Compensation-Related (14, 15 & 16) 237
10. Miscellaneous (17) 238
B. UCAN's Review of Shared Services 238
1. External Affairs Senior Vice President (A-1) 240
2. Legislative Governmental (A-3) 241
3. Affiliate Compliance (A-4) 241
4. Community Affairs (A-6) 243
5. Communications (A-9) 243
6. Holding Co.'s Chief Financial Officer (B-1) 243
7. Investor & Shareholder Relations (B-2) 244
8. Auditing Services (B-3) 244
9. Payroll (B-4) 245
10. Accounting (B-5) 245
11. Corporate Planning (B-6) 245
12. Corporate IT (B-7) 246
13. Treasury (B-8) 247
14. Risk Management - Insurance (B-9) 249
15. Tax Services (B-11) 249
16. Human Resources Senior VP & Staff (C-1) 251
17. Corporate Staffing (C-2) 251
18. Diversity Affairs (C-3) 251
19. Human Resources Information System 252
20. Corporate Security (C-5) 252
21. Compensation & Benefits (C-6) 253
22. Training & Development (C-7) 253
23. Corporate Secretary (D-3) 254
24. Legal Department (D-4) 255
25. Nuclear Property Insurance (IP-2) 255
26. All Risks Insurance (IP-3) 256
27. Officers & Directors' Liability Insurance (IL-2) 257
28. Excess Liability Insurance (IL-3) 257
29. Other Liability Insurance (IL-5) 258
C. SoCalGas Shared Corporate Services 258
1. SoCalGas Account 923 - Outside Services 259
2. Insurance Costs 261
3. SDG&E Account 923 - Outside Services 262
4. SoCalGas and SDG&E Account 924 - Property Insurance 262
5. SoCalGas and SDG&E Account 925 - Directors and
Officers' Insurance 263
6. SoCalGas Account 930 - Miscellaneous Expense Accounts 265
a) Account 930.0 - Miscellaneous 265
b) Account 930.2 - Research Development & Demonstration 265
c) Power Generation 265
d) Integrated Energy System Controls 266
e) Administration 267
D. SDG&E Account 930 "C" - Environmental Services 267
E. SDG&E Account 930A - Administration Costs for Rate
Reduction Bonds 268
F. SoCalGas Account 935 - Real Estate & Facilities Expense 268
XXIX. SoCalGas and SDG&E - Income and Other Taxes 268
XXX. SDG&E Electric Department Operations & Maintenance Expense 269
A. SDG&E Nuclear Operations & Maintenance Expense 269
B. SDG&E Account 556 - System Control & Load Dispatch 269
C. SDG&E Account 557 - Purchase Power 270
D. SDG&E Account 580 - Operation Supervision & Engineering 271
E. SDG&E Account 581 - Load Dispatch 273
F. SDG&E Account 582 - Station Expense 273
G. SDG&E Account 584 - Underground Line Expense 273
H. SDG&E Account 588 - Miscellaneous Distribution Expenses 274
I. SDG&E Account 590 - Maintenance Supervision - Engineering 275
J. SDG&E Account 593 - Maintenance of Overhead Lines 276
1. Vegetation Management 276
2. General Order 165 Inspections - Mapping 278
3. Other Adjustments 278
K. SDG&E Account 594 - Maintenance of Underground Lines 279
L. SDG&E Account 870 - Operating Supervision and Engineering 280
M. SDG&E Account 880 - Other Expenses 281
N. SDG&E Account 887 - Mains 281
O. SDG&E Account 892 - Services 281
P. SDG&E Account 586 - Electric Meter Testers 282
Q. SDG&E Account 878 - Relocation of Gas Meters and Regulators 283
R. SDG&E Account 879 - Gas Customer Installation Expenses 283
S. SDG&E Account 910 - Miscellaneous Customer Service and Informational Expenses 283
XXXI. ORA's Historical Review 285
A. Gain on Sale of Blythe Property 285
B. Independent Audit Fees 287
C. Reconciliation of Base Year 2001 288
XXXII. Electric Rate Design - SDG&E 288
XXXIII. Additional Issues Identified in the Scoping Memo 289
XXXIV. Comments on Proposed Decision 295
XXXV. Assignment of Proceeding 296
Findings of Fact 296
Conclusions of Law 346
ORDER 350
APPENDIX A - List of Appearances
APPENDIX B - List of Acronyms and Abbreviations
APPENDIX C - SDG&E Combined Summary of Earnings Test Year 2004
APPENDIX D - SDG&E Gas Summary of Earnings Test Year 2004
APPENDIX E - SDG&E Electric Summary of Earnings Test Year 2004
APPENDIX F - SoCalGas Summary of Earnings Test Year 2004
COST OF SERVICE TEST YEAR 2004 FOR
SOUTHERN CALIFORNIA GAS COMPANY AND SAN DIEGO GAS &
I. Summary
In this decision, the Commission establishes the authorized base electric and gas revenue requirements for Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E) in the consolidated applications for Test Year 2004 Cost of Service. The critical issue in these proceedings is to ensure that the companies receive a reasonable level of revenue for monopoly distribution services that will in turn assure customers of safe, reliable and responsive service under conditions of prudent management, while assuring the companies' ability to earn an authorized rate of return, again assuming prudent and effective management. We do not intend to place safety, reliability or the responsiveness of the companies' service at risk through under funding activities, programs and services. This is the same standard we used in Pacific Gas and Electric Company's (PG&E) Application (A.) 97-12-020.1 This decision rejects the two proposed partial Settlement Agreements filed in these proceedings. Phase 1 of these proceedings was submitted on February 19, 2004.
We authorize for SoCalGas $1.501 million in natural gas distribution revenues for Test Year 2004. We authorize SDG&E $776.097 million in electric distribution revenues and $211.520 million in natural gas distribution revenues for Test Year 2004.
1 Decision (D.) 00-02-046, dated February 17, 2000. (Mimeo., p. 2.)
