ALJ/JSW/sid * DRAFT Item H-5

2/21/2002

Decision ___________

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of Southern California Gas Company for Authority Pursuant to Public Utilities Code Section 851 to Sell Cushion Gas in its Aliso Canyon and La Goleta Storage Fields. (U 904 G)

Application 01-04-007 (Filed April 9, 2001)

OPINION REGARDING THE SALE OF THE

RECLASSIFIED CUSHION GAS

I. Summary

In this decision, we consider what should be done with the 14 billion cubic feet (Bcf) of natural gas in the storage fields owned by Southern California Gas Company (SoCalGas) at its Aliso Canyon and La Goleta sites. Previously, in Decision (D.) 01-06-086, the Commission authorized SoCalGas to perform the well drilling and associated work that would allow SoCalGas to free up and reclassify the 14 Bcf of cushion gas as working gas available for sale. D.01-06-086 prohibits SoCalGas from selling the reclassified cushion gas until the Commission directs SoCalGas to do so on the terms and conditions specified in a future Commission decision. This same decision also authorized SoCalGas to recover the book cost of the gas and the cost of the well work needed to reclassify the cushion gas.

Today's decision directs SoCalGas to transfer the entire 14 Bcf of reclassified cushion gas at the two storage fields to SoCalGas' core portfolio at an interim floor price of 31 cents per Mcf (thousand cubic feet), which represents the $4.4 million book value of the 14 Bcf of gas. This interim price may be adjusted upwards after hearings are held in Phase 2 of this proceeding. Phase 2 will determine whether the price that core customers should have to pay for the 14 Bcf of gas should be at the original book cost or if the evidentiary record developed in Phase 2 warrants that the price should be adjusted upwards. The other ratemaking issues described in D.01-06-086 shall also be addressed in Phase 2 of this proceeding.