ALJ/CAB/avs DRAFT H-5

Agenda ID #967

10/3/2002

Decision PROPOSED DECISION OF ALJ BROWN (Mailed 8/19/2002)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation Into the Adequacy of the Southern California Gas Company's and San Diego Gas & Electric Company's (SDG&E) Gas Transmission Systems to Serve the Present and Future Gas Requirements of SDG&E's Core and Noncore Customers.

Investigation 00-11-002

(Filed November 2, 2000)

OPINION ON ADEQUACY OF SOUTHERN CALIFORNIA
GAS COMPANY'S AND SAN DIEGO GAS AND
ELECTRIC COMPANY'S GAS TRANSMISSION SYSTEMS
TO SERVE THE PRESENT AND FUTURE NEEDS OF
CORE AND NONCORE GAS CUSTOMERS

TABLE OF CONTENTS

Title Page

OPINION ON ADEQUACY OF SOUTHERN CALIFORNIA GAS COMPANY'S AND SAN DIEGO GAS AND ELECTRIC COMPANY'S GAS TRANSMISSION SYSTEMS TO SERVE THE PRESENT AND FUTURE NEEDS OF CORE AND NONCORE GAS CUSTOMERS 2 2

Summary 2 2

Background 3 3

I. Order Instituting Investigation 3 3

II. Advice Letter 4 4

III. Bifurcation of the Proceeding 4 4

IV. Decision 01-12-018 5 5

Phase I Issues: SDG&E 6 6

I. Past and Future Planning and System Expansion 6 6

II. Curtailment Protocol 11 11

A. Limiting Firm Noncore 13 13

B. Allocation of Firm Capacity in an Open Season 15 15

C. Curtailment Credit 16 16

D. Long-Term Commitments and Tradable Rights 19 19

III. Pre-Construction Activities on Written Indication of Interest 20 20

V. Cost Allocation and Rate Design 21 21

A. Differential Between Firm and Interruptible Rates 21 21

VI. Affiliate Interests 23 23

A. Corporate Affiliate Interests 23 23

B. Baja Norte Pipeline 25 25

VII. Summary Phase I 29 29

Phase II Issues: SoCalGas 29 29

I. System Planning 30 30

A. Planning Criteria 30 30

B. Open Season 33 33

C. Optimization of Storage and Transmission 34 34

D. Interstate Pipeline Issues 34 34

II. Local Transmission System Issues 34 34

A. Advice Letter Issues 34 34

Title Page

B. Local Transmission System Expansion Policy 38 38

C. Service Interruption Credit 39 39

III. Receipt Point Capacity Allocation 39 39

IV. Ratemaking Issues 39 39

V. Summary Phase II 41 41

Comments on Proposed Decision 41 41

Findings of Fact 41 41

Conclusions of Law 43 43

OPINION ON ADEQUACY OF SOUTHERN CALIFORNIA
GAS COMPANY'S AND SAN DIEGO GAS AND
ELECTRIC COMPANY'S GAS TRANSMISSION SYSTEMS
TO SERVE THE PRESENT AND FUTURE NEEDS OF
CORE AND NONCORE GAS CUSTOMERS

Summary

At the time the Commission initiated this proceeding, there was a gas transmission crisis in San Diego Gas & Electric Company (SDG&E's) service territory that resulted in 17 days of curtailed service and threatened California's energy supply. We now implement new rules and procedures for noncore customers, for SDG&E and Southern California Gas Company (SoCalGas), to prevent the confluence of factors that created the crisis in 2000. In summary, this decision adopts system planning criteria and reliability standards for both utilities; adopts the rule changes set forth in the interim opinion in Decision (D.) 01-06-008 as the permanent changes to Rule 14; allows SDG&E to offer interruptible service at an interruptible rate; orders both utilities to hold open seasons to determine need, timing, and location of capacity additions; adopts a service interruption credit for SDG&E; allows SDG&E to go forward with requested system expansions upon written notice of interest; allocates the costs for Line 6900; and addresses three outstanding Advice Letters.

In this decision we authorize SDG&E to limit firm noncore service to available firm capacity until additional capacity improvements are completed. We also adopt a 1-in-10 cold-year reliability standard for firm noncore service. With the adoption of this standard, we are requiring SDG&E to proceed with all infrastructure improvements necessary to achieve a 1-in-10 standard for all firm noncore customers. In addition, we have established a mechanism whereby customers can work with SDG&E to begin preconstruction activities in anticipation of new demand.

The adequacy of SoCalGas' gas transmission system and its ability to serve the needs of its core and noncore gas customers was significantly different than SDG&E's circumstances. Most importantly, there were no curtailments, and no allegations that affiliate preference drove expansion decisions.

In addition, many of the topics under investigation for SoCalGas, specifically, system planning issues of open seasons, storage, transmission, and interstate pipelines; local transmission issues of expansion policy and service interruption credits; and receipt point capacity allocation concerns were all addressed and resolved by the Commission's Decision (D.) 01-12-018 in the Gas Industry Reform Proceeding (GIR), Investigation (I.) 99-07-003. Remaining issues to be addressed include: planning criteria, SoCalGas' pending advice letters, and Line 6900 ratemaking. We adopt a system planning criteria of 1-in-35 for core customers, 1-in-10 for noncore customers, and keep the 1-in-35 for core customers for local transmission. When open seasons are held in combination with these planning criteria, SoCalGas' system should be adequate to serve the needs of its customers.