10. SDG&E's Wildfires Update

When SDG&E filed A.04-06-035, $66.4 million had already been recorded to SDG&E's Wildfires Account through May 31, 2004. As updated in Ex. SDG&E-9,⁶⁰ SDG&E's actual total firestorm costs recorded through December 31, 2004 are $70.6 million, representing a difference of $4.2 million from May 31, 2004. According to SDG&E, the difference is the result of approximately $0.2 million of O&M (primarily environmental costs and accounting adjustments) and $4.0 million of capital expenditures primarily incurred for the rebuilding of Circuit 79⁶¹ and the smaller amount spent on Circuit 176 that serves the eastern area of the city of Poway.

Additional cost of $2.9 million recorded through December 31, 2004 are incremental Commission jurisdictional costs, and according to SDG&E, the balance of $1.3 million is non-incremental and should be excluded from the Wildfires Account. The capital costs were not included when the application was filed because SDG&E records the costs in the Wildfires Account after the work is completed.⁶²

On February 4, 2005, SDG&E filed Ex. SDG&E-10, which as errata to Ex. SDG&E-9, made several adjustments to the update. As updated⁶³ in Ex. SDG&E-10, SDG&E's actual total firestorm costs recorded through December 31, 2004 are $71.1 million, representing an increase of $4.7 million ($71.1 million less $66.4 million) from May 31, 2004. Thus the errata, Ex. SDG&E-10, increased the total by $500,000 compared to the Late-filed Update Ex. SDG&E-9 ($71.1 million less $70.6 million).

Wildfire Costs Including Update & Errata

	FERC		CPUC
	Total Cost	Electric Transmission	Electric Distribution	Gas	Total CPUC
O&M Expenses:
Pre-Update O&M	$ 18,032	$ 1,569	$ 15,865	$ 598	$ 16,463
Internal Labor	$ 11	1	$ 10	$ -	$ 10
Materials	4	(1)	5	-	5
Overhead	10	1	9	-	9
Vehicle Charges	(2)	-	(2)	-	(2)
External Labor	8	-	8	-	8
Services/Other	225	16	$ 208	1	209
Update & Errata	$ 256	$ 17	$ 238	1	239
Total O&M	$ 18,288	$ 1,586	$ 16,103	$ 599	$ 16,702
Capital Costs:
Pre-Update Capital	$ 48,395	$ 6,847	$ 41,445	$ 103	$ 41,548
Internal Labor	$ 47	-	$ 41	$6	47
Materials	19	-	17	2	19
Overhead	1,229	2	1,213	14	1,227
Vehicle Charges	30	-	29	1	30
External Labor	342	-	342	-	342
Services/Other	2,813	6	2,807	-	2,807
Update & Errata	4,480	8	4,449	23	4,472
Total Capital	$52,875	$ 6,855	$ 45,894	$ 126	$46,020
Updated Total	$ 71,163	$ 8,441	$ 61,997	$ 725	$ 62,722

According to SDG&E, the final difference is the result of approximately $0.3 million of O&M (primarily environmental costs and accounting adjustments) and $4.4 million of capital expenditures primarily incurred for the rebuilding of Circuit 79⁶⁴ and the smaller amount spent on Circuit 176 that serves the eastern area of the city of Poway. As revised, $3.2 million of the additional costs recorded through December 31, 2004 are incremental Commission jurisdictional costs, and according to SDG&E, the balance of $1.5 million is non-incremental and should be excluded from the Wildfires Account.

Memo Account-Eligible Wildfire Costs
Including Update & Errata

Memo Account-Eligible Wildfire Costs including Update & Errata
	Total CPUC (a)	Memo Account (b)	Current Rates (b)
O&M Expense
Pre-Update O&M	$16,463	$12,055	$4,408
Internal Labor	$10	-	$10
Materials	5	-	5
Overhead	9	44	(35)
Vehicle Charges	(2)	-	(2)
External Labor	8	-	8
Services/Other	209	(17)	226
Update & Errata	$239	$27	$212
Total O&M	$16,702	$12,082	$4,620
Capital Costs
Pre-Update Capital	$41,548	$25,605	$15,943
Internal Labor	$47	$5	$42
Materials	$19	19	-
Overhead	$1,227	5	1,222
Vehicle Charges	$30	-	30
External Labor	$342	342	-
Services/Other	$2,807	2,745	62
Update & Errata	$4,472	$3,116	$1,356
Total Capital	$46,020	$28,721	$17,299
Total Wildfire	$62,722	$40,803	$21,919

On February 9, 2004, ORA and UCAN filed comments on SDG&E's updated testimony and errata. ORA had no objections. UCAN was succinct: it questioned the late inclusion of $600,000 of costs incurred prior to May 31, 2004; and secondly, UCAN pointed out that the update and errata include $209,000 of environmental costs which it believes supports UCAN's contention that the environmental costs are connected with the cost of installation of a capital project and should be capitalized.⁶⁵ UCAN does not convince us that SDG&E's earlier omission is somehow unrecoverable when included in an update. We know from SDG&E's testimony and ORA's review that SDG&E established reasonable accounting procedures to segregate and track the Wildfire costs. Corrections and updates are not innately unreasonable. We will not make this adjustment. As already discussed, we did find that SDG&E's practice under-capitalized environmental costs (and other overheads) and therefore we will direct SDG&E capitalize $176,000 of the late-filed environmental costs using the same 84.2% as required above.

⁶⁰ Filed on January 18, 2005.

⁶¹ "Circuit 79 is a 12 kV electric distribution line that traverses through Cuyamaca Rancho State Park. Circuit 79 was extensively damaged during the firestorm and as a result had to be rebuilt and relocated." (Ex. SDG&E-9. p. 1-2.)

⁶² Ex. SDG&E-9. p. 1.

⁶³ Ex. SDG&E-10, p 2.

⁶⁴ "Circuit 79 is a 12 kV electric distribution line that traverses through Cuyamaca Rancho State Park. Circuit 79 was extensively damaged during the firestorm and as a result had to be rebuilt and relocated." (Ex. SDG&E-9. p. 1-2.)

⁶⁵ UCAN comments, p. 3.