ALJ/DUG/avs DRAFT Agenda ID # 4798

Ratesetting

8/25/2005 Item 53

Decision PROPOSED DECISION OF ALJ LONG (Mailed 7/19/2005)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of SAN DIEGO GAS & ELECTRIC COMPANY under the Catastrophic Event Memorandum Account (CEMA) for Recovery of costs related to the 2003 Southern California Wildfires. (U 902-M)

Application 04-06-035
(Filed June 28, 2004)

OPINION ON THE REASONABLENESS OF SAN DIEGO GAS
AND ELECTRIC COMPANY'S RESPONSE TO THE 2003 WILDFIRES

(See APPENDIX A for Appearance Lists)

TABLE OF CONTENTS

TITLE PAGE

1. Summary 2 2

2. Background 2 2

a. History of the Wildfires 3 3

b. SDG&E 2003 Wildfire Costs Through May 2004 6 6

c. Proposed Recovery of Wildfire Account Costs Through May 2004 7 7

3. Procedural History 7 7

4. The Burden of Proof 9 9

a. The Standard for Prudent Managerial Action 11 11

5. Review by Other Parties 13 13

6. Restoration Management 14 14

7. Reasonableness of Costs 15 15

a. ORA's Examination 17 17

b. UCAN's Recommendations 18 18

1. Food Services 19 19

Discussion 22 22

2. Avoided Pole Test and Treat Expenses 24 24

Discussion 25 25

3. Franchise Fees and Uncollectibles 26 26

Discussion 27 27

4. Tree Inventory 27 27

8. Ratemaking Treatment 28 28

a. Allocation of Support Costs to Expense and Capital 28 28

Discussion 29 29

b. Amortization of the Wildfire Account 32 32

Discussion 32 32

9. Labor Costs and Incentive Compensation 32 32

Discussion 33 33

10. SDG&E's Wildfires Update 36 36

11. Comments on Proposed Decision 39 39

12. Assignment of Proceeding 40 40

Findings of Fact 40 40

Conclusions of Law 45 45

ORDER 46 46

APPENIDX A

1. Summary

This decision finds San Diego Gas & Electric Company (SDG&E) prudently managed its response and allows the recovery of certain recorded costs incurred to restore service and repair or replace those portions of its gas or electric distribution systems damaged or destroyed by a series of catastrophic wildfires. This decision requires SDG&E to capitalize rather than expense certain support costs ($7.376 million) and allows for an 15-month amortization of the remaining costs charged to expense. Three reductions are made to the total of recoverable costs: to adjust for certain avoided future costs for pole inspection and treatment ($42,348), to adjust for excessive costs charged to SDG&E for food service ($582,300), and disallow unjustified incentive compensation accruals ($426,000). This decision allows SDG&E to recover $39.752 million.