4. Requested Increase In Rates

According to applicant, since the last application for a rate increase, there have been capital additions to the Line 63 System totaling $27 million. At the same time, however, applicant states that average trunk line volumes on Line 63 have steadily decreased, as shown below:

Period	Barrels Per Day
1998	99,700
Aug '99 - July `00	78,400
2000 (YDT through July)	71,400
2000 (Apr. through July)	68,500

Applicant states that for the test year August 1, 2000 to July 31, 2001, trunk line throughput on Line 63 is expected to decrease further to approximately 66,600 barrels per day.

As a result of the capital improvements and because of decreasing volumes, the forecasted return on equity for Pacific Pipeline's Line 63 System during the test year is 4.36%. The requested increase will provide an opportunity to earn an overall return of 7.56% and an equity return of 7.1%. Based on projected throughputs, the requested rates would increase test year revenues by approximately $1.04 million.

The requested return is less than that authorized by the Commission in D.97-05-031. Applicant states that the lower return it seeks reflects the strong competitive environment in which the Line 63 System operates as it competes to transport volumes sought from the San Joaquin Valley to the Los Angeles Basin versus other pipelines that move volumes to refineries in Bakersfield and the San Francisco Bay Area. Applicant states that the proposed rate increase provides an appropriate balance between remaining competitive and being able to generate sufficient cash to continue to fund system additions and improvements.