IX. Additional Issues Identified in the Scoping Memo

As a part of I.03-03-016 that is consolidated with these applications, the Assigned Commissioner Carl Wood directed SoCalGas and SDG&E other parties to present testimony on several issues. The Scoping Memo dated April 2, 2003 specifically directed the parties to address a number of questions that elaborated on the nexus between the cost and service quality in the context of a renewed commitment to cost of service regulation. The Scoping Memo, as a procedural device for shaping the issues in a Commission proceeding, was made a part of the Commission's practice in rate proceedings by Chapter 856 of Stats. 1996 (SB 960 (Leonard)) which added Pub. Util. Code § 1701.1⁵⁹ and 1701.5.⁶⁰

These provisions enable the parties and the assigned commissioner to shape the issues proactively and not be passive recipients of an agenda shaped solely by a utility-initiated application submitted months in advance pursuant to the Rate Case Plan. The statute clearly states that the issues identified in the scoping memo must be addressed. They are not optional or peripheral.

It is apparent from the Settlements that in a forum primarily focused on adopting a reasonable test year revenue requirement the parties are most interested in addressing immediate rate impacts and not taking a longer-term view as intended by the directives of the scoping memo. Regrettably, the parties did not explicitly address all of these issues.

California energy utility regulation is in a difficult transitional stage following the breakdown of the wholesale electricity market in 2000 and 2001, and it is important to engage in dialogues, such as were proposed in the Scoping Memo, in order to ensure that future regulation is informed by the views and expertise of all stakeholders. We are disappointed in the lack of participation shown by the parties on these items. In the following discussion, we will however briefly review and comment on them.

1. Investment Planning

The objective of the investment planning process was "to determine how SDG&E is, and how it should be, positioning itself to resume provision of fully integrated electric utility service." Parties were also asked to "submit proposals on how the Commission should structure and oversee SoCalGas and SDG&E's investment planning process."⁶¹

Investment planning was adequately examined in the course of developing capital expenditure forecasts for plant additions, and also by the review of the shared services for strategic planning. We are satisfied that the review of the test year was adequate to allow us to adopt reasonable test year capital investment estimates.

2. Safety and Reliability

The Scoping Memo requested "an examination of SoCalGas and SDG&E's safety, reliability, and maintenance standards and performance." Parties were also asked to "propose an appropriate level of maintenance expenditures, including recommendations for parts of the two natural gas systems, and SDG&E's electric system."⁶²

Safety and reliability was addressed in course of developing reasonable test year forecasts of the appropriate expense accounts, and in Phase Two, we consider past safety and reliability measurements in our review of the applicants' proposed safety and reliability incentive measures.

3. Customer Service

Parties were also asked to "evaluate current PBR customer satisfaction standards, compare SoCalGas and SDG&E's standards to those of other utilities, and make recommendations on new standards and performance measures." And also "assess the effectiveness of SoCalGas and SDG&E's billing system, website, and call center to meet customer needs, including web-based contacts and responses, 800 telephone numbers, call management systems, and voice mail."⁶³

Customer Service expenses were addressed in the development of the test year revenue requirement and they are also the subject of the Phase Two review of specific applicant proposals for customer service incentives and monitoring.

4. Utility Operations

Parties were asked "to develop a consistent overall policy for how SoCalGas and SDG&E undertake their operations ... to examine the decision-making processes the utilities use to determine how to provide safe and reliable service to customers at a reasonable cost. ... to conduct a review of SoCalGas and SDG&E's land-use and land management practices, especially with respect to environmental impacts, use of utility lands for unregulated activities by SoCalGas and SDG&E, their affiliates, or third parties, and incidental benefits to ratepayers and the community at large."⁶⁴

Utility Operations were addressed in the development of the test year revenue requirements, but were not scrutinized in a more holistic approach to examine how SoCalGas and SDG&E are managed. SoCalGas and SDG&E filed brief supplemental testimony on their land management practices that are general in nature and do not cite to specific management practices, written policies or practices or designates who has primary management responsibility for land-use management.⁶⁵ SoCalGas stated that it has "secured programmatic state and federal permits over two thirds of its service territory" that establish protective and conservation measures SoCalGas will undertake during its daily operations. In the testimony, SoCalGas stated further that it was in the process of obtaining a final programmatic permit for the remainder of its lands.⁶⁶ SDG&E stated that in 1995 the company prepared the SDG&E Subregional Natural Community Conservation Plan, that is a 50-year plan, and there are additional protections limiting the company's use of its land.⁶⁷

5. Diversity, Outreach, Contributions, and Minority Contracting

Consistent with the February 13, 2003 Scoping Memo for A.02-11-017, the utilities were asked to serve supplemental testimony regarding its workforce diversity over the last 10 years, as well as present and future plans regarding workforce diversity. Diversity, Outreach, Contributions, and Minority Contracting where "matters within the scope⁶⁸ of R.03-03-035 were excluded from the scope of these consolidated proceedings. Any other WMDVBE issues beyond the scope of R.03-02-035 may be pursued to the extent they are relevant to the 2004 test year revenue requirement." And to "address GO 77K related issues to the extent they are relevant to the 2004 test year revenue requirement."⁶⁹

Diversity, Outreach, Contributions, and Minority Contracting were narrowly reviewed within the constraints of adopting a test year revenue requirement.

6. Gas Resource Plans

This issue was not settled in either the SDG&E or SoCalGas Settlement. The Clarification to the Scoping Memo required SoCalGas and SDG&E "to supplement their testimony ... as defined in D.02-11-073. ... and the applicants must further supplement their cases to demonstrate that their systems are adequate and they are positioned to comply with the recently adopted reliability standards."⁷⁰

SoCalGas and SDG&E served three exhibits (Exs. 52, 54 and 55) that provided supplemental testimony on their resource plans.

With respect to gas system planning for both companies the supplemental testimony was insufficient to reasonably inform us as a part of adopting the projected test year capital expenditures and the operating expenses to support planning and oversight of the gas systems. In D.04-05-039, the Commission dismissed without prejudice the pending Biennial Cost Allocation Proceedings for SoCalGas and SDG&E, A.03-09-008 and A.03-09-031, in part because of the stay on the Gas Industry Restructuring pending Commission adoption of an order in Phase One of R.04-01-025. We therefore will defer the gas resource plans to the next appropriate proceeding - the next filed SoCalGas and SDG&E BCAP.

⁵⁹ Section 1701.1 provides in pertinent part:

(b) The commission upon initiating a hearing shall assign one or more commissioners to oversee the case and an administrative law judge where appropriate. The assigned commissioner shall schedule a prehearing conference. The assigned commissioner shall prepare and issue by order or ruling a scoping memo that describes the issues to be considered and the applicable timetable for resolution.

⁶⁰ Section 1701.5 provides in pertinent part:

1701.5. (a) Except as specified in subdivision (b), in a

ratesetting or quasi-legislative case, the commission shall resolve

the issues raised in the scoping memo within 18 months of the date

the scoping memo is issued, unless the commission makes a written

determination that the deadline cannot be met, including findings as

to the reason, and issues an order extending the deadline. No single

order may extend the deadline for more than 60 days.

⁶¹ Scoping Memo, p. 3.

⁶² Scoping Memo, p. 4.

⁶³ Scoping Memo, p. 5.

⁶⁴ Scoping Memo, pp. 5-6.

⁶⁵ Ex. 53 and 56, are both about six pages long, and share much identical text, which is consistent with the centralization of utility management in the Corporate Center.

⁶⁶ Ex. 53, p. RAK-5.

⁶⁷ Ex. 55, pp. RAK-4 and 5.

⁶⁸ "By this order, we grant the Petition of the Greenlining Institute and Latino Issues Forum (Greenlining/LIF) to institute a rulemaking to amend General Order (GO) 156. We institute this rulemaking to eliminate the exclusions currently permitted under GO 156, and to refine certain aspects of GO 156 verification and reporting." (R.03-02-035, dated February 27, 2003, mimeo., p. 1.)

⁶⁹ Scoping Memo, pp. 6-7.

⁷⁰ Scoping Memo, pp. 8-9.