ALJ/RAB/avs DRAFT CA-3

02/22/01

Decision DRAFT DECISION OF ALJ BARNETT (Mailed 1/19/01)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of San Diego Gas & Electric Company and Southern California Gas Company for Approval of a Gas Tariff Which Caps Rates for Small EG Customers. (U 902-G and U 904-G.)

Application 00-06-028 (Filed June 19, 2000)

OPINION

San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas) (Applicants) have filed this application in compliance with Ordering Paragraph (OP) 7 of Decision (D.) 00-04-060, in the SoCalGas/SDG&E 1999 Biennial Cost Allocation Proceeding (BCAP). OP 7 in D.00-04-060 states,

"SoCalGas and SDG&E shall jointly file an application, within 60 days after the effective date of this order, proposing a Sempra-wide tariff for EG customers using 3,000,000 therms per year or less, as a class, which caps their rate at the level which prevailed at the EG rate in effect prior to the effective date of this order. Any shortfall in revenue shall be allocated to the > 3,000,000 therm class."

Applicants request that the Commission reject the rate cap they are proposing and let stand the rates recently adopted in D.00-04-060. In Applicants' view, a rate cap for small EG (electric generation) customers (using less than 3,000,000 therms per year) is unnecessary and unwise because the rate for this group of customers is substantially the same with or without the cap.

Applicants state that this rate cap is at best premature, and at worst completely unsupported by the record. They argue that in D.00-04-060, the Commission adopted segmented "Sempra-wide" rates for SDG&E and SoCalGas. In doing so, the Commission completely overhauled the gas rate structure for both SoCal Gas and SDG&E. The resulting gas rates went into effect on June 1, 2000. According to the BCAP decision, the Commission is "concerned about the impact of segmentation on customers using less than 3,000,000 therms per year" (p. 53, n. 6). While recognizing that the Commission's explicit goal is to ensure that the new structure does not competitively disadvantage small EG customers and thereby restrain growth of these customers, Applicants believe it is too soon to determine whether or not the new BCAP rates create such a problem. They recommend that the Commission permit the new BCAP rate structure to remain in place for some reasonable period of time before determining if the adopted rates have harmed a particular class of customers.

Applicants point out that the Commission has recognized that capping small EG rates is "complex" at a minimum (at p. 53, n. 6). Applicants foresee complaints from customers who must pick up additional costs due to this cross-class subsidy. Applicants hope that after carefully analyzing this proposal, the Commission will find a rate cap for small EG customers to be "unreasonable" and let the adopted BCAP rates stand.

Applicants' uncontradicted showing is that in order to cap the rate of EG customers using 3,000,000 therms per year or less (as a class) at the level in effect prior to the effective date of the BCAP, it is necessary to first determine what the "EG rate" would have been before the Commission issued D.00-04-060. In order to calculate this "prior rate," it is necessary to determine (1) precisely which customers are in the new Sempra wide EG class; and (2) which rates were applicable to these customers before the 1999 BCAP decision.

The vast majority of SoCalGas' small EG customers are cogeneration customers. Pursuant to SoCalGas' tariff Schedule Nos. GT-F (firm) and GT-I (interruptible) in effect at the time, gas service to these cogeneration customers was divided between GT-5 (or EG) and GT-3 (or G-30), electric generation and regular noncore Commercial and Industrial utility transport services, respectively. The exact load served on the EG rate was determined by the Cogeneration Gas Allowance (CGA).¹ All other gas consumption used by cogeneration equipment was billed at the GT-F3 rate. Prior to the BCAP decision, SoCalGas served approximately 70% of this small cogeneration load on the EG rate and served the remaining 30% on the G-30 rate.

Similarly, the vast majority of SDG&E's small EG customers are also cogeneration customers. The CGA loads for these customers were billed under SDG&E Schedules GTCG or GTCG-SD. The additional (non-CGA) loads were billed at the customers otherwise applicable non-QF rate schedule(s). In addition, SDG&E serves approximately 13 customers, whose total loads were billed (pre-BCAP decision) at their otherwise applicable non-QF rates, but who are now billed under SDG&E's EG rates.

The joint SoCalGas and SDG&E rate cap proposal for the small EG class (below 3 million therms per year) is equal to the consolidated class average rate for this group that prevailed prior to implementation of D.00-04-060. The difference between rate cap results and the adopted rate for the small EG class is $0.00166 per therm, or 2.5% less than the adopted rates. Applicants assert that such a negligible difference fails to justify the imposition of an artificial rate cap, with one class subsidizing another. Appendix A shows the billing comparison for both SDG&E's and SoCalGas' EG Class BCAP rates and proposed rate cap rates.

We agree with Applicants and will rescind OP 7 of D.00-04-060. The analysis presented by Applicants is extremely complex. Its assumptions may not accurately reflect the reality of pre-D.00-04-060 use for small EG customers; nor does a difference of $0.00166/therm warrant imposing a rate cap.

There are no protests. A public hearing is not necessary.

Comments on Draft Decision

The draft decision of the administrative law judge in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. Comments were filed on ___________, and reply comments were filed on __________.

Findings of Fact

1. The difference between rate cap results and the adopted rate for the small EG class is $0.00166/therm.

2. This small difference does not warrant imposing a rate cap.

Conclusion of Law

Ordering Paragraph 7 of D.00-04-060 should be rescinded because the negligible difference in rates does not justify a cross-class subsidy.

ORDER

IT IS ORDERED that:

1. Ordering Paragraph 7 of Decision 00-04-060 is rescinded.

2. This proceeding is closed.

This order is effective today.

Dated , at San Francisco, California.

APPENDIX A

(SEE CPUC FORMAL FILES FOR APPENDIX A)