STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

April 2, 2001

TO: PARTIES OF RECORD IN INVESTIGATION 00-08-003

This is the draft decision of Administrative Law Judge (ALJ) Sullivan. It will be on the Commission's agenda at the next regular meeting 30 days after the above date. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the draft decision as provided in Article 19, attached, of the Commission's "Rules of Practice and Procedure." Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

________________________

Lynn T. Carew, Chief

Administrative Law Judge

LTC:avs

Attachments

ALJ/TJS/avs DRAFT CA-9

5/3/2001

Decision DRAFT DECISION OF ALJ SULLIVAN (Mailed 4/02/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation Into the Gas Procurement Ratemaking Practices of San Diego Gas & Electric Company.

Investigation 00-08-003 (Filed August 3, 2000)

OPINION ESTABLISHING METHODOLOGY FOR
CALCULATING THE GAS PRICES FOR SDG&E CUSTOMERS

Introduction - Adopting a Border Price Methodology for Pricing Procured Gas; Rebating Past Over-Collections and Recovering Under-Collections

We order San Diego Gas and Electric (SDG&E) to modify the methodology that it uses to price natural gas for its core and non-core customers commencing with the first tariff filing following the adoption of this decision. The implementation of Option 2, the Border Price Method, corrects a flaw in the current methodology. The methodological flaw shifts some costs for the transportation of gas incurred to provide gas to non-core customers to the bills of core customers. This cost shifting contravenes Commission policy.

We order SDG&E to rebate to core customers via surcredits applied for one year the overcharges paid since February 2000, when Office of Ratepayer Advocates (ORA) first filed a formal protest pointing out the methodological flaws and the consequences for consumers. We permit SDG&E to recover the misallocated charges and the undercollection of gas transport costs from non-core customers via a surcharge. The surcharge must recover no more revenues than those rebated to core customers. If SDG&E declines to impose a surcharge, it cannot recover these undercollections by other means.