BACKGROUND

Decision (D.) 93-07-052 approved a Wholesale Agreement requiring SoCalGas to provide full requirements wholesale intrastate natural gas transportation and storage service to SWG.

Resolution G-3157, dated January 24, 1995, approved Amendment 1 to the Wholesale Agreement that gave SWG a discount from the existing negotiated wholesale transmission rate for transportation quantities delivered by SWG to its system.

On July 31, 2000 SoCalGas and SWG agreed to again amend the Wholesale Agreement. This Amendment would change the existing negotiated transportation rate to the GW-SWG Tariff rate approved by the Commission in D.00-04-060.

On August 24, 2000, Sempra Energy, on behalf of SoCalGas, filed AL 2951 requesting that the Commission approve: 1) a rate change applicable to SWG transportation service, and 2) a contract amendment with SWG.

This Amendment provides SWG the option of an Annual Interstate Transition Cost Surcharge (ITCS) Crediting Mechanism. The Annual ITCS Crediting Mechanism gives SWG the right to enter into annual pre-arranged deals for SoCalGas' capacity on El Paso Natural Gas Company's pipeline at 100% of the as-billed rate charged to SoCalGas by El Paso. SoCalGas will then provide SWG a credit in the amount of El Paso's as-billed rate against SWG's annual ITCS payments.

The maximum annual credit will be equal to the amount of ITCS paid by SWG to SoCalGas during that year. SWG may use the interstate pipeline capacity or re-release it in accordance with the tariffs of El Paso and SWG shall be entitled to keep any revenues from re-release. Credits that exceed SWG's monthly ITCS payment will carry over to the following month. If at the end of the annual period, the credit for the last month in that annual period exceeds the monthly ITCS payment, but not the total annual ITCS payments for the period, SoCalGas will credit the balance to the first ITCS payment made in the next annual period. SWG's right to use or re-release SoCalGas' El Paso capacity shall begin on the date that El Paso posts the notice of the particular pre-arranged deal on its electronic bulletin board.

The proposed amendment also reduces the existing negotiated transportation rate for SWG. The rates proposed are based on the cost allocations and volumes approved by D.00-04-060, in SoCalGas' 1999 Biennial Cost Allocation Proceeding (BCAP).