III. SDG&E's Request

In this application, SDG&E requests the Commission's approval of its participation in the SGRP. Specifically, it requests that the Commission:

· Find it reasonable for SDG&E to participate in the SGRP assuming its ownership share of SONGS remains at 20%.

· Find reasonable SDG&E's estimate of its share of the SGRP costs of $142 million (2004$) consisting of $117 million for replacement steam generator installation and $25 million for removal and disposal of the original steam generators, including allocated overheads and excluding allowance for funds used during construction (AFUDC).

· Find SDG&E's ratemaking proposal reasonable.

· Find that no review pursuant to the California Environmental Quality Act (CEQA) is required, beyond that performed in connection with SCE's application for approval of the SGRP.

SDG&E proposes the following ratemaking treatment:

· An increase in the depreciation expense recorded to its Non-Fuel Generation Balancing Account (NGBA), and recovered in commodity rates, to recover 20% of its ownership share of the removal and disposal costs of the original stream generators from 2007 through 2011.

· Recovery of the revenue requirement associated with its ownership share of SGRP costs not to exceed its ownership share of the maximum amount allowed in D.05-12-040 , $163 million (2004$), as adjusted for allocated overheads, inflation and cost of capital, and excluding AFUDC.

· Authorization of a SONGS Major Additions Adjustment Clause (SONGS MAAC) to record the revenue requirement associated with its share of the replacement steam generator installation costs for each unit as of the date of operation of each unit, and the remaining balance of its share of the removal and disposal costs of the original steam generators for each unit, excluding the amount recovered through depreciation from 2007 through 2011 as discussed above, as of the date removal and disposal is completed for each unit.

· Authorization to transfer the balance in its SONGS MAAC associated with installation of the replacement steam generators for each unit to the NGBA for interim cost recovery on January 1 of the year following commercial operation of the unit through an advice letter filing.

· Authorization to transfer the balance in its SONGS MAAC associated with removal and disposal of the original steam generators for each unit to the NGBA for interim cost recovery on January 1 of the year following completion of removal and disposal through an advice letter filing.

· Authorization to file an application for inclusion of the SGRP costs permanently in rates after completion of the SGRP.

· Establish a two-way balancing account for SONGS O&M costs, including refueling outage O&M costs, and SCE contractual overheads, billed to SDG&E under the SONGS Operating Agreement after January 1, 2007.

· Authorize a return on equity (ROE) applicable only to SONGS investment of 11.6% effective January 1, 2007.