4. Summary of Winter Hedge Plans

The utilities have completed three years of hedging subject to cost recovery outside the incentive mechanisms beginning with winter 2005-2006. The winter hedge plans are all submitted on a confidential basis to the Commission. DRA files an annual report on each incentive mechanism and, as part of this report, also indicates the total expenditure for the winter hedge plan. Since DRA has not filed its annual reports for winter 2007-2008, we cannot at this time divulge the expenditure. However, for the first two hedging years, DRA has published their reports showing the amounts spent to protect core customers from extreme price increases: In total, these three utilities have spent over $200 million to hedge for the first two winters of their expanded hedging programs, allocated as follows:

- PG&E has spent over $134 million

- SoCalGas has spent just over $46 million

- SDG&E has spent over $29 million

As approved in D.05-10-015 and D.05-10-043, the first winter hedge plans (winter 2005-2006) for the utilities were comprised of confidential hedging plans subject to expenditure limits. The decisions authorized an increase for average residential customer's monthly bill by approximately $2.00. In D.05-10-015, PG&E was also given authorization to hedge for the upcoming two winters and to file an application addressing long-term financial hedging. SoCalGas' hedging plan was approved as requested, which was on an annual basis. In similar fashion, for the 2006-2007 winter period, the Commission approved hedging plans for each utility.

PG&E's plan as approved in D.07-06-013 was undertaken on a rolling three-year basis via an Annual Plan filing beginning with the 2007-2008 winter season. After the initial three-year term, the Program will continue on an annual basis, unless a member of the Core Hedging Advisory Group¹⁶ notifies the other members of its desire to modify the Program. The Program provides for an annual budget for options as well as a separate authority to hedge with swaps for a certain specified level. The per-customer impact of the plan should be about $14 for the winter months.

SoCalGas' winter hedge plan as approved in D.07-12-019 is undertaken via an annual hedge plan application for an initial three-year period, subject to reevaluation after the third year, which is the 2009-2010 winter hedge period. As with PG&E's decision which has a customer impact of about $14, D.07-12-019 does not specify a specific dollar amount, but rather an annual hedge plan that must be filed via an application. As noted above, D.07-12-019 combined the core portfolios of SoCalGas and SDG&E. Therefore, SDG&E's core is now combined with that of SoCalGas and it is SoCalGas' Gas Acquisition Department who has the responsibility for the core portfolio of itself as well as that of SDG&E.

¹⁶ The hedge plan also includes a "Core Hedging Advisory Group" comprised of PG&E, DRA, Aglet and TURN. The advisory group would meet quarterly to confer about the Annual plans and related hedging operations.