I. INTRODUCTION

In this Order we dispose of the applications for rehearing of Decision
(D.) 11-05-045 (or "Decision") filed by SFPP. L.P. ("SFPP") and Indicated Shippers ("Shippers").

SFPP is an oil pipeline operator whose intrastate services are regulated by this Commission.¹ In 1997 Shippers filed a complaint (C.97-04-025) against SFPP concerning the rates charged for transportation service.² In D.98-03-033,³ the Commission resolved that complaint. Limited rehearing was subsequently granted in D.99-06-093.⁴

Decision 11-05-045 resolved issues subject to the limited rehearing as well as certain issues from seven related proceedings which were eventually consolidated
with C.97-04-025.⁵ The consolidated proceedings span a period of 13 years (1997-2010).

In pertinent part, the Decision determined:

· SFPP's Sepulveda Line is subject to Commission jurisdiction;

· SFPP is not entitled to a ratemaking allowance for federal income tax expenses;

· SFPP should reallocate certain environmental expenses;

· SFPP's Watson Station and Sepulveda Line facilities do not qualify for market-based rates;

· SFPP's capital structure should be set at 60% equity and 40% debt, with a Return on Equity ("ROE") of 12.61%;

· SFPP should be allowed a 2004 attrition adjustment for its North Line Expansion Project;

· SFPP should refund certain overcharges.

Other outstanding issues from the consolidated proceedings were left open so that parties could pursue settlement or a subsequent litigated determination.

SFPP and Shippers both filed timely applications for rehearing. SFPP challenges the Decision alleging it: (1) wrongly denied a ratemaking allowance for federal income tax expenses; (2) erred in determining the appropriate ROE; (3) ignored

evidence which justified the requested environmental costs; (4) wrongly denied Test
Year ("TY") recovery of North Line Expansion Project costs; (5) erred in denying market-based rates; and (6) violated the prohibition against retroactive ratemaking. SFPP also requests oral argument. A response was filed by Shippers.

Shippers challenge the Decision alleging it: (1) erred in allowing an attrition adjustment for the North Line Expansion Project; (2) wrongly determined the appropriate capital structure; and (3) erred in closing C.97-04-025. A response was filed by SFPP.

We have carefully considered the arguments raised in the applications for rehearing and are of the opinion that good cause has been established to: (a) grant limited rehearing regarding the refunds and adjustments ordered in connection with C.97-04-025 and A.03-02-027; and (b) grant limited rehearing regarding SFPP's request for market based rates. In addition, the Decision would benefit from modifications to: (a) clarify the amount of environmental costs that SFPP is authorized to recover; (b) correct the effective date of the attrition adjustment for the North Line Expansion Project; and

(c) clarify our discussion regarding SFPP's adopted capital structure. In all other respects we deny the applications for rehearing of D.11-05-045, as modified herein, because no legal error has been shown.

¹ SFPP was previously named Santa Fe Pacific Pipeline, L.P. SFPP's regulated intrastate pipeline network transports refined petroleum products such as gasoline, diesel, and jet fuel. SFPP's interstate operations are regulated by the Federal Energy Regulatory Commission ("FERC").

² Entities comprising Indicated Shippers are: BP West Coast Products LLC; Chevron Products Company; ConocoPhillips Company; ExxonMobile Oil Corporation; Southwest Airlines Company, Tesoro Refining and Marketing Company, Ultramar, Inc.; and Valero Marketing and Supply Company.

³ Arco Products Company et al. v. SFPP, L.P. [D.98-08-033] (1998) 81 Cal. P.U.C.2d 573.

⁴ Arco Products Company, Mobil Oil Corporation, and Texaco Refining and Marketing, Inc., Complainants, vs. SFPP, L.P., Defendant ("Order Granting Rehearing") [D.99-06-093] (1999) __ Cal.P.U.C. 3d __ , 1999 Cal. PUC LEXIS 442.

⁵ The consolidated proceedings are C.00-04-013, C.06-12-031, A.00-03-044, A.03-02-027, A.04-11-017, A.06-01-015, and A.06-08-028. They are related complaints by Shippers and rate increase applications by SFFP.