Procedural and Factual Background

The GCIM is a ratemaking mechanism that SoCalGas uses to purchase natural gas on behalf of its core customers. SoCalGas was first authorized to use the GCIM in D.94-03-076 [53 CPUC2d 663]. Most recently, in D.02-06-023, the GCIM was modified and SoCalGas was authorized to continue the use of the GCIM on an annual basis until modified or terminated by the Commission. SoCalGas' application describes the results of operations under the GCIM structure for its gas acquisition activities for Year Eight, the period from April 1, 2001 through March 31, 2002.

On June 17, 2002, SoCalGas filed its Year Eight GCIM application. Southern California Edison Company (SCE) filed a protest to SoCalGas' Year Eight GCIM application on July 26, 2002. The Office of Ratepayer Advocates (ORA) filed a response to the application on July 25, 2002. On August 5, 2002, SoCalGas filed a reply to SCE's protest.

On December 20, 2002, ORA served its Monitoring and Evaluation Report on the Year Eight GCIM.

A prehearing conference was held on November 6, 2002 to discuss whether the issues raised by the protestant should be examined in this application or elsewhere, and to determine the procedural schedule for processing this application. At that prehearing conference, the administrative law judge (ALJ) mentioned that D.02-06-023 had approved the settlement agreement in Phase II of A.00-06-023, the Year Six GCIM proceeding; that the Commission was considering opening an investigation into the gas border price spikes at its November 7, 2002 business meeting, and that the investigation could possibly be the forum for addressing SCE's concerns about the GCIM structure. On November 21, 2002, the Commission adopted I.02-11-040, initiating its investigation into the possible causes of high gas border prices for the period March 2000 through May 2001.

On January 16, 2003, the scoping memo and ruling was issued for this proceeding.¹ The scoping memo and ruling described I.02-11-040 and stated:

Based on the action taken in I.02-11-040, the issues raised by SCE in its protest to this application will be addressed in I.02-11-040. As a result, there are only two remaining issues that need to be addressed in this proceeding. The first issue is whether the calculation of the shareholder award for Year Eight under the GCIM is correct or not. The second issue is whether SoCalGas' acquisition operations during Year Eight were reasonable within the context of the authorized GCIM.

As noted at the November 6, 2002 prehearing conference, the first issue is straightforward, and is derived by examining ORA's Monitoring and Evaluation Report dated December 20, 2002. No one contests the way in which the shareholder award was calculated for Year Eight.

The second issue is also addressed in ORA's Monitoring and Evaluation Report. Although SCE has raised concerns about the way in which the GCIM is structured, and whether SoCalGas' operations amounted to market power, anticompetitive behavior, or was a cause of the high gas prices experienced in later 2000 through spring 2001, I.02-11-040 will provide a forum for addressing those concerns. Consequently, the second issue can be addressed without waiting for I.02-11-040 to be resolved.

The scoping memo and ruling also determined that no evidentiary hearings would be held because no one disputes how SoCalGas' shareholder award was calculated, and because SCE's concerns about the GCIM will be addressed in I.02-11-040.