SDG&E's Proposal

SDG&E proposes to establish a completely new PBR mechanism for the period 1999-2002, but with the preference that this PBR mechanism would be perpetual. SDG&E proposes a rate index PBR, i.e., rates would be directly adjusted each year for escalation and a productivity offset. Rather than the usual sharing mechanism in which amounts to be shared are flowed back to ratepayers as a one-time adjustment, SDG&E proposes to use the sharing mechanism to adjust the starting point from which future rates are calculated. SDG&E characterizes this mechanism as a self-calibrating rate mechanism, in which information on the results of one year's performance is used to adjust the starting point for setting rates in future years. SDG&E argues that its proposed PBR mechanism should be evaluated in light of balancing all components of the mechanism. Although its parent company recently merged with Pacific Enterprises (the parent of SoCalGas), SDG&E states that SoCalGas' PBR design components are not applicable.