Z factor and Exclusions

SDG&E recommends that the nine criteria adopted for Z-factor treatment in Edison's and SoCalGas' PBR be applied to its proposed mechanism.

Pursuant to the cost of service settlement adopted in D.98-12-038, certain costs will not be included in the PBR mechanism, but are subject to other forms of ratemaking. Tree-trimming expenses are not included in the PBR sharing mechanism, but are subject to a one-way balancing account. For the duration of the PBR period, revenues and incurred expenses for tree trimming will be excluded from the indexing mechanism and from recorded base rate revenue expenses before SDG&E calculates its actual earned rate of return for revenue sharing purposes.⁹ In addition, costs attributable to senior executive retirement plans or executive bonuses are also excluded from the indexing mechanism and from earnings sharing during the PBR period. The costs for the Natural Gas Vehicle (NGV) program will be excluded for the year 2000 update rule because they are recovered under the NGV balancing account, which is expected to be eliminated at the end of 2000. Future costs related to the Catastrophic Event Memorandum Account (CEMA) and the Gas Hazardous Substance Cost Recovery Account will be recovered through those respective balancing accounts, not through the PBR.