City of San Diego's Proposal

In its opening brief, City of San Diego supports a rate indexing mechanism, but recommends that a stretch factor be incorporated into SDG&E's proposed productivity factors. City of San Diego points out that a margin should be included in the productivity factors to protect consumers from inexact forecasts of future productivity trends and recommends that SDG&E be encouraged to stretch beyond the amount of historical productivity in the utility industry, which is one of the main purposes of PBR regulation. City of San Diego recommends comparable productivity factors to those adopted to Edison and SoCalGas: 1.2%, 1.4%, and 1.6% on the electric side and 1.2%, 1.3%, and 1.4% on the gas side. These values represent a midway position between the high and low proposals in this proceeding. Because SDG&E competes within the same industry within Southern California, City of San Diego believes productivity improvements should be roughly similar.

City of San Diego essentially supports ORA's proposal and recommends that a progressive earnings sharing mechanism similar to SoCalGas' be adopted. City of San Diego asserts that the merged utilities should share the same type of PBR mechanism and thinks consumers in San Diego should benefit from the same type of mechanism enjoyed by consumers in SoCalGas' service territory. City of San Diego prefers SoCalGas' approach over Edison's because ratepayers are insulated from downside risk, i.e., they do not share in losses below the authorized rate of return. However, City of San Diego recommends a 50-basis-point deadband rather than a 25-basis-point deadband because if the GFCA is eliminated, SDG&E is at greater risk from sales fluctuations in gas throughput than is SoCalGas. City of San Diego also believes that SDG&E should be rewarded for proposing an electric escalation factor based on utility industry inputs which is less advantageous to shareholders.