4. SCE's Application

SCE's initial request for an overall rate increase and increases in its authorized expenses are shown on the following table. Also shown are ORA's initial recommendations for the rate increase and operating expenses. The third column shows the adopted increases authorized by this decision.

Southern California Edison

Catalina Gas Operations

Test Year 2005

Proposed Rates

	(Thousands of Dollars)
	SCE	ORA	Adopted
Total Operating Revenues	1,157	888	984.5
Operating Expenses
Escalation
Production	351	249	297
Distribution	215	141	181
Customer Accounts	10	10	10
Uncollectibles	1	0	0
Administrative $ General	58	44	44
Franchise Requirements	12	9	7
Revenue Credits	(62)	(62)	(62)
Subtotal	585	391	477
Escalation	60	41	49
Depreciation	128	120	123
Taxes Other Than on Income	60	43	43
Taxes on Income	89	81	71
Total Taxes	149	124	114
Total Operating Expenses	922	676	763
Net Operating Revenue	235	212	222
Rate Base	2,419	2,177	2,276
Rate of Return	9.71%	9.74%	9.75%

SCE's authorized rate of return is set in annual cost of capital proceedings before the Commission. The 9.75% rate of return was set for 2003 in D.02-11-027. This rate of return was extended through December 31, 2004, when the Commission excused SCE from a 2004 cost of capital application. (D.03-08-063.) SCE's rate of return for 2005 is to be determined in Application 04-05-021, which is pending before the Commission.

In the discussion that follows, we will first address SCE's proposed capital expenditures. When the capital additions are in service, the expenditures are added to rate base, and a rate of return on those expenditures is included in ratepayer bills. We also deal with SCE's proposed operations and maintenance proposals and resolve disputes in that category. Finally, we turn to SCE's proposal for a new gas adjustment mechanism, attrition increases for years after 2005, and a phase-in plan.