10. Attrition

SCE demonstrated at hearing that it will experience very little growth in gas sales on Catalina. Customer growth is also limited. It follows that SCE cannot rely on increased sales of gas to recover increased operations and maintenance expenses after 2005. SCE therefore seeks attrition increases for the years 2006, 2007 and 2008 of about $20,000 per year. ORA opposes the request for attrition increases as unnecessary and inappropriate, stating:

Edison can and presumably would come back to the Commission with a new rate case application in three years if it turns out that inflation or other costs increase faster than productivity. If at that time the Commission concludes an increase in the company's rate is justified, the Commission can grant the requested relief then. Given that context, the issue is whether Edison has demonstrated that it will suffer hardship if the Commission does not grant it automatic attrition increases each year for three years. ORA submits that Edison has not demonstrated such hardship. (ORA Opening Brief, at 30.)

SCE argues that the lack of customer growth and the normal effects of inflation make attrition increases necessary. ORA argues that depreciation and retirement of obsolete plant will tend to reduce rate base over the next three years, and the new propane system and pipeline training program are likely to produce lower operations and maintenance costs.

We are not persuaded that burdening 1,300 gas ratepayers with attrition increases is justified, especially since cost increases are not certain to occur. Both SCE and ORA forecast increases in gas sales after a temporary decline next year, and this additional revenue will help offset increases in operating costs. The Commission did not provide for attrition increases in SCE's last general rate case in Catalina. Historically, the Commission has not granted attrition increases to smaller utilities, such as PacificCorp,⁸ Bear Valley Electric⁹ and Mountain Utilities.¹⁰ In those cases, the utilities were provided balancing accounts for potentially volatile fuel expenses. Similarly here, SCE has a procedure in place for recovering increases in the wholesale cost of propane and passing those costs on to customers. For these reasons, we decline to adopt the proposed attrition increases.