Conclusions of Law

1. The adopted summaries of earnings and the quantities and calculations that underlie them are reasonable for ratemaking purposes and should be adopted.

2. Because SCE's Catalina gas service is distinguishable from other all-propane gas operations, the Commission should retain jurisdiction over the Catalina gas service.

3. No rate increase should go into effect until SCE's new gas vaporization system and upgrade have been completed and the new plant is fully operational.

4. The $60,000 allocation for a basement upgrade should be effective July 1, 2005, rather than April 1, 2005, as originally requested by SCE.

5. SCE has not met its burden of proof at this time in showing the necessity of a Gas Revenue Adjustment Mechanism balancing account.

6. Attrition increases in operations and maintenance expenses after 2005 have not been justified.

7. Because of the limited number of customers who must bear these costs, ORA's three-year rate phase-in proposal is more reasonable than the four-year phase-in plan proposed by SCE.

8. The rate increase should be allocated 15% to the fixed portion of a customer's bill and 85% to volume so that customers will have more control over their gas costs.

9. Low-income customers should receive a 20% discount in gas service rates under a CARE schedule for gas service.

10. SCE should be authorized to implement the rate changes set forth in this order.

11. This decision should be made effective immediately to allow SCE opportunity to earn the return found reasonable for it in Test Year 2005.

ORDER

IT IS ORDERED that:

1. Southern California Edison Company (SCE) is authorized to file in accordance with the General Order 96 series, and make effective on not less than five days' notice, the revised tariff schedules for gas rates for 2005 included as Appendix A to this order. The revised tariff schedules shall apply to service rendered on and after their effective date.

2. Advice letters for authorized rate increases for 2006 and 2007 may be filed in accordance with the General Order 96 series no earlier than November 1 of the preceding year, to be effective January 1 of the following year, subject to Energy Division review for compliance. The filing shall include appropriate work papers. The increase shall be the amount authorized in Appendix A.

3. The summaries of earnings and the quantities and calculations that underlie them, as set forth in this decision, are adopted.

4. The Commission has jurisdiction over SCE's Catalina gas service.

5. This proceeding is closed.

This order is effective today.

Dated December 2, 2004, at San Francisco, California.

MICHAEL R. PEEVEY

President

CARL W. WOOD

LORETTA M. LYNCH

GEOFFREY F. BROWN
Commissioners

I dissent.

/s/ SUSAN P. KENNEDY
Commissioner