COM/LYN/jva Mailed 12/3/2004

Decision 04-12-018 December 2, 2004

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Southern California Edison Company (U 338-E) for Authority to, Among Other Things, Increase Its Authorized Revenues for Gas Service for Santa Catalina Island in 2005, and to Reflect That Increase in Rates.

Application 04-01-031

(Filed January 23, 2004)

David R. Garcia, Attorney at Law, for Southern
California Edison Company, applicant.
James E. Scarff, Attorney at Law, for the
Commission's Office of Ratepayer Advocates, protestant.

OPINION RESOLVING GENERAL RATE CASE

TABLE OF CONTENTS

TITLE PAGE

1. Summary 2 2

2. Background and Procedural History 2 2

3. Jurisdictional Question 5 5

4. SCE's Application 6 6

5. Capital Expenses 8 8

5.1 LPG Vaporization Plant Upgrade 8 8

5.2 Basement Upgrade 9 9

5.3 Bird Park Line Extension 10 10

5.4 Pebbly Beach Village Line Replacement 10 10

6. Operations and Maintenance 11 11

6.1 Additional Employee 12 12

6.2 Additional Training 13 13

6.3 Preventative Maintenance 14 14

6.4 Work Management System 14 14

6.5 Uncontested SCE Proposals 15 15

7. Forecast of Gas Sales 15 15

7.1 Gas Sales Adjustment Mechanism 16 16

8. Depreciation Expense and Reserve 17 17

9. Rate Base 17 17

10. Attrition 18 18

11. Rate Phase - In 20 20

12. Rate Design 23 23

12.1 Baseline Quantities of Gas 23 23

12.2 Allocation of Rates 24 24

12.3 Domestic CARE Rates 24 24

13. Comments on Proposed Decision 24 24

14. Assignment of Proceeding 26 26

Findings of Fact 26 26

Conclusions of Law 27 27

ORDER 28 28

APPENDIX A Santa Catalina Island System Rate Design

OPINION RESOLVING GENERAL RATE CASE

1. Summary

Southern California Edison Company (SCE) is authorized to increase its gas distribution base rate revenue requirement in Santa Catalina Island (Catalina) to $984,500 to be phased in over a three-year period beginning in 2005. This equates to a 39.4% increase in 2005, a 28.2% increase in 2006, and a 22.0% increase in 2007 in authorized gas distribution expenses. SCE had sought an increase in base rate revenue to $1,157,482 in 2005 (an increase of 169% over the current rate), or $1,648,000 if phased in over four years (an increase that would total 283% over current base rates by the year 2008). The proposed increases are large because this is the first gas distribution rate increase that SCE has sought in Catalina in 17 years and because SCE is in the process of replacing its 30-year-old gas plant in Catalina.

The new rates authorized today will mean an increase in single-family gas bills, on average, of about 14.9% in 2005, 13.2% in 2006, and 11.5% in 2007. For commercial customers, the increase, on average, will be 20.3% in 2005, 15.6% in 2006, and 10% in 2007.