2. Background

On June 28, 2004, SDG&E filed an application to recover $37.6 million, the California jurisdictional costs associated with the 2003 Southern California Wildfires (Wildfires). Applicant asserts the memorandum account (Wildfire Account) is in conformance with its Catastrophic Event Memorandum Account (CEMA) tariff as authorized in its Preliminary Statement. Including updates through December 2004, SDG&E spent $71.163 million in total, allocated $8.441 million to transmission service subject to the Federal Energy Regulatory Commission's (FERC) jurisdiction and the balance of $62.722 million to California- jurisdictional gas and electric service. SDG&E reduced this amount by $21.9 million to reflect funds already authorized in rates. The remaining $40.8 million are the residual incremental costs that are the subject of this proceeding.

SDG&E described the Wildfires by citing1 a joint report of the U.S. Forest Service and the California Department of Forestry and Fire Protection, "In October of 2003, Southern California experienced the most devastating wildland fire disaster in state history. The facts are staggering - 750,043 acres burned, 3,710 homes lost and 24 people killed including one firefighter."2 The report further states:

The October Fire Siege of 2003 tested the modern fire service like no other time. The combined efforts of the largest wildland fire agencies in the world, the United States Forest Service and the California Department of Forestry and Fire Protection (CDF), along with armies of local fire departments across the state mustered ground and air resources into the firefight as never before. At the peak of the fire siege, over 14,000 firefighters were on the line. Never in California's history were so many homes and lives in danger by fire at one moment . . . . In addition, countless miles of power lines were damaged, communication systems destroyed, watersheds reduced to bare scorched soils, and thousands of people were forced into evacuation centers, unsure if they would have a home to return to - many did not.3

SDG&E further indicates that it believes no area in Southern California may have been harder hit by the wildfires than San Diego County. It states that approximately 3,200 power poles, 400 miles of wire, 400 transformers and more than 100 other pieces of related equipment were damaged by the fire and needed to be replaced. Over 2,400 homes were destroyed and countless other structures were damaged by these wildfires. In addition, SDG&E presents detailed testimony on the scope of the damage to its system attributed to the fire and the response to repair and replace the damage.4

In order to invoke and employ the Wildfire Account, SDG&E must demonstrate that the circumstances surrounding the Wildfires meet the conditions for a catastrophic event account as defined in Pub. Util. Code (Code) Section 454.9(a), for restoring utility services to customers, repairing, replacing, or restoring damaged utility facilities, and complying with governmental agency orders in connection with events declared disasters by competent state or federal authorities. Such costs are recoverable only after the Commission makes a finding of their reasonableness and approves them following an expedited proceeding in response to the utility's filed application (Code § 454.9(b)). This proceeding was conducted on a schedule designed to result in a prompt decision after first ensuring due process was provided to all parties.

On October 26, 2003, then-Governor Davis declared a state of emergency in San Diego County. The following day, October 27, 2003, President Bush also declared a state of emergency in San Diego County. In addition, the County of San Diego and the City of San Diego also declared states of emergency on October 28, 2003 and November 3, 2003, respectively. SDG&E invoked its CEMA tariff in response to this catastrophic event, and, in accordance with Resolution No. E-3238,5 notified the Commission's Executive Director on November 24, 2003.6 The first table below is from Ex. 3 and it shows SDG&E's original cost basis for the request before applying the incremental cost test discussed later in this decision. The second table is from Ex. 4 and it shows the $37.661 million portion of $58.011 million California-jurisdictional costs (through May 2004) that SDG&E claims are reasonable for inclusion in the memo Account and recoverable from ratepayers. As described in SDG&E's testimony, $20.35 million was identified to be already available in rates to fund the Wildfire's costs. The residual $37.661 million is described as incremental costs, not otherwise provided in rates, and therefore eligible for recovery.7 The net request is for $37.309 million for electric costs and $0.352 million for natural gas costs.

The testimony and evidentiary hearings focused on those costs increased through May, 2004. SDG&E provided two late-filed exhibits (SDG&E-9 and SDG&E-10) that updated actual costs through December, 2004. Those costs are discussed in a separate section of this decision. Parties reviewed the late-filed exhibits and filed comments that are considered in this decision.

Proposed Recovery of Wildfire Account Costs Through May 2004

(a) Ex. 3 Attached Ex. D-1.

1 Application, pp. 1-2.

2 As quoted in the Application, from "California Fire Siege 2003 - The Story: October 21 - November 4, 2003" (Preface).

3 As quoted in the Application, Id. (Introduction).

4 Ex. SDG&E-1, Testimony of Steven D. Davis and in more detail in Ex. SDG&E-2, Testimony of Scott P. Furgerson.

5 CPUC Resolution E-3238, dated July 24, 1991.

6 Application, p. 3.

7 There are some slight rounding differences in the two exhibits that are not material here. In the adopted recovery we identify the accurate reasonable jurisdictional allocation.

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