1. Section 454(a)

TURN and RACE claim that the Phase I Decision contravenes section 454(a) by setting rates without evidentiary hearings. (Joint Application, pp. 14-15.) Although the Applicants admit that we did not authorize a rate change for any existing utility service in the Decision, they claim that the Commission "has authorized a new service (shipping as north into the SDG&E system and north into the SoCalGas system) and established rates for that service, in the process allowing one class of shippers (SoCalGas end use customers) not to pay the transportation charges applicable to other shippers (SDG&E end use customers) using that same service." (Joint Application, p. 16 (emphasis in original).)

Section 454(a) states:

Except as provided in Section 455, no public utility shall change any rate or so alter any classification, contract, practice, or rule as to result in any new rate, except upon a showing before the commission and a finding by the commission that the new rate is justified. Whenever any electrical, gas, heat, telephone, water, or sewer system corporation files an application to change any rate, other than a change reflecting and passing through to customers only new costs to the corporation which do not result in changes in revenue allocation, for the services or commodities furnished by it, the corporation shall furnish to its customers affected by the proposed rate change notice of its application to the commission for approval of the new rate. This notice requirement does not apply to any rate change proposed by a corporation pursuant to an advice letter submitted to the commission in accordance with commission procedures for this means of submission.

(Pub. Util. Code, § 454(a).) Applicants argue that the Phase I Decision is distinct from Southern California Edison v. Peevey (Edison v. Peevey) (2003) 31 Cal.4th 781, which held that the Commission's action of continuing rates set during the rate freeze, which were existing approved rates, did not violate section 454. (Joint Application, p. 16.) The Court reasoned, in TURN and RACE's estimation, that "the settlement continued existing approved rates." (Joint Application, p. 16.) TURN and RACE contend that the setting of a new interim transportation rate does not fit the exception outlined in the Edison v. Peevey decision, but rather constitutes a "'change in existing classifications and practices, in that it authorizes a new transportation service at a new rate." (Joint Application, p. 16.)

Upon further reflection and in consideration of the question regarding our compliance with section 454(a) in the setting of an interim rate for gas flowing through the Otay Mesa joint receipt point, we have decided to modify the Phase I Decision to eliminate the setting of an interim rate for the Otay Mesa joint receipt point. We are currently addressing this issue in a separate proceeding, A.04-12-004, concerning SDG&E's and SoCalGas' proposals to integrate their gas transmission rates, establish firm access rights, and provide off-system gas transportation services. A decision resolving the issue of rates at the Otay Mesa joint receipt point will be forthcoming in that proceeding. Because the issue of what rates should apply to gas flowing through the Otay Mesa joint receipt point will be determined shortly in A.04-12-004, we will modify the Phase I Decision to remove the language setting interim rates for the Otay Mesa joint receipt point. In the meantime, should SDG&E and SoCalGas need to move gas through the Otay Mesa joint receipt point, they may file an application at the Commission to set interim rates pending the issuance of a decision in A.04-12-004.