II. Jurisdiction and Background
Applicants are public utilities subject to the jurisdiction of this Commission as defined in Pub. Util. Code § 218.2 PG&E, a California corporation, provides electric and gas services in northern and central California. SCE, a California corporation and wholly owned subsidiary of Edison International, provides electric service principally in southern California. SDG&E, a California corporation wholly owned by Sempra Energy, provides electric service in a portion of Orange County and electric and gas services in San Diego County.
PG&E and SCE filed their respective test year 2006 ROE applications pursuant to Decision (D.) 89-01-040 and SDG&E pursuant to D.04-12-047.3 PG&E seeks to increase its ROE to 11.50% from 11.22% while SCE seeks to increase its ROE to 11.80% from 11.40%. SDG&E seeks to increase its electric and gas operations ROE to 12.00% from 10.38%. SDG&E also seeks to change its authorized capital structure to 43.25% long-term debt and 51.00% common stock equity from 45.25% and 49.00%, respectively. SDG&E proposes no change to its currently approved preferred stock ratio of 5.75%.
On June 16, 2005, the applications were consolidated pursuant to Rule 55 of the Commission's Rules of Practice and Procedure. The consolidation of these applications does not necessarily mean that a uniform ROE should be applied to each of the utilities. This is because each of these utilities has unique factors and differences that need to be considered in arriving at a reasonable return. These unique factors and differences encompass three distinct areas: capital structure, long-term debt and preferred stock costs, and return on common equity.
2 All statutory references are to the Public Utilities Code unless otherwise stated.
3 SDG&E was required to file its application so that we may assess what impact, if any, that debt equivalence has on its credit ratings and capital structure.
