IV. Length of Periods

A. Length of BCAP Period

Following the initial restructuring of the gas industry in May, 1988, the Commission elected to revisit gas cost allocation and rate design issues annually (D.89-01-040, 30 CPUC2d 576,618). However, it soon became apparent that annual cost allocation proceedings for each of the three major gas utilities were administratively burdensome. The Commission then moved to biennial cost allocation proceedings (D.90-09-089, 37 CPUC2d 583, 626) but, because of circumstances unique to each case, rates often remained in place for periods greater than 24 months.

In this case, SoCalGas, SDG&E, ORA, and TURN are all proposing that rates from this proceeding be in place until the end of 2002, a period of three years assuming an end-of-the-year decision. This would synchronize the end of the BCAP with the end of both the SoCalGas and SDG&E PBR proceedings. The parties also recommend that the next cost allocation and PBR proceedings be consolidated into a single proceeding.

SCGC and CIG/CMA oppose a BCAP period longer than the traditional two years. They argue that extending the forecast period beyond the traditional 24-month period introduces significant uncertainty into the forecast. Some of that uncertainty includes determining where new power plants will be sited, how recently deregulated power plants will operate, and if and when new bypass pipelines will appear. A three-year period increases the risks associated with fluctuations in load over forecast amounts. Loads higher than forecast mean ratepayers paid too much; loads lower than forecast mean the utility will not recover its revenue requirement.

B. Length of the Forecast Period

One of the more controversial issues is the proposal by both SoCalGas and SDG&E to use a forecast of 1999 throughput for the entire BCAP period. ORA and other parties oppose this proposal and instead recommend that the forecast period match the BCAP period.

SoCalGas puts forth several reasons justifying its proposal to use a single year forecast. First, using a single year forecast eliminates the need to litigate forecasts for the years 2000-2002. Second, use of a 1999 forecast is intended to provide upside potential to offset the downside risk of discounting and loss of load. Those opposed to a single year forecast believe it has the same infirmity as the three-year BCAP: fluctuations make it uncertain and risky.

C. Impact of the Joint Recommendation

Adoption of the JR will result in a reasonable compromise of the debate over the appropriate length of the BCAP period and whether the forecast should be based on a single year or multi-year forecast. Under its terms, BCAP rates would be in place for three years and rates would be based upon an agreed upon forecast which is a compromise between SoCalGas' single year forecast and the higher ORA forecast based upon a three year average. The reasonableness of the forecast is addressed below.