II. Background

The application before us was filed in response to the Phase I decision, Decision (D.) 04-09-022, in Rulemaking (R.) 04-01-025. That rulemaking addresses the policies and rules needed to ensure reliable, long-term supplies of natural gas to California. In Phase I of R.04-01-025, SDG&E and SoCalGas advocated for the adoption of their transmission system integration and firm access rights proposals. In D.04-09-022, we declined to adopt those two proposals and directed SDG&E and SoCalGas to file an application regarding those proposals. D.04-09-022 also designated Otay Mesa as a joint receipt point for the gas transmission systems of both SDG&E and SoCalGas.

SDG&E and SoCalGas filed the above-captioned application in response to D.04-09-022. The utilities propose to integrate the two gas transmission systems on an economic basis, and that their system of firm access rights be adopted. The application also addresses off-system gas deliveries as directed by D.04-09-022.

In the May 24, 2005 scoping memo and ruling (scoping memo), the proposals of SDG&E and SoCalGas were divided into two phases. The first phase addresses the system integration issues. The second phase will address the firm access rights and off-system delivery issues. The phase one system integration issues were identified in the scoping memo as follows:

· Should the gas transmission systems of SDG&E and SoCalGas be integrated on an economic basis, including the transmission component of the gas transportation rates of SDG&E and SoCalGas?

· Does the system integration proposal, including the proposed integration of the gas transmission rates of SDG&E and SoCalGas, conflict in any way with D.01-09-056 and D.98-03-073 regarding the treatment of SDG&E and SoCalGas as separate regulated utilities? (See 79 CPUC2d at pp. 354-355, 429, FOF 146; D.01-09-056, p. 6.)

· Are there any potential capacity constraints along the Rainbow Corridor (Lines 6900, 1027 and 1028), and what impact will this have on the system integration proposal? (See Resolution G-3377.)

· Should the Rainbow Corridor be treated as a local transmission line, backbone transmission line, or as a receipt point, and what impact will this have on the system integration proposal and the ability to move regasified LNG from Otay Mesa? (See Resolution G-3377.)

Three days of evidentiary hearings in the system integration phase of this proceeding were held in September 2005, and this phase was submitted on November 4, 2005, following the filing of reply briefs.