Findings of Fact

1. The system integration proposal was included in this application in response to D.04-09-022.

2. SDG&E is currently a wholesale customer of SoCalGas, and receives all of its natural gas from SoCalGas at the Rainbow and San Onofre meter stations.

3. If regasified LNG is delivered through Otay Mesa, natural gas could flow from SDG&E to SoCalGas.

4. Currently, none of the gas delivered to an end-use customer in SoCalGas' territory comes from a receipt point on SDG&E's system.

5. The system integration proposal provides the framework for allowing customers of both SoCalGas and SDG&E to access gas supplies at existing or new receipt points on both systems at a single integrated transmission rate.

6. The gas transmission systems of SoCalGas and SDG&E are currently integrated on an operational basis, but the transmission and distribution costs of the two utilities remain separate.

7. Under the proposal, the customers of SoCalGas and SDG&E would continue to pay their respective distribution rates.

8. Under the proposal, the pancaking of transmission rates would be eliminated so that a customer located on the SoCalGas system would not have to pay a wheeling charge to SDG&E to move gas north from Otay Mesa into SoCalGas' territory.

9. Under the proposal, SoCalGas' peaking rate would not apply if SDG&E or a customer in SoCalGas' service territory takes gas from Otay Mesa.

10. Under the proposal, the gas transmission rates for all SoCalGas customers would go up, except for EG customers, and the gas transmission rates for SDG&E customers would decrease.

11. The rate impact of the cost shift to SoCalGas customers amounts to approximately $14.4 million.

12. The Rainbow Corridor pipelines currently function as local transmission because SoCalGas does not receive any gas from SDG&E.

13. The Joint Recommendation was attached to the opening briefs of four of the parties.

14. The potential change in the direction of the flow of gas is the impetus for the system integration proposal, and represents a fundamental change in how SDG&E and SoCalGas can obtain gas.

15. The ECA facility is currently being built in Baja California, and is likely to be the first LNG project on the west coast.

16. The Commission has a window of opportunity to decide whether to encourage the entry of LNG from Baja California into California, or to wait and see whether the California-based LNG projects will be approved or not.

17. The regasified LNG from the ECA facility can provide a new supply source for customers of SDG&E, and to customers of SoCalGas through the use of the SDG&E system and the Rainbow Corridor as backbone transmission facilities.

18. If a significant amount of gas is delivered through Otay Mesa, this new supply will diversify the existing gas supply sources and may result in increased supply reliability over time, and help moderate gas prices in the southern California market.

19. The single integrated rate makes sense when one considers that SDG&E historically received gas from the SoCalGas receipt points, and none of the gas to serve SoCalGas customers has come from a SDG&E receipt point.

20. The Energy Action Plan encourages the promotion of infrastructure enhancements such as diversifying supply sources to include LNG.

21. If the system integration proposal is not adopted, and SDG&E customers choose to take gas from Otay Mesa instead of from receipt points on the SoCalGas system, SoCalGas will lose gas throughput and SDG&E's wholesale gas transmission revenues, which will shift more costs to the remaining customers of SoCalGas.

22. Several factors will influence how much gas will flow through Otay Mesa, and how much of that gas will flow to customers of SoCalGas.

23. Taking steps to encourage suppliers of LNG from Baja California to ship their gas to the southern California market will allow market forces to develop and shape how the gas from the ECA facility will make its way into California.

24. If the anticipated benefits of the system integration proposal do not materialize, we remain open to revisiting whether the single integrated rate for both transmission systems should continue.

25. Encouraging the entry of additional gas supplies into the southern California is consistent with D.04-09-022 in which we recognized the need for a diverse portfolio approach, including potential sources of LNG.

26. Not having to pay pancaked rates for transportation of gas through Otay Mesa will encourage this source of supply to flow into the southern California market, and for infrastructure investments to be made upstream and downstream of Otay Mesa.

27. If SoCalGas customers have to pay two rates to access the gas supply from Otay Mesa, these customers are unlikely to procure gas from this supply source.

28. If pancaked rates apply, this will increase the likelihood that the regasified LNG from Baja California will be sold to east-of-California customers.

29. D.05-10-045 modified D.04-09-022 by eliminating the interim rate for gas flowing through Otay Mesa.

30. The peaking service tariff applies to gas transportation service provided to any noncore customer who bypasses SoCalGas' service, in part or in whole.

31. When the SoCalGas peaking rate was first developed, it was not contemplated that LNG would be a new supply source for SDG&E and SoCalGas, or that Otay Mesa would become a joint receipt point.

32. With the creation of Otay Mesa as a joint receipt point, the gas that flows through Otay Mesa should be treated the same as gas that flows through the receipt points on the SoCalGas system.

33. Having the system integrated rates go into effect when the flow of gas through Otay Mesa begins will better match the implementation of the rate changes to the event that will benefit SDG&E and SoCalGas customers.

34. The issue of balancing account protection for the throughput for the transmission revenue requirement is to be revisited in the next BCAP or other appropriate proceeding.

35. The construction of the GE facility along the Rainbow Corridor makes it all that more important to look to, and facilitate the delivery of natural gas from alternate gas supplies.

36. This is not the appropriate proceeding in which to study and decide what capacity expansions may be needed along the Rainbow Corridor to accommodate the increase in gas demand.

37. The Rainbow Corridor and SDG&E's transmission pipelines are expected to provide a backbone transmission function to SoCalGas, and under the proposal, the transmission costs of those facilities are allocated on that basis.

38. No changes to the system integration proposal are needed due to how the Rainbow Corridor is treated in the proposal.

39. The mitigation measures adopted in D.98-03-073 permit SDG&E and SoCalGas to be organized in a manner that allows them to provide the highest quality utility service that focuses on safety and reliability, is responsive to customers' needs, and to the extent it makes business sense, to share resources.

40. Under the proposal, SDG&E and SoCalGas essentially share the existing and new receipt points on the two systems at a single integrated rate.

41. Today's decision does not prevent other LNG project developers in Baja California from transporting their gas through Otay Mesa in the future.

42. Gas suppliers who use receipt points in SoCalGas' service territory will be able to move their gas to SDG&E's service territory using the same integrated transmission rate that Sempra LNG is subject to.

43. The parties were not provided with notice or an opportunity to be heard regarding the Joint Recommendation.