ALJ/JSW/jt2 Mailed 4/17/2006

Decision 06-04-033 April 13, 2006

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of San Diego Gas & Electric Company (U 902 G) and Southern California Gas Company (U 904 G) for Authority to Integrate Their Gas Transmission Rates, Establish Firm Access Rights, and Provide Off-System Gas Transportation Services.

Application 04-12-004 (Filed December 2, 2004)

(See Appendix B for List of Appearances)

OPINION REGARDING THE SYSTEM INTEGRATION PROPOSAL

TABLE OF CONTENTS

Title Page

OPINION REGARDING THE SYSTEM INTEGRATION PROPOSAL 11

I. Summary 22

II. Background 22

III. System integration Proposal 44

A. Introduction 44

B. Rainbow Corridor Issues 66

C. System Integration Proposal and D.01-09-056 and D.98-03-073 77

D. Joint Recommendation 88

E. Position of the Parties in Favor of the Proposal 1010

1. SDG&E/SoCalGas 1111

2. Coral 1414

3. Division of Ratepayer Advocates 1717

4. Duke 1818

5. Sempra LNG 1919

6. SCGC 2121

7. TURN 2323

8. Woodside 2424

F. Position of the Parties Opposed to the Proposal 2525

1. IP/Watson/CMTA 2626

2. BHPB 2929

3. Crystal 3131

4. SCE 3333

G. Discussion - System Integration Proposal 3737

1. Introduction 3737

2. Subsidy and Rate Impact Considerations 3939

3. LNG Gas Volume Considerations 4444

4. Gas Price Considerations 4747

5. Infrastructure Investment Considerations 4848

6. Pancaked Rate Considerations 5050

7. Peaking Rate Considerations 5252

8. Allocation Methodology Considerations 5555

9. ITBA Considerations 5858

TABLE OF CONTENTS

(Cont'd)

Title Page

10. Rainbow Corridor Considerations 5959

11. Merger and Reorganization Decisions 6262

12. Joint Recommendation 6464

13. Conclusion 6565

IV. Comments on Draft Decision 6767

V. Assignment of Proceeding 6767

Findings of Fact 6767

Conclusions of Law 7272

ORDER 7373

APPENDIX A

APPENDIX B

OPINION REGARDING THE SYSTEM INTEGRATION PROPOSAL