2. Background

On December 21, 2004, SCE requested a $568,773,000 (16.29%) revenue requirement increase for test year 2006 and authority to implement estimated revenue requirement increases of $224,829,000 (5.54%) for post-test year 2007 and $207,273,000 (4.85%) for post-test year 2008. SCE provided the testimony of over 80 witnesses, which covered the need and reasonableness of its proposed 2006 generation, transmission, distribution, customer service, customer accounting and general administration operations, all of which SCE claims are necessary to serve its forecasted customers and loads for that year. The testimony also detailed the forecasted operating expenses and capital-related costs of these operations, which were the foundation for SCE's base revenue requirement request for test year 2006 and post-test years 2007 and 2008.

On May 26, 2005, Investigation (I.) 05-05-024 was instituted to allow the Commission to hear proposals other than those of SCE and to enable the Commission to enter orders on matters not proposed by SCE. A.04-12-014 and I.05-05-024 were consolidated for these purposes.

Prehearing conferences were held on February 18, 2005, May 6, 2005, and June 6, 2005. During May, 2005, public participation hearings were held in Rosemead, Fullerton, San Bernardino, Palm Springs, and Visalia. There were 23 days of evidentiary hearings held from June 7, 2005 to July 14, 2005. An additional day of hearing was held on September 12, 2005. Opening briefs were filed on August 12, 2005 and reply briefs were filed on September 2, 2005. An evidentiary update hearing was held on October 11, 2005. Update-related briefs were then filed on October 21, 2005. The proceeding was submitted for decision on November 30, 2005. Final oral argument before the Commission was held on April 4, 2006. Aglet, Greenlining and TURN each actively participated in this proceeding by conducting discovery, sponsoring expert testimony, cross-examining utility witnesses, filing briefs and comments on the proposed decision, and participating in the final oral argument.

D.06-05-016 resolved numerous disputed revenue, expense and rate base issues related to SCE's GRC request and closed this consolidated proceeding. For test year 2006, SCE was authorized a revenue requirement increase of $333,115,000 (9.75%). The adopted methodology for calculating post-test year revenue requirements resulted in additional estimated revenue requirement increases of $143,350,000 (3.82%) for post-test year 2007 and $192,573,000 (4.95%) for post-test year 2008. In summary, the decision also:

· Assumed a temporary shutdown of the Mohave Generating Station (Mohave) and reflected costs for this scenario, as forecasted by SCE. All costs will be booked to a two-way balancing account and will be subject to reasonableness review.

· Ordered SCE to establish a Mohave Sulfur Credit Sub-Account to accumulate revenues from the sale of any sulfur credits created by the December 31, 2005 Mohave closure. Funds should not be disbursed from this sub-account without specific Commission authorization to do so. The issue of the distribution of revenues accumulated in the account will be addressed in a separate proceeding.

· Excluded costs for SCE's proposed Project Development Division in rates, but allowed SCE to establish a memorandum account to track those costs that support new generation not associated with proposed projects. SCE can seek to include those supportive costs in future rates.

· Approved a stipulation regarding maintenance activities. Such activities will continue to be performed on an opportunity basis, while SCE and the Commission's Consumer Protection and Safety Division work-out details to implement a new maintenance program.

· Modified SCE's Results Sharing request by requiring SCE to credit ratepayers for any difference between the authorized level for Results Sharing and the recorded level.

· Adopted TURN's recommendation to recognize, for ratemaking purposes, the regulatory liability associated with plant removal costs that do not meet the definition of an Asset Retirement Obligation.

· Adopted the Division of Ratepayer Advocates' (DRA) proposed net salvage rates for calculating depreciation expense, with the exception of Account 364, distribution poles, towers and fixtures. For Account 364, the decision adopts a compromise net salvage rate proposed by SCE.

· Accepted SCE's forecasted plant additions for 2004 and 2005, subject to a truing up process if the recorded additions are less than forecasted.

· Rejected proposals to determine the post-test year revenue increases by applying a consumer price index factor to the adopted 2006 revenue requirement. The decision also rejected SCE's proposal to reflect its proposed capital budgets for 2007 and 2008 in determining the revenue increases for the post-test years. Plant additions were instead determined by taking the adopted 2006 test year plant additions and escalating that amount to 2007 and 2008 post-test year dollars.

· Rejected the proposal of San Diego Gas & Electric Company (SDG&E) to establish a Cost Control Incentive Mechanism for the San Onofre Nuclear Generating Station (SONGS).

· Approved a settlement regarding a Reliability Investment Incentive Mechanism (RIIM).

· Approved a settlement regarding bill calculation services for submetered mobile home parks.