VIII. Biennial Cost Allocation Proceeding

A. Introduction

The Commission's last complete adjudication of the BCAPs for SDG&E and SoCalGas occurred in D.00-04-060.⁷⁶ Subsequent BCAP applications requesting revised rates effective January 1, 2003 were filed by SoCalGas (A.01-09-024) and SDG&E (A.01-10-005) on September 21, 2001 and October 5, 2001, respectively. Due to the Commission's approval of the CSA in D.01-12-018, SoCalGas and SDG&E were to file revised BCAP applications. As a result of parties' requests to defer the proceedings, the Commission in D.03-05-050 dismissed these two BCAP applications. The Commission recognized in D.03-05-050 that SoCalGas and SDG&E would be filing new BCAP applications in September 2003, and that those BCAP applications would receive new proceeding numbers.

SoCalGas and SDG&E filed their new BCAP applications on September 3, 2003 (A.03-09-008) and September 17, 2003 (A.03-09-031), respectively. Those two applications requested that the revised rates go into effect on January 1, 2005. On April 1, 2004, the Commission adopted D.04-04-015, which addressed the implementation of the tariffs adopted in the CSA decision. However, the Commission stayed D.04-04-015 until a decision in Phase 1 of Order Instituting Rulemaking R.04-1-025 could be issued. In an April 4, 2004 ruling in A.03-09-008 and A.03-09-031, the BCAP schedule was suspended pending a further ruling or a Commission decision.

In D.04-05-039, the Commission dismissed A.03-09-008 and A.03-09-031 without prejudice. D.04-05-039 directed SoCalGas and SDG&E to file new BCAP applications within 120 days of the date the stay of D.04-04-015 is lifted, or as otherwise ordered by the Commission.

In the Phase 1 decision in R.04-01-025, D.04-09-022, we continued the stay of D.04-04-015 until further notice. (D.04-09-022, page 73.) As a result of the continuing stay, the Commission has not set a date for SDG&E and SoCalGas to file new BCAP applications.

B. Discussion

More than six years have elapsed since we fully examined the cost allocation issues pertaining to SDG&E and SoCalGas' gas transmission system. Some of the parties recommend that if the FAR proposal is adopted, SDG&E and SoCalGas' BCAP filings occur shortly after the open season, or that the filings be delayed until after the Commission has gained experience with the new FAR system. SDG&E and SoCalGas recommend that they file their BCAP applications within eight months of this decision. SCGC recommends that if a system of FAR is adopted, the BCAP should be deferred until at least a year after the FAR has been implemented.

Due to the various proceedings involving the gas industry in general, and the gas market structure for southern California, the BCAPs for SoCalGas and SDG&E have been postponed. Today's decision marks a significant change to the basic structure of the natural gas market in southern California and will result in an unbundled element in SoCalGas' rates that are not reflected in its current rate structure. We support a cost-based FAR reservation charge policy, and it is our intention to address this issue in the next BCAP.

A new BCAP is long overdue. Furthermore, due to our intention to adopt a cost-based FAR charge and reexamine the regulatory gap that has led to the peaking rate, we believe the next BCAP should begin within the next year. Accordingly, SDG&E and SoCalGas shall be directed to file their respective BCAP applications no earlier than October 1, 2007 and no later than December 15, 2007.

⁷⁶ The issue of when SDG&E and SoCalGas should be required to file their next BCAP applications was identified in the scoping memo and amended scoping memo as an issue.