Comments and Replies on Draft Decision

The draft decision of ALJ Sullivan in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. SDG&E and LIF filed comments on the proposed decision on April 23, 2001. In addition LIF filed reply comments on April 30, 2001, along with a motion for the Commission to accept the late-filed reply comments. LIF cited the difficulties arising from the demands of other Commission filing deadlines falling on limited staff as the cause of its late filing. We will accept these late-filed comments since no party is harmed by the late filing of these reply comments and LIF has shown a good reason for their lateness.

In its comments on the draft decision, SDG&E renews its claim that adjustments to rates starting with the February 2000 advice letter, despite ORA's protest, constitute retroactive ratemaking. In general, SDG&E argues that the Commission has adopted a cost methodology that divides costs between firm interstate pipeline and gas commodity costs, and has thus approved the current methodology. SDG&E further argues that its interpretation that the Commission has endorsed this specific methodology is consistent with the OII. SDG&E cites dicta which note "the Commission did not envision the kind of changes that SDG&E itself acknowledges have taken place in the market."

Further, SDG&E claims noncore customers "could hardly be expected to guess what option for change the Commission might adopt." SDG&E further argues that retroactive changes to rates constitute bad regulatory policy.

On a separate note, SDG&E argues that should the Commission order adjustments starting with the February 2000 advice letters, then it should book the undercollections into the non-core PGA for subsequent recovery, rather than establishing a surcharge on gas rates.

LIF's Opening Comments support the draft decision as correct in all aspects and urge the Commission to adopt it in its entirety. LIF states that both ORA's protest of SDG&E's advice letter and the OII provided clear notice to all concerning the likely problems of the cost allocation methodology. LIF further

notes that I.00-08-003 informed parties that the range of remedies could include the reallocation of costs dating from February 2000.

LIF's Reply Comments state that SDG&E misinterprets Southern Pacific Co. v. Railroad Com (1924). (194 Cal.734, 739.) LIF notes that in this case, the California Supreme Court distinguished "between the power to fix rates and the power to award reparation. The former is a legislative function, the latter is judicial in its nature." It continued "there is nothing in the section operating as a prohibition against the exercise of judicial power in remedying past wrongs or inequalities." LIF further mentions that the Court notes: "... when complaint is made to the Commission concerning a rate for service furnished by a public utility and the Commission has found ...that the public utility has charged an excessive or discriminatory rate for such service the Commission may order the public utility to make due reparation ... with interest from the date of collection." LIF states that the Commission is empowered to remedy past wrongs associated with the protested advice letters and by noting that the OII created a balancing account mechanism. LIF concludes that the Commission should approve the decision without modification.