II. Procedural Background

On December 15, 2004, SCE filed Advice Letter SCE 1847-E. On December 20, 2004, SDG&E filed Advice Letters 1647-E for its electric operations and Advice letter 1494-G for its gas operations. These advice letters sought to revise residential line extension allowances. Resolution E-3921, dated June 16, 2005, which addressed these advice letters, ordered SCE, SDG&E, SCG, and PG&E to file applications addressing policy and methodologies for determining line extension allowances and monthly cost of ownership charges. The applications that are the subject of this proceeding were filed in response to Resolution E-3921.

Prehearing conferences were held on February 7, 2006 and March 23, 2006. An assigned Commissioner's ruling and scoping memo was issued on April 4, 2006, which confirmed the preliminary determinations that the category of the proceedings is ratesetting and that hearings were needed. Hearings were held from September 18-21, 2006. This proceeding was submitted on October 30, 2006.

The issues relating to residential line extensions to be addressed in this proceeding are as follows:

· Calculation of the net revenue on which line extension allowances are based.

· Whether the Cost of Service factor should account for replacement in perpetuity.

· Sources of data for calculating line extension allowances.

· Whether line extension allowances should continue to be offered in portions of the utilities' service territories where publicly-owned energy utilities (POUs) are offering service.

· Criteria for requiring a revenue impact estimate to be included in a line extension allowance change advice letter.

· Cost components to be recovered by the monthly COO charge.

· The relationship of the monthly COO charge to monthly charges for operations and maintenance of special distribution facilities, and the COS factor.

· For SCE only, whether sub-transmission costs should be considered distribution costs for the purpose of calculating line extension allowances.