XII. TURN's Proposal to Reduce and Freeze the Allowance

Line extension allowances go into ratebase. TURN argues that because the allowances increase ratebase, they cause rates to increase. The increase then leads to higher net revenues, which leads to higher allowances. Thus, TURN argues that the Commission's method of calculating line extension allowances results in perpetual rate increases. As a result, TURN recommends that the current allowances be reduced by 20%, and frozen for five years. TURN states that the Commission could use data gathered over the freeze period to determine whether there is a resulting effect on capital spending, rates and new customer hookups, and to determine whether the allowance should be adjusted for inflation.

SCE and Sempra state that TURN has not justified the freeze or reduction.

This proceeding is limited to the issues identified in the scoping memo. The only issues identified in the scoping memo to which TURN's recommendation could be related are:

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

· Whether the COS factor should account for replacement in perpetuity.

TURN's proposal does not address the calculation of the net revenue or the COS factor. Therefore, it falls beyond the scope of this proceeding and will not be adopted.