ALJ/JPO/hkr Mailed 7/13/2007

Decision 07-07-019 July 12, 2007

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Joint Application of San Diego Gas & Electric Company and Southern California Gas Company (E-3921) for: Adoption of Their Residential Electric and Gas Line Extension Allowance Methodologies and its Monthly Ownership Charge Methodology.

Application 05-09-019
(Filed September 14, 2005)

Application of Pacific Gas and Electric Company in Response to Resolution E-3921, Proposing Revisions to Line Extension Allowance and Related Matters.
(U 39 M)

Application 05-10-016
(Filed October 13, 2005)

Application of Southern California Edison Company (U 338-E) Regarding Residential Line and Service Extension Allowances.

Application 05-10-019
(Filed October 14, 2005)

Judi Mosley and Jasmin Ansar, Attorneys at Law, Roxanne Piccillo and Stephen L. Garber, for Pacific Gas and Electric Company; Maricruz Prado and Michael D. Montoya, Attorneys at Law, for Southern California Edison Company; and Georgetta J. Baker, Attorney at Law, for San Diego Gas & Electric Company and Southern California Gas Company; applicants.

Rashid A. Rashid and Gregory Heiden, Attorneys at Law, for the Division of Ratepayer Advocates; Nina Suetake, Attorney at Law, for The Utility Reform Network; Ann L. Trowbridge and Dan L. Carroll, Attorney at Law, for the Modesto Irrigation District and the Merced Irrigation District; Joy A. Warren, Attorney at Law, for the Modesto Irrigation; Jacqueline P. Minor and Stephen A. S. Morrison, Attorneys at Law, for the City and County of San Francisco; Greggory L. Wheatland, Attorney at Law, for Hercules Municipal Utility; Howard V. Golub, Attorney at Law, for the City of Santa Maria; James D. Squeri, Joseph F. Weidman, and Carl Lower, Attorneys at Law, for California Building Industry Association; and Dan Geis, Attorney at Law, for Agricultural Energy Consumers Association; interested parties.

OPINION ADDRESSING ELECTRIC AND GAS RESIDENTIAL LINE
EXTENSION ALLOWANCE CALCULATION METHODOLOGY

TABLE OF CONTENTS

Title Page

OPINION ADDRESSING ELECTRIC AND GAS RESIDENTIAL LINE EXTENSION ALLOWANCE CALCULATION METHODOLOGY 3 3

I. Summary 3 3

II. Procedural Background 4 4

III. Line Extension Allowance Background 6 6

IV. Calculation of the Net Revenue on Which Line Extension Allowances
are Based 9 9

A. Positions of Parties 9 9

B. Electric Net Revenues-Current Status 15 15

C. Discussion-Electric 15 15

D. Gas Net Revenues-Current Status 22 22

E. Discussion-Gas 22 22

V. Whether the COS Factor Should Account for Replacement
in Perpetuity 24 24

A. Positions of Parties 24 24

B. Discussion 26 26

VI. Sources of Data for Calculating Line Extension Allowances 27 27

A. Positions of Parties 27 27

B. Discussion 29 29

VII. Whether Line Extension Allowances Should Continue to be Offered
in Portions of the Utilities' Service Territories Where POUs
are Offering Service 29 29

A. Positions of Parties 30 30

B. Discussion 31 31

VIII. Criteria for Requiring a Revenue Impact Estimate to be Included
in a Line Extension Allowance Change Advice Letter 32 32

A. Positions of Parties 32 32

B. Discussion 34 34

IX. Cost Components to be Recovered by the Monthly COO Charge 34 34

A. Positions of Parties 35 35

B. Discussion 36 36

X. The Relationship of the Monthly COO Charge to Monthly Charge
for Operations and Maintenance of Special Distribution Facilities,
and the Cost of Service Factor 38 38

A. Positions of Parties 39 39

B. Discussion 40 40

XI. Whether SCE's Sub-Transmission Costs Should be Considered
Distribution Costs for the Purpose of Calculating
the Line Extension Allowance 41 41

A. Positions of Parties 41 41

B. Discussion 42 42

XII. TURN's Proposal to Reduce and Freeze the Allowance 42 42

XIII. TURN's Proposal to Restrict Gas Allowances 43 43

XIV. Comments on Proposed Decision 43 43

XV. Assignment of Proceeding 44 44

Findings of Fact 44 44

Conclusions of Law 55 55

ORDER 58 58

ATTACHMENT A: List of Acronyms

OPINION ADDRESSING ELECTRIC AND GAS RESIDENTIAL LINE EXTENSION ALLOWANCE CALCULATION METHODOLOGY

I. Summary

By this order, we refine the calculation of line extension allowances, and the cost of ownership (COO) charges applicable to refundable costs in excess of the line extension allowance, for Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E), and Southern California Gas Company (SCG).¹ The above utilities are required to file advice letters to implement the refinements within 120 days. The refinements are as follows:

· Electric net revenue shall be based on the average distribution revenue per residential customer calculated as the total residential distribution revenue divided by the total number of residential customers.

· If the cost of an electric distribution rate discount is not included in residential electric distribution rates, but recovered separately from residential customers through a surcharge, the revenue effect of the discount shall be excluded from the calculation of average distribution revenue per residential customer.

· The results of the most recent California Residential Appliance Saturation Survey (RASS), implemented at the direction of the California Energy Commission (CEC), shall be used to determine average household appliance usage for each type of gas use.

· The average residential gas distribution rate shall be calculated as total residential distribution revenues divided by total residential usage.

· If the cost of a residential gas distribution rate discount is not included in residential gas distribution rates, but recovered separately from residential customers through a surcharge, the revenue reduction due to the discount shall be excluded from the average residential gas distribution rate calculation.

· Replacement for 60 years shall be included in the calculation of the cost of service (COS) factor.

· The types of data used to calculate the allowances shall include data that have been previously adopted by the Commission or derived from such data, recorded data, or data adopted by other state or federal agencies.

· The calculation of the COO charge applicable to refundable costs in excess of the line extension allowance shall include facility replacement for 60 years, and shall not include capital-related costs.

These applications are closed.

Due to the large number of acronyms used in this decision, a list of acronyms is included as Attachment A.

¹ As used herein, the term "line extensions" is used to denote both line and service extensions. A line extension is an extension of the distribution line. A service extension connects the distribution line to the meter. When a new residential dwelling is constructed, a service extension will be necessary to provide utility service. A line extension may also be necessary if the existing distribution line is not close enough to allow a service extension to be connected. The allowance is applied to the service extension first. Any remaining allowance is applied to the line extension.