IV. Review of the Stipulation

The stipulation provides for a revenue requirement of $4,713,616 through 2002, an 8.9% reduction from SoCalGas' application.²¹ It excludes $7,687 in costs incurred in anticipation of the El Niño storms and $286,118 for lost gas, as recommended by ORA, but allows an additional $425,000 in costs that were incurred after the application was filed but before ORA and SoCalGas entered into the stipulation.²² It also caps recovery for future costs that were not yet incurred.²³ SoCalGas contends that the stipulation precludes it from recovering over $1.2 million in costs properly attributable to the El Niño caused storms of 1998 and that "undoubtedly greater amounts that have yet to be fully discovered." (Opening Brief at p. 11.)

We find that the settlement, as modified and clarified herein, is reasonable in light of the whole record, consistent with the law, and in the public interest. The exclusion of costs incurred in anticipation of the El Niño storms and the lost gas, by themselves, do not make the settlement reasonable since the former costs are excluded from the CEMA by prior Commission decision prohibiting the recovery of costs incurred prior to and in anticipation of a catastrophic event (D.93-11-071)²⁴ and the latter reduction is necessary to prevent double counting since it is a component of SoCalGas' BCAP. However, SoCalGas assists in making the stipulation reasonable by agreeing, at the evidentiary hearing, to forego interest on the unamortized balance in the CEMA that would otherwise have been recoverable pursuant to its CEMA tariff, which totals $361,026 for 2000-2003.

A key element of the stipulation relates to SoCalGas' and ORA's agreement to cap recovery of future costs attributed to the El Niño caused storms of 1998 to $425,000 in actual incurred costs. Testifying in support of the stipulation, SoCalGas witness Yee confirmed that the negotiated settlement included a "cut off from recovery of any residual or ongoing incremental O&M, El Niño O&M and capital costs at $425,000," noting that, to date, SoCalGas "has incurred in excess of $317,000 above the negotiated settlement of $425,000" and stating that "we expect that those costs will continue to increase." (Yee, Tr. Vol. 1, p. 29.) Mr. Yee later sponsored Exhibit 19, which shows that $445,158 in repair costs were incurred up to November 30, 1999 and are excluded from recovery under the stipulation. Mr. Saline also testified to an anticipated $40,000 to $50,000 in costs to restore withdrawal lines that were pushed off their supports by mud, which he attributes to the El Niño storms. (Tr. Vol. 2, pp. 181; 192.)

We believe that this agreement is critical to the reasonableness of the settlement. We interpret this agreement to mean that SoCalGas cannot ever recover any further costs related to damage sustained as a result of the 1998 El Niño-caused storms. Whether the 1998 storms are the sole, or a contributory cause, this is particularly important since, as we noted earlier, SoCalGas' expert witness specifically opined that the effects of the storms might be manifested weeks, months, and even years later. A further clarification, however, is necessary. In its brief, SoCalGas characterizes this agreement to limit its recovery for 1998 El Niño-related costs to recovery through the CEMA. ORA does not discuss the cap in its brief and it is not further addressed in either the Joint Motion or the stipulation.

All damage attributed to a declared disaster is properly recovered through the CEMA. SoCalGas was not required to seek to recover disaster-related costs through the CEMA; however, since it has elected to do so, we believe that all costs caused by such disaster should be recovered in this manner. Thus, we also interpret the stipulation to preclude SoCalGas from recovering any costs resulting from damage traceable to the 1998 El Niño storms, including future damage caused by further earth movement resulting from the removal of "resisting forces" occurring during the 1998 landslides and in the areas weakened by the 1998 storms, in any future rate proceeding. SoCalGas will not be permitted to include the costs of repairing such pipelines in its cost of service showing or as a "Z" factor adjustment in future cost-of-service proceedings. We clarify the stipulation accordingly.

Further, we reduce the $425,000 in actual incurred costs by $110,000 since we have found that costs associated with the relocation of Lines 404 and 1011 under Work Order 94377 in the amount of $110,000 should not be recovered under the CEMA. We modify the stipulation accordingly.

In sum, we find the stipulation as modified and clarified herein, reasonable in light of the record as a whole because: (1) an issue remains whether relocating the pipelines prior to the storms of 1998 would have been cost-effective; (2) the total dollar amount of the settlement, as modified herein to remove $110,000 in costs associated with work performed under work order 94377, is reasonable as a compromise between strongly held interests, in light of SoCalGas' determination to forego accrued interest and waiver of the costs of recovery of El Niño-caused storm damage subsequent to entering into the stipulation, as clarified above; and (3) we are satisfied that ORA and SoCalGas represent a broad range of interests-ORA represents the long-term interests of all California utility consumers and SoCalGas represents the interests of the utility. This stipulation in this case, as modified and clarified, satisfies our concern that the CEMA not be abused by using it to recover costs that may be more appropriately considered in a utility's cost-of-service proceeding. Thus, the stipulation, as modified and clarified herein, generally balances the various interests at stake. For similar reasons, with our additional clarification, and given the lack of opposition to the stipulation, we find that the stipulation is in the public interest.

If the stipulating parties agree with the modifications to the stipulation, we adopt the stipulation as modified. If not, we reject the stipulation and render this decision based on the evidentiary record developed in this case.