SoCalGas Request for 100%
Balancing Account Protection

In its April 3, 2002 Response, SoCalGas objected to ORA's Motion to Suspend the Procedural Schedule and Defer the Proceeding. However, SoCalGas stated that should ORA's motion be granted, the continuance should address two items to ensure that no party was harmed by the substantial delay. First, SoCalGas should be given 100 percent balancing account protection of noncore revenue risk from the time the 2003 BCAP was to take effect (January 1, 2003) until the date the new BCAP rates go into effect; and second, the appropriate ratemaking treatment and allocation of the costs to expand Line 6900 should be resolved. The issue relating to the balancing account treatment for noncore revenue risk is addressed in this Decision. The treatment of cost allocation for expansion of Line 6900 was heard in Investigation (I.) 00-11-002 and will be decided in that case.

In the 1999 BCAP decision (D.00-04-060), the Commission approved the Joint Recommendation (JR) of various parties that adopted, among other things, a 75%/25% (ratepayer/shareholder) balancing account mechanism for noncore throughput variation. The 1999 BCAP decision found this to be a reasonable compromise since ORA and other parties took the position that SoCalGas' forecast was too low, while SoCalGas opined that ORA's forecast was too high.¹ In its decision, the Commission indicated that the 75/25 balancing account would continue to place shareholders at some risk for discounting, while protecting shareholders and ratepayers in the event the adopted forecast is significantly off the mark.² In its response to ORA's Motion to defer the BCAP proceedings, SoCalGas states that the parties to the JR intended that the agreements reached on specific items would apply only through the end of the BCAP period, December 31, 2002.³ This date is consistent with Findings of Fact 10 and 11 in D.00-04-060.

In its Response, SoCalGas indicates that it is forecasting significantly reduced noncore throughput compared to that adopted in the 1999 BCAP decision - an annualized average reduction of about 10% in total gas demand, from the 950.4 MMdth adopted in the BCAP to 857.0 MMdth. However, the forecasted reduction in noncore throughput is more than 20 percent, from 610.5 MMdth adopted in the 1999 BCAP to 473.2 MMdth. If SoCalGas' revised forecast for noncore throughput for the years 2003 and 2004 is realized, that portion of its revenue requirement for which noncore customers are responsible will be collected from annual noncore throughput of approximately 473.2 MMdth based upon rates that were calculated assuming annual noncore throughput of approximately 610.5 MMdth. Thus, there would be a significant undercollection of the revenue requirement. Under the current 75/25 (ratepayer/shareholder) balancing of noncore revenue throughput risk, 25 percent of the resulting undercollection of revenue would never be recovered from noncore customers. SoCalGas argues that this outcome, resulting from a delay in the proceeding neither requested nor caused by SoCalGas, would be "unconscionable and unquestionably punitive to SoCalGas' shareholders and would amount to a windfall for SoCalGas' noncore customers."⁴

SoCalGas argues that if the BCAP proceeding is suspended, no one will ever know what the Commission would adopt as the appropriate noncore throughput forecast for 2003 and 2004. However, it predicts that an application filed in the first half of 2003 will likely morph into a 2005 BCAP, with rates becoming effective in late 2004 at the earliest. Consequently, the appropriate test years for the BCAP, with the adoption of ORA's motion, would be 2003 and 2004. With this delay, there will never be a Commission decision identifying the appropriate forecast for those two years. SoCalGas speculates that it is highly unlikely there will be any opportunity to retroactively adjust noncore rates to compensate them for the revenue it would have received during 2003 and 2004 had the 2003 BCAP been litigated on schedule.

For these reasons, SoCalGas argues that it is only fair and equitable for the Commission to issue an order instituting 100 percent balancing account protection for noncore throughput revenue risk during the period of delay, from January 1, 2003 until the new BCAP rates go into effect. It states that an order of this type will mitigate against the adverse consequences of delaying the proceeding. With this mitigation, neither SoCalGas' shareholders nor its noncore customers will be penalized or unfairly enriched by the failure of the Commission to recalibrate noncore throughput forecasts as presently scheduled. Furthermore, SoCalGas states that the 100 percent balancing does not require any change in revenue requirement and will not require a change in rates except if required to amortize an over or undercollection in a regulatory balancing account. SoCalGas indicates that the significant decline predicted for noncore throughput is driven by forces beyond the control of SoCalGas, including the construction of new, efficient electric generation facilities not located on SoCalGas' system that will impact the load of existing electric generation customers.