STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

November 4, 2003 Agenda ID #2955

Quasi-Legislative

TO: PARTIES OF RECORD IN RULEMAKING 02-06-041

This is the draft decision of Administrative Law Judge (ALJ) Brown. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:sid

Attachment

ALJ/CAB/sid DRAFT Agenda ID #2955

Quasi-Legislative

Decision DRAFT DECISION OF ALJ BROWN (Mailed 11/4/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Require California Natural Gas and Electric Utilities to Preserve Interstate Pipeline Capacity to California.

Rulemaking 02-06-041 (Filed June 27, 2002)

OPINION ESTABLISHING COST ALLOCATION FOR

EL PASO TURNED BACK CAPACITY

OPINION ESTABLISHING COST ALLOCATION FOR

EL PASO TURNED BACK CAPACITY 2

I. Summary 2

II. Background 2

III. Phase II 4

IV. Procurement of Additional Capacity 5

V. Allocation of Costs 5

A. Edison 6

B. Southwest Gas 7

C. SDG&E 8

D. PG&E 10

E. SoCalGas 14

1. Direct Assignment 15

2. Increasing SoCalGas' Core Holdings 16

3. Allocation of Stranded Costs 18

a) Newly Acquired Turned Back El Paso Capacity 18

b) Pre-Existing Excess El Paso Capacity 20

F. Adjustment to Gas Cost Incentive Mechanisms 21

G. Date for Recovery of Costs for Turned Back Capacity 22

H. Releases of Capacity 23

I. Transwestern Pre-Existing Capacity on PG&E System 25

J. Strategic Storage Reserve 26

VI. Comments on Draft Decision 28

VII. Assignment of Proceeding 28

Findings of Fact 28

Conclusions of Law 31

ORDER 32

OPINION ESTABLISHING COST ALLOCATION FOR

EL PASO TURNED BACK CAPACITY

I. Summary

This opinion establishes cost allocation methodologies for Pacific Gas and Electric Company (PG&E), Southern California Gas Company (SoCalGas), Southern California Edison Company (Edison), Southwest Gas Corporation (Southwest Gas), and San Diego Gas & Electric Company (SDG&E) for the costs of the turned back capacity on El Paso Natural Gas Company's (El Paso) interstate pipeline that the utilities were ordered to procure pursuant to Decision (D.) 02-07-037.