6. A&G Direct Expenses

In addition to system-wide A&G expenses allocated to the Northern and Southern California Divisions, each division incurs direct A&G expenses. Direct A&G expenses are discussed below.

6.1. Southern California Division

6.1.1. Account 923 - Outside Services

Southwest recorded no expenses for Account 923, Outside Services, in 1997,1998 or 1999, and only a moderate amount of $3,313 in 2000. A significant increase to $83,925 was recorded in 2001, an amount Southwest attributes to work done in the I.01-06-047 regarding gas procurement. Southwest does not believe this level of expense will continue, and therefore estimated test year expense at $3,449. ORA forecasted the test year using a five-year average of recorded amounts resulting in an estimate of $17,448. In order to recognize the potential for other outside services in the test year, we adopt ORA's estimate based on a five-year average.

6.1.2. Account 925- Injuries and Damages

The difference between Southwest and ORA for Account 925, Injuries and Damages, is due to different estimating methods.⁵¹ The recorded annual expenses between 1997 and 2001 vary between minus 43% and plus 92%, and therefore we will adopt an average of the last five recorded years to forecast the test year Account 925 expense.

6.1.3. Account 928 - Regulatory Commission
Expense

ORA reviewed and accepted Southwest's estimate of $21,990, for Regulatory Commission Expense, however, this estimate assumes the next GRC will be in 2008. Since we are adopting a schedule providing for a GRC in 2007, the adjusted and adopted Account 928 expense is $27,467.

6.1.4. Account 930.1 - Safety Education

Southwest proposes an increase of $100,000 to its California Divisions for safety related advertising in 2003. Account 930.1, Safety Education, for the Southern California Division is allocated 82.15% of this amount based on the four-factor allocation method.⁵² ORA agrees with an increase in safety advertising expenses and recommends an amount of $112,218, compared to Southwest's request of $113,016. The difference between estimates is minimal and we support informing customers about gas safety; therefore, we will adopt Southwest's amount of $113,016.

6.1.5. Account 935 - Maintenance of General Plant

The recorded amounts for Account 935, Maintenance of General Plant, were similar for 1997 and 1998. A sharp increase was recorded in 1999 and 2000, and then a decline in 2001. The additional costs to maintain general plant reflect costs to serve additional customers. Therefore, we adopt Southwest's estimate of $223,113 for this account.

6.2. Northern California Division

6.2.1. Account 923 - Outside Services

After recording only $777 in 1997 for Account 923, Outside Services, Southwest's expenses jumped to over $164,000, and $155,000 in 1998 and 1999, respectively. Although there is no explanation in the record for these substantial increases, it appears that significant costs were incurred as a result of the new operations in Truckee and other areas in the Northern California Division. Consistent with our adopted methodology for the Southern California Division, we will adopt an amount based on ORA's use of a five-year average for this account.

6.2.2. Account 925 - Injuries and Damages

Variances in recorded Northern California Account 925, Injuries and Damages, expenses are substantial, exceeding variances in Southern California for this account. Although not explained by any party, it appears there was a refund, dividend, or other revenue in 1998 leading to a negative expense. Therefore, we will adopt an estimate based on ORA's five-year average.

6.2.3. Account 928 - Regulatory Commission
Expenses

ORA reviewed and accepted Southwest's estimate of $7,019, for Regulatory Commission Expense, however, this estimate assumes the next GRC will be in 2008. Since we are adopting a schedule providing for a GRC in 2007, the adjusted and adopted Account 928 is $5,264.

6.2.4. Account 930 - Miscellaneous General
Expenses

We will estimate Northern California Account 930, Miscellaneous General Expenses, expenses in the same way as our adopted estimate for Southern California. Therefore, we adopt Southwest's estimate of $19,947 that also includes an allocated amount for increased safety advertising.

6.2.5. Account 935 - Maintenance of General Plant

Year-to-year recorded amounts in Account 935 have generally declined during the past five years. In order to recognize the generally declining trend, we will adopt an amount that averages the past two years, or $19,154.