VII. Test Year Forecast Methodology

SoCalGas and SDG&E used the following method to estimate Test Year 2004 expenses: Both SoCalGas and SDG&E identified, a Base Year 2001 of recorded data and then adjusted for known downward changes for one-time or non-recurring expenses; the companies then escalated the residual base Year for inflation in 2002, 2003 and Test Year 2004. To this adjusted base, SoCalGas and SDG&E added any forecast for new activities begun in 2002, 2003 or forecast for 2004. This addition was in 2004 dollars. The escalated base year with the two adjustments for changes formed the basis for the test year estimate. SoCalGas and SDG&E then provided testimony to justify the level of activity and the purpose of the activity represented by the estimate. This is similar to a "budget-based" method that the Commission has previously found to be reasonable if properly applied (see Southern California Edison, 64 CPUC 2d 241, 316 (D.96-01-001) or California Water Service Company D.03-09-021, mimeo., pp. 35 and 36.) Where SoCalGas and SDG&E used a different method to forecast Test Year 2004 they provided a specific explanation and offered a justification for that method. The appropriateness of this method depends upon a thorough review of the supporting data.

ORA varied its methodology, from account-to-account as discussed in detail where applicable.

TURN raised what it believed were serious concerns about the SoCalGas and SDG&E forecast methodology, including its development of Base Year 2001 costs. It cited the large number of adjustments and reallocations made by SoCalGas and SDG&E²⁴ and pointed out that recorded 2002 data, available late in the proceeding, were different than the forecast 2002 expenses, one step towards estimating Test Year 2004.

UCAN made similar objections to the Base Year 2001 and subsequent forecast method used by SDG&E; again, we will work with the data we have available. UCAN also argued that the rate application as filed is an inadequate base for rates to be in effect for five years.²⁵

²⁴ TURN opening litigation brief, pp. 9-13.

²⁵ UCAN opening litigation brief, p. 42.