IV. Comments on Proposed Decision
The Alternate Proposed Draft Decision of Commission President Lynch in this matter was mailed to the parties on January 4, 2001 in accordance with 311(g) and Rule 77.6(d). Comments should be filed by January 11, 2001 and reply comments, if any, should be filed by January 16, 2001.
1. A substantial amount of rain fell throughout California during the winter of 1998, attributed to El Niño, a natural, recurring and phenomenon that routinely brings heavy rains to Southern California, generally with advance warning.
2. The Governor of California and President of the United States declared various counties in which SoCalGas incurred pipeline and facility damage disaster areas during the 1998 El Niño-driven storms, effective February 2, 1998.
3. During February and March of 1998, SoCalGas sustained damage to pipelines and facilities in Ventura, Orange, Los Angeles, San Bernardino, Riverside, Kern, San Luis Obispo, and Santa Barbara counties, with the most serious damage to the pipelines occurring near the coastlines of Ventura and Orange counties.
4. SoCalGas's and ORA's stipulation allows SoCalGas to recover in rates incremental El Niño storm-related expense and capital costs through the CEMA consisting of a revenue requirement of $4,713,616 through 2002 with the remainder of the revenue requirement to be capitalized in SoCalGas' next rate case. The stipulation provides that SoCalGas will forego interest on the unamortized balance in the CEMA and will not seek future cost recovery for any damage attributed to the 1998 El-Niño driven storms.
5. Because TURN, an active party, did not join in the proposed stipulation, we will evaluate it under the criteria set forth under Rule 51.1(e).
6. Neither SoCalGas' application nor the stipulation contain sufficient facts from which to determine whether the El Niño-driven storms qualify as a disaster for CEMA purposes, and if so, the scope of the disaster, whether the damage for which cost recovery is sought was related to that disaster, whether the costs could have been avoided or reduced, or whether the costs for which recovery is sought are reasonable and incremental to normal pipeline and facility repair activity.
7. An evidentiary hearing was necessary to obtain necessary information to fully evaluate the application for coverage under the CEMA, the reasonableness of the costs sought for recovery, and the reasonableness of the stipulation.
8. SoCalGas had advance notice of the impending 1998 storms and made some preparations for it.
9. The CEMA was established after the 1989 Loma Prieta earthquake specifically for the purpose of promoting quick repairs for unexpected events.
10. Heavy winter rains, including El Niño-caused rains, regularly occur in California and cannot reasonably be viewed as unexpected events; at the most, El Niño-caused rains can be considered unusual or infrequent. Damage sustained from unusual or infrequent events is generally not appropriate for recovery under the CEMA.
11. The CEMA is subject to abuse where the disaster is not easily quantified, occurs regularly, with advance warning, and may be used as an expensive substitute for good resource planning.
12. Substantial rains fell in the Ventura/Hall Canyon area from January through May of 1998, with the greatest concentration falling in February of 1998.
13. In February and March of 1998 SoCalGas sustained damage to portions of pipelines 404, 406, 1004, 1005, and 1011 situated in the slopes, ridges, and canyons of the Ventura mountains. The pipelines were either exposed or ruptured due to landslides.
14. Of the costs sought for recovery under the stipulation, almost twice as much is sought for capital costs as for operating and maintenance expenses, with a substantial amount reflecting costs expended to relocate pipelines that were exposed as a result of landslides or to relocate ruptured pipelines.
15. The portions of the pipelines 404, 406, 1004, 1005, and 1011 exposed or ruptured during the 1998 storms were relocated as a preventative measure.
16. Relocating pipelines raises questions regarding the appropriateness of the initial siting of the pipeline, the nature of the company's actions to monitor and reduce or avoid predictable damage before it occurs, and the appropriateness of assigning costs for preventative measures on an emergency basis to the CEMA account.
17. The Ventura mountains area is geologically described as having an underlying pico formation, which consists of fine-grained sedimentary rocks that are weak and prone to earth movement, including landslides and soil creep.
18. SoCalGas had prior knowledge that these pipelines were situated in a geologically unstable area prone to earth movement and soil creep.
19. SoCalGas had prior knowledge that many of the pipelines were located adjacent to active landslides, that they were susceptible to future damage from such landslides, particularly from future rains, and that there were feasible and recommended ways to mitigate the risks.
20. After the pipelines ruptured or were exposed during the 1998 rains, SoCalGas relocated most of the portions of the damaged pipelines as previously recommended on the geologic maps and in the geologic reports.
21. The rainfall in February of 1998 and the total rainfall for January through May of 1998 in the Ventura/Hall Canyon area was excessive. This area also experienced excessive rainfall in several prior years, including almost identical rainfall totals in the January through May time period in 1995 and 1978 as in 1998. January of 1995 was almost as wet as February of 1998.
22. Landslides are particularly sensitive to rainfall and once the earth becomes saturated and the land begins to move, it will continue moving until movement is blocked by a resisting force.
23. The naturally weak and unstable ground was saturated and subject to continuous creep for a substantial time prior to the 1998 rains. It is likely that the 1995 rains contributed to the 1998 landslides.
24. SoCalGas' testimony that the pipeline damage was caused solely by rainfall occurring during the winter of 1997-98 is not credible.
25. We have insufficient evidence upon which to determine whether these costs could have been avoided or reduced, including whether some or all of these at-risk pipelines should have been relocated prior to 1998 and whether that would have been cost-effective for ratepayers.
26. We have insufficient evidence upon which to determine whether the costs associated with the repair and relocation of these pipelines are incremental to normal pipeline repair.
27. SoCalGas did not include a request for recovery for the work performed on Lines 1011 and 404 under Work Order 94377 in its application despite the fact that it sought recovery for "forecasted damages."
28. According to SoCalGas, in February or March of 1998, landslides on both sides of the portions of Lines 1011 and 404 covered under Work Order 94377 became very saturated and moved but did not encompass the pipelines. The pipelines did not suffer any damage during the 1998 storms.
29. Costs incurred in anticipation of the El Niño Storms are not properly recoverable.
30. Lost gase is a component of SoCalGas' BCAP and is not properly recoverable.
31. SoCalGas gave the earth movement adjacent to the portions of Lines 1011 and 404 covered under Work Order 94377 a low priority and did not undertake to remediate the situation for almost one-year. SoCalGas undertook "permanent remediation" work, which was to elevate the pipelines on caissons, beginning in January or February of 1999 and continuing through March or April of 1999.
32. We do not have a sufficient record upon which to find that the El-Niño related costs sought for recovery under the stipulation, are reasonable or in the public interest
33. An investigation into the proper treatment of future El Niño storm repairs would not likely lead to the establishment of a reasonable generic rule to govern recovery of costs attributed to storm damage; these issues are more appropriately considered in a factual context, on a utility-by-utility basis in conjunction with the utility's cost-of-service ratemaking proceeding. A proceeding generic to all utilities to revise the purpose of the CEMA and to consider guidelines regarding the types of repairs authorized, the proximity of the damage to the declared disaster, and the timing of the repairs to the discovery of the damage, however, may be appropriate.
1. The burden of proving that the settlement is fair is on the proponents.
2. It is the Commission's responsibility to independently assess and protect the public interest.
3. The Commission may reject a stipulation if it is not in the public interest, hold hearings on the underlying issues, allow the parties to renegotiate the settlement, or propose alternative terms.
4. The disaster declarations issued by the Governor and the President effective February 2, 1998 in the various Southern California counties in which SoCalGas suffered pipeline and facility damage during the El Niño-driven storms constitute events declared disasters by competent state or federal authorities for purposes of § 454.9.
5. Use of the CEMA for recording and recovering costs for restoring utility service to customers, repairing, replacing or restoring damaged facilities, and complying with governmental agency orders for damage caused by the 1998 El Niño-driven storms as of February 2, 1998 and through May of 1998 is appropriate under the statute as written.
6. Without a sufficient record to conclude that recovery of these costs is reasonable and in the public interest, we cannot approve the stipulation.
7. We cannot conclude on this record if whether the costs to repair or relocate pipelines 404, 406, 1004, 1005, and 1011 referenced in Work Orders 94190, 94191, 94192, 94194, 94195, 94197, and 94198 could have been avoided or reduced by relocating the pipelines prior to 1998 or whether these costs were incremental to normal pipeline repair.
8. We should exclude from future consideration the costs tracked in the CEMA associated with the elevation of Pipelines 404 and 1011 under Work Order 94377 undertaken to prevent damage to Lines 404 and 1011 from future threatened continued earth movement because this delayed activity cannot reasonably be viewed as incremental to normal pipeline repair activity, necessary action to restore services or make repairs after a declared disaster, or costs incurred immediately after the disaster, and as such is not the type of damage or emergency repair that is reasonably charged to the CEMA.
9. We should exclude from future consideration costs incurred in anticipation of the El Niño storms and the cost of lost of gas.
10. The Commission should reject the stipulation based upon the evidentiary record. We should permit SoCalGas to seek recovery of the costs SoCalGas sets forth in the stipulation and in the application in this proceeding, other than those specifically denied herein, in a future cost-of-service proceeding, for consideration of incorporation into rates post-2002. We should also permit SoCalGas to seek recovery of other capital costs incurred or that may be incurred that it attributes to the El Niño-driven storms, if it desires to pursue them, at that time. We should closely scrutinize these costs in accordance with the principles set forth in this decision and should incorporate the record from this proceeding into our review. We should permit SoCalGas and any other interested party to supplement the record developed in this proceeding with other evidence on the issues discussed in this decision.
11. For the specific costs SoCalGas seeks recovery, it should provide information on the following issues so that we may determine the appropriateness and desirability of providing separate cost recovery for repair of these pipelines:
1. The level of capital expenditure loss already built into existing rates, and the extent to which the El Niño loss costs are included in those rates;
2. The degree to which costs could have been avoided or reduced, including whether some or all of the facilities should have been relocated prior to the 1998 storms;
3. Whether the costs incurred are reasonable and incremental to regularly scheduled facility operation and repair that would occur as a result of prudent facility management, including whether the costs were or should have been included among the risks contemplated to be borne by the utility in current rates.
12. If SoCalGas seeks to include costs for facility repair that is attributed to earth movement in future base margin proceedings, it should specifically itemize and identify such costs and reference this decision and whatever decision is issued in the next cost-of-service proceeding so that we may determine their reasonableness.
13. This order should be effective today.
IT IS ORDERED that:
1. The Joint Motion of Southern California Gas Company (SoCalGas) and the Office of Ratepayer Advocates (ORA) for approval of the stipulation is denied.
2. If SoCalGas wants to recover the expenses and capital costs detailed in this CEMA request or other capital costs that it contributes to the El Niño-driven storms, it shall file, in its next cost-of-service proceeding, detailed information consistent with the discussion contained in the body of this order.
3. If SoCalGas seeks to include costs incurred in repairing or relocating facilities because of earth movement in future base margin proceedings, it shall specifically itemize and identify such costs and reference this decision and whatever decision is issued in the next cost-of-service proceeding so that we may determine their reasonableness.
4. In the future, we should consider whether to open a proceeding generic to all utilities to revisit the purpose of the CEMA and to consider whether to enact guidelines governing implementation of the statute, on such issues as the type of type of repairs authorized, the proximity of the damage to the declared disaster, and the timing of the repairs to the discovery of the damage, to ensure that the CEMA is not used as an expensive substitute for good resource planning.
Application 99-03-049 is closed.
This order is effective today.
Dated _______________________, at San Francisco, California.
************ APPEARANCES ************
Marcel Hawiger ********** STATE EMPLOYEE *********** Donna-Fay Bower Linda R Bytof |
********* INFORMATION ONLY ********** Kathleen H. Cordova Bruce Foster |
