3. Overview of the Litigated Issues

In the comparison exhibit, the parties identified specific issues for both SoCalGas and SDG&E and provided references into their exhibits in support of their litigation positions. Using that as an outline, in addition to the briefs and the record as a whole, this decision resolves the issues necessary to adopt just and reasonable rates for the post-test year periods until the next rate cases for SoCalGas and SDG&E:

1. Starting Conditions for Indexing

2. Indexing Method

3. Productivity Factor

4. Sharing Mechanism

5. Adjustment to Cost of Capital

6. Z-Factor - Allowance for Unique Events

7. Term of the Mechanisms

8. Electric Reliability Incentives - SDG&E

9. Safety Incentives

10. Service Quality Indicators

11. 2004 Incentives

12. Nuclear-related Cost Recovery - SDG&E

a. Program Features and Descriptions

It is important to note that this decision will try not to adopt and use ratemaking program features,¹⁶ presumptive naming conventions, and common ratemaking language without description or attribution; a specific example is the phrase "performance-based ratemaking" (PBR) which is used by SoCalGas and SDG&E to mean their specific ratemaking program that encompasses a bundle of specific ratemaking features. The term PBR may also mean a different ratemaking program with a different mix of features to other parties. In adopting a complete ratemaking package, this decision will consider the various proposals of SoCalGas and SDG&E and intervenors. A hybrid outcome can be reasonable in light of the whole record, and in consideration of a particular combination of features which may more fully serve the public interest.

¹⁶ By program features we mean for example that the ratemaking proposals for productivity factors can be separately considered and adopted or rejected without regard to whether we also adopt or reject other program features such as a sharing mechanism all of which are included as parts of PBR by SoCalGas and SDG&E.