O R D E R

IT IS ORDERED that:

1. Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E) shall file a compliance advice letter within 14 days of the effective date of this decision that makes the necessary changes to the preliminary statements to reflect the implementation of this decision.

2. For post-test year ratemaking beginning in 2005, SoCalGas and SDG&E are authorized to file for rate adjustments using the following mechanisms:

a. A Margin Per Customer (MPC): where MPC_t = MPC_t-1 (1 + Inflation_t - X-Factor_t - Stretch);

b. A Base Margin: where Total Base Margin_t = (MPC_t * Customer Forecast_t) ± any Z-factor Adjustments;

c. The Gas and Electric Indices as described in this decision; and

d. All other post-test year ratemaking components as authorized in this decision.

3. In the next proceeding SoCalGas and SDG&E shall either propose an X factor adjusted to reflect good to excellent performance (by excluding poor performance from the request) or propose an appropriate stretch factor to offset mediocrity in the study group.

4. The post-test year ratemaking X-factors are 1.16% for gas and 0.47% for electric distribution for both SoCalGas and SDG&E.

5. The post-test year ratemaking for Margin Per Customer includes a 0.5% stretch factor for the gas operations for both SoCalGas and SDG&E and a 0.25% stretch factor for electric operations for SDG&E.

6. SoCalGas and SDG&E may decline the adopted sharing mechanism at the time they file the implementation advice letter.

7. The adopted Sharing band, and rates of sharing, for SoCalGas and SDG&E are:

Authorized Sharing
Bands	Basis Points Above/Below Authorized Rate of Return	Company	Customer
Inner	0-50	100%	0%
1	50-75	35%	65%
2	75-100	45%	55%
3	100-125	55%	45%
4	125-150	65%	35%
5	150-200	75%	25%
6	200-250	85%	15%
7	250-300	95%	5%
Outer	More than 300	100%	0%

8. The otherwise adopted sharing mechanism does not apply for SoCalGas and SDG&E to 2004.

9. SoCalGas and SDG&E shall file traditional annual cost of capital applications beginning in 2005.

10. SDG&E is authorized to have three Electric Incentives: System Average Interruption Duration Index (SAIDI), System Average Interruption Frequency Index (SAIFI), and Momentary Average Interruption Frequency Index (MAIFI). These include deadbands, livebands, and incremental rewards or penalties as shown:

	Adopted Reliability Incentives
		SAIDI	SAIFI	MAIFI
	5 Year Base	64	0.68	0.77
	Stretch Factor	1	0.01	0.01
	Target	63	0.67	0.76
	Deadband	+/-2	+/-0.02	+/-0.02
	Liveband	+/-15	+/- 0.15	+/- 0.30
	Reward/Penalty	$250,000	$250,000	$50,000
	Range - Millions	$3.75	$3.75	$1.00

11. SDG&E's Service Guarantee mechanism is terminated.

12. SoCalGas and SDG&E are each authorized to have four Service Quality incentives as shown:

Adopted Indicators SoCalGas and SDG&E	Target	Deadband	Maximum Reward/Penalty Each Company
Phone/Office Contact Satisfaction	83.4%	+/- 1.0%	+/- $500,000
Field Visit Satisfaction	94.1%	+/- 1.0%	+/- $500,000
Field Service Orders Appointments Provided/Percent Made	Varies	35-40% provided 99% Met	+/- $600,000
Call Center Responsiveness	80% within 60 Seconds	+/- 2%	+/- $1,500,000

13. SoCalGas and SDG&E shall include a detailed report in their next rate proceedings on the monitor-only service quality indicators as shown:

Adopted Indicators	SoCalGas	SDG&E
Level of busy signal	_	_
Estimated meter reads	_	_
Leak response time	_	_
Missed appointments	_	_
Problem resolved on first visit	_	_
Elapsed time	_	_
Percentage of abandoned calls	_	_
Shortest time to CSR	_	_
Gas emergency response time	_	_
Electric emergency response time	N/A	_
Complaints	_	_

14. This proceeding is closed.

This order is effective today.

Dated ____________________, at San Francisco, California.