COM/SK1/cvm ALTERNATE DRAFT Agenda ID #4799

Alternate to Agenda ID #4798

Ratesetting

Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER KENNEDY

(Mailed 7/19/2005)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of SAN DIEGO GAS & ELECTRIC COMPANY under the Catastrophic Event Memorandum Account (CEMA) for Recovery of costs related to the 2003 Southern California Wildfires. (U 902-M)

Application 04-06-035
(Filed June 28, 2004)

OPINION ON THE REASONABLENESS OF SAN DIEGO GAS
AND ELECTRIC COMPANY'S RESPONSE TO THE 2003 WILDFIRES

(See APPENDIX A for Appearance Lists)

TABLE OF CONTENTS

TITLE PAGE

1. Summary 2 2

2. Background 2 2

a. History of the Wildfires 3 3

Proposed Recovery of Wildfire Account Costs Through May 2004 7 7

3. Procedural History 7 7

4. The Burden of Proof 9 9

a. The Standard for Prudent Managerial Action 10 10

5. Review by Other Parties 12 12

6. Restoration Management 13 13

7. Reasonableness of Costs 14 14

a. ORA's Examination 15 15

b. UCAN's Recommendations 16 16

1. Food Services 17 17

Discussion 19 19

2. Avoided Pole Test and Treat Expenses 20 20

Discussion 21 21

3. Franchise Fees and Uncollectibles 22 22

Discussion 22 22

4. Tree Inventory 23 23

8. Ratemaking Treatment 23 23

a. Allocation of Support Costs to Expense and Capital 23 23

Discussion 25 25

b. Amortization of the Wildfire Account 27 27

Discussion 27 27

9. Labor Costs and Incentive Compensation 28 28

Discussion 29 29

10. SDG&E's Wildfires Update 29 29

11. Comments on Proposed Decision 33 33

12. Assignment of Proceeding 33 33

Findings of Fact 33 33

Conclusions of Law 37 37

ORDER 38 38

APPENDIX A

1. Summary

The firestorm of 2003 was the largest disaster of this type ever to occur in the State of California. Nearly 400,000 acres were burned, 16 lives were lost and more than 2,400 homes were destroyed in San Diego County alone. SDG&E experienced severe damage to its infrastructure with approximately 3,200 power poles, 700 spans of wire, 400 transformers and more than 100 other pieces of related equipment damaged and needing to be replaced. In total, approximately 108,000 of SDG&E's electric customers and 2,050 gas customers were left without service as a result of the firestorm.

By November 2, 2003, only one week following the start of the fire, SDG&E had restored service to more than 102,000 electric customers and had successfully restored service to the remaining 6,000 customers primarily living in areas of rugged terrain by November 20, 2003. This exceptional effort has been the subject of numerous accolades and commendations from customers as well as government officials thanking the Company for a job well done.

This decision finds San Diego Gas & Electric Company (SDG&E) prudently managed its response to the firestorm of 2003 in its service territory and allows the recovery of certain recorded costs incurred to restore service and repair or replace those portions of its gas or electric distribution systems damaged or destroyed by a series of catastrophic wildfires. This decision allows SDG&E to recover the full amount of its request, $40.595 million.