STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

March 28, 2006 Agenda ID #5529

Ratesetting

TO: PARTIES OF RECORD IN APPLICATION 02-12-027 et al.

This is the draft decision of Administrative Law Judge (ALJ) Long. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the Assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:jt2

Attachment

ALJ/DUG/jt2 DRAFT Agenda ID #5529

Ratesetting

Decision DRAFT DECISION OF ALJ LONG (Mailed 3/28/2006)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of SOUTHERN CALIFORNIA GAS COMPANY for authority to update its gas revenue requirement and base rates. (U 904 G)

Application 02-12-027
(Filed December 20, 2002)

Application of SAN DIEGO GAS & ELECTRIC COMPANY for authority to update its gas and electric revenue requirement and base rates. (U 902-M)

Application 02-12-028
(Filed December 20, 2002)

Investigation on the Commission's Own Motion into the Rates, Operations, Practices, Service and Facilities of Southern California Gas Company and San Diego Gas & Electric Company.

Investigation 03-03-016
(Filed March 13, 2003)

OPINION ON PHASE 3 FOR THE LIMITED REHEARING
GRANTED IN DECISION 05-05-018 FOR THE CALCULATION
OF SAN DIEGO GAS & ELECTRIC'S SHARE OF
SAN ONOFRE NUCLEAR GENERATING STATION COSTS

TABLE OF CONTENTS

Title Page

OPINION ON PHASE 3 FOR THE LIMITED REHEARING
GRANTED IN DECISION 05-05-018 FOR THE CALCULATION
OF SAN DIEGO GAS & ELECTRIC'S SHARE OF SAN ONOFRE
NUCLEAR GENERATING STATION COSTS 2 2

Summary 2 2

Background 2 2

Procedural History Phase 3 4 4

Scope of the Rehearing 4 4

Relevant Record and Exhibits 5 5

Revenue Requirement Adopted in D.04-12-015 7 7

Clear and Convincing Evidence Requirement 12 12

Results Sharing 13 13

Internal Market Mechanism 15 15

Post-retirement Benefits Other than Pensions 17 17

Contractual Overheads 17 17

Escalation Rates 18 18

Adopted Changes to the Revenue Requirement 18 18

Attrition Year 2005 19 19

Comments on Draft Decision 19 19

Assignment of Proceeding 19 19

Findings of Fact 20 20

Conclusions of Law 20 20

ORDER 21 21

OPINION ON PHASE 3 FOR THE LIMITED REHEARING
GRANTED IN DECISION 05-05-018 FOR THE CALCULATION
OF SAN DIEGO GAS & ELECTRIC'S SHARE OF
SAN ONOFRE NUCLEAR GENERATING STATION COSTS

Summary

The Commission granted limited rehearing on the forecast of San Diego Gas & Electric Company's (SDG&E) share of San Onofre Nuclear Generating Station (SONGS) costs in order to be consistent with Decision (D.) 04-07-022 and ensure that there is a sufficient record. This decision clarifies the record and adopts a correct forecast for test year 2004 and the attrition year 2005. This decision finds that D.04-12-015 under-estimated test year 2004 expenses by $5.4 million and that post-test year 2005 expenses should include an escalated allowance to adjust for the under-estimated expenses.