10. Comments on Draft Decision

This is an uncontested matter in which the decision substantially grants the relief requested. However, since our approval is granted subject to two minor conditions, public review and comment is appropriate. Because of the potential for working and cushion gas withdrawals at Montebello to ease capacity constraints on SoCalGas' system as soon as that gas becomes available, public necessity requires that we reduce the 30 day comment period. Therefore, pursuant to Rule 77.7(f)(9), comments on the draft decision shall be filed and served by May 21, 2001. The electronic service protocols established for this proceeding will facilitate the short timeline for comment. Comments shall be served on Assistant Chief Administrative Law Judge Angela Minkin, ang@cpuc.ca.gov, in addition to the service list.

Findings of Fact

1. All parties are signatories to the Amended Settlement which supercedes the November Settlement.

2. The only difference between the November Settlement and the Amended Settlement is that the parties now recommend an increase in the size of the up-front reduction in rates from $28.3 million to $44.1 million. This increase is attributable to current forecasts of higher natural gas prices than those forecast in November 2000.

3. Montebello is a small natural gas storage field in a non-strategic location and compared to SoCalGas' other storage fields in Southern California, has high operating costs, low injection/withdrawal capability (with deliverability of only 100-200 million cubic feet per day (MMcfd) for a couple of days at low inventory levels), low on-going revenue potential, and high salvage value.

4. Under current operational and physical conditions, if Montebello were not abandoned, the approximately 26 Bcf of working and cushion gas now stored there would remain unavailable.

5. SoCalGas' other storage fields in Southern California together have 105 Bcf of inventory capacity, which if fully injected, is physically more than enough to avoid gas curtailments on the SoCalGas system next winter.

6. The potential for inadequate storage next winter is not due to insufficient storage capacity.

7. Because the gas stored at Montebello is already in the Los Angeles basin, it does not need to be transported over interstate pipelines or SoCalGas' backbone transmission to reach customers. Therefore withdrawal of the working and cushion gas at Montebello will provide flowing supply that should ease transmission capacity constraints in the near term, effectively adding an average of 50 MMcfd of transmission capacity to the SoCalGas system for about seven months, and a lesser amount thereafter.

8. On this record, it appears that abandonment of Montebello will have no negative effect on winter storage for the core or the noncore and may have a positive impact. If total flowing supply into the system, including Montebello gas withdrawals, is greater than demand, then net injection into storage will occur. If flowing supply, including Montebello gas withdrawals, is equal to demand, then no net injection into storage will occur, but withdrawals from other storage supplies may be eliminated.

9. Theory predicts continued high prices as long as the system continues to operate at or near capacity. Therefore, release of the Montebello cushion gas into the system should tend to exercise downward pressure on the market price of gas on SoCalGas' system.

10. The treatment of gain on sale of utility property has been essentially a case by case assessment and ratepayer/shareholder sharing ratios vary widely. However, the 50/50 split proposed in the Amended Settlement is within the range of outcomes the Commission has approved in the past.

11. The 70/30 allocation between core and noncore customers of the ratepayer gain on sale represents the general allocation of storage costs between these customer groups over the course of several past biennial cost allocation proceedings (BCAPs). The allocation of the ratebase reduction among customer classes follows allocation among these classes of the costs of Montebello in rates.

12. Each week or month that market prices decrease above the current high, shareholders and ratepayers lose value. For ratepayers, delay also means that the Montebello assets remain in ratebase and thus, a component of the monthly rates they pay.

13. The Amended Settlement substantially complies with each of the all-party settlement guidelines.

14. The Commission's staff conducted a review of SoCalGas' proposed project and issued a draft MND for public review and comment.

15. Staff prepared the Final MND, including the "Mitigation Monitoring and Reporting Program," in compliance with CEQA.

16. The Final MND, including the "Mitigation Monitoring and Reporting Program," is adequate for the Commission's decision making purposes.

17. Following receipt of comments, the Commission's staff prepared a Final MND.

18. With the incorporation of the mitigation measures in the Final MND, including the "Mitigation and Monitoring and Reporting Program," SoCalGas' proposed project will not have potentially significant adverse environmental impacts.

19. Information obtained in the course of environmental review indicates that Montebello can become productive in two-three weeks, rather than the 30 day-period indicated in the Amended Settlement. Therefore, it is fair and reasonable to require SoCalGas to commence gas withdrawals at Montebello as quickly as safe operating practices will allow.

20. It is fair and reasonable to authorize any signatory to the Amended Settlement to petition for modification of this decision to permit an additional rate reduction effective in 2002, should natural gas prices increase above current forecasts such that the estimates of ratepayer gain increase significantly above $30 million.

21. Subject to these two conditions, the Amended Settlement (which includes the updated Appendix A attached to SoCalGas May 3, 2001 ACR response) is reasonable and in the public interest.

Conclusions of Law

1. A hearing is not required.

2. The Final MND was prepared in compliance with and pursuant to CEQA.

3. The Final MND should be adopted.

4. In compliance with CEQA, SoCalGas must agree to, and is required to carry out, all mitigation measures adopted in the Final MND, including the "Mitigation Monitoring and Reporting Program."

5. SoCalGas' May 3, 2001 motion for approval of the Amended Settlement (which includes the updated Appendix A attached to its ACR response) should be granted subject to the two minor conditions identified herein.

6. Because of the public interest in maximizing the operational and economic benefits which are expected to flow from the Amended Settlement, the following order should be effective immediately.

7. Public necessity requires that we reduce the 30-day comment period and on our own motion, we do so.

ORDER

IT IS ORDERED that:

1. The May 3, 2001 motion of the Southern California Gas Company (SoCalGas) for approval of the Amended Settlement, which includes the updated Appendix A attached to SoCalGas May 3, 2001 response to the Assigned Commissioner's Ruling, is granted subject to the following minor conditions:

(a) SoCalGas shall commence gas withdrawals at Montebello as quickly as safe operating practices will allow.

(b) Any signatory to the Amended Settlement may petition for modification of this decision to permit an additional rate reduction effective in 2002, if natural gas prices increase above current forecasts such that the estimates of ratepayer gain increase significantly above $30 million.

2. The Final Mitigated Negative Declaration , Initial Study, and Mitigation Program for Decommissioning and Sale of Southern California Gas Company's Montebello Gas Storage Facility, Montebello California (Final MND) is adopted.

3. SoCalGas shall fully implement the mitigation measures required by the Final MND, including the "Mitigation Monitoring and Reporting Program," and these measures are conditions of project approval.

4. SoCalGas shall enter into a cost reimbursement agreement with the Commission for expenses accrued from implementing the mitigation and monitoring plan described in the Final MND. Compliance with this agreement, including timely payment, is a condition of approval of this decision.

5. The Environmental Projects Unit of the Energy Division shall supervise and oversee abandonment and sale of the project insofar as it relates to monitoring and enforcement of the mitigation measures described in the Final MND. The Energy Division may designate outside staff to perform on-site monitoring tasks. The Commission project manager (Environmental Projects Unit, Energy Division) shall have the authority to issue a Stop Work Notice on the entire project, or portions thereof, for the purpose of insuring compliance with the mitigation measures described in the Final MND. Abandonment and sale may not resume without a Notice to Proceed issued by the Environmental Projects Unit of the Energy Division.

6. SoCalGas shall send a copy of this decision to concerned local permitting agencies not later than 30 days from the date of this order.

7. Resolution ALJ 176-3038 is amended to state that no hearings are necessary on this application.

8. This proceeding is closed.

This order is effective today.

Dated _____________________ in San Francisco, California.

ATTACHMENT A

Notice of availability of the Final Mitigated Negative Declaration (MND) was mailed to all parties to the application as well as all who commented on the draft MND (entitled "Mitigated Negative Declaration, Initial Study, and Mitigation Program for Decommissioning and Sale of Southern California Gas Company's Montebello Gas Storage Facility, Montebello California"). Due to the volume of this document, only Chapter 7, entitled "Summary of Mitigation", is attached to this decision.

The final MND will be posted on he Commission's web site at www.cpuc.ca.gov. Click on "Environment", then "Current Projects," and then "Montebello."

If you are unable to access this document electronically, please call Dain Anderson at MHA Environmental Consulting, Inc. at 650-373-1200.

(END OF ATTACHMENT A)

ATTACHMENT A-1

"Mitigation Monitoring and Reporting Program"

(End of Attachment A-1)