3. Appropriate Recorded Data
3.1. 2006-Recorded Data
SDG&E and SoCalGas filed for rate increases in compliance with the Commission's extant rate case plan. The applicants served a notice of intention to file the applications in the summer of 2006 based on the latest available 2005-recorded data and reported in the format of the Federal Energy Regulatory Commission's (FERC) Uniform System of Accounts (USOA). DRA reviewed the filing and provided a list of deficiencies for SDG&E and SoCalGas to correct or resolve in the applications filed in December 2006.
SDG&E and SoCalGas do not use the USOA to manage and control operations - instead there is a cost control system based on areas of responsibility and function or cost centers.5 Therefore, for many witnesses, it was necessary to translate these operating cost center control accounts into FERC-USOA accounts for the rate case. This in turn led to significant adjustments. Even though the accounting system was able to generate a translation, SDG&E and SoCalGas made numerous adjustments to "manually" reallocate many overhead accounts or activities to the FERC-USOA accounts for rate case presentation. SDG&E and SoCalGas then forecast or escalated 2005 costs to derive 2006 and 2007 costs in order to ultimately forecast in much greater detail Test Year 2008.
In the spring of 2007, the 2006-recorded data was available and SDG&E and SoCalGas provided it to the intervenors. But the applicants were unable to replicate the adjustments to 2005-recorded data on the 2006-recorded data in the very limited time frame before the intervenors served testimony for the evidentiary hearings. Nevertheless, DRA and others used 2006-recorded data in many instances to substitute for the interim 2006 forecast as a part of calculating ratemaking adjustment recommendations for Test Year 2008. SDG&E and SoCalGas objected to this use of 2006-recorded data as beyond the scope of the rate case plan. The companies argue that the rate case plan narrowly limits up-dating during the rate case and that up-dating for 2006 exceeds the scope of permissible up-dating. SDG&E and SoCalGas objected that the results were inaccurate because the intervenors did not consider the numerous 2005 adjustments which could not be accurately reflected in the 2006-recorded data.
We disagree with SDG&E and SoCalGas on whether the updating exceeds the permissible rate case updates: the issue with using 2006 data is whether it is compatible with the other years of recorded data in order to derive trends and forecasts. However, we find that the 2006 data was not in a format compatible with the adjusted data for 2005 and prior years. We, therefore, agree with SDG&E and SoCalGas that it is unreasonable in this instance to use unadjusted 2006-recorded data to substitute for the 2006 forecast based on adjusted 2005-recorded data because it is an inconsistent base for re-forecasting 2007 and 2008. Neither DRA nor any other intervenor used 2006-recorded data for every instance of re-forecasting 2007 and deriving a different Test Year 2008. In fact, SDG&E and SoCalGas assert that the intervenors only used 2006-recorded data when the unadjusted 2006-recorded data was a lower amount than the applicants' forecast 2006. No party rebutted this assertion. Therefore, we would not adopt any use of 2006-recorded data, as proposed by DRA and others, if we adopted a litigated outcome for Test Year 2008. We, therefore, find the intervenors did not reasonably use unadjusted 2006-recorded data to derive their 2008 test year forecasts.
3.2. Accounting Systems
It is clear from our record that using the FERC-USOA format added an unnecessary level of complexity to the current proceeding. In recent years, the companies have filed rate cases in a format which requires translation or allocation from the in-house accounting and management control system used to operate the companies. SDG&E and SoCalGas do not manage operations on a daily basis using the FERC USOA for reporting and control. They clearly made numerous and extensive conversions of operating data to fit the USOA. As already noted, this meant the company could not do a complete conversion of 2006 data into the rate case format based on the FERC USOA.
To the extent that SDG&E and SoCalGas operate the utilities with a different accounting system which matches costs to areas of operational responsibility, it is reasonable to allow and even require SDG&E and SoCalGas to file the next GRCs formatted to reflect the actual operations of the companies. We therefore expect fewer adjustments and re-allocations because we will have the next recorded base year - and the ultimate test year forecast - in the exact format used by SDG&E and SoCalGas management to operate and control the companies.6 SDG&E and SoCalGas noted in opening briefs7 that the cost center accounting system changes over time, as cost centers are opened or closed. But this system reflects how the companies are operated and changed, and therefore, even if some tracking is required, updated data for the entire system does not have to be translated to the FERC accounts. We note too that in the past SDG&E and SoCalGas have no doubt opened and closed cost centers which were translated into the historical FERC accounts.
We can authorize this change without the need to change how SDG&E and SoCalGas file and report their financial statements in the FERC-USOA format to the Commission and to FERC. Parties commented that five years of data should be included in the new format for the next proceeding, and we agree that such a historical base is needed. Any cost centers that are closed during the historical period would show zero for subsequent periods and new cost centers would show zero for earlier years. This would reflect real changes within the operations of the companies obscured by the FERC account summations. We believe we can reasonably distinguish financial reporting (which is intended to be consistent for all reporting jurisdictional utilities) from the unique operational features of individual utilities to forecast a just and reasonable test year revenue requirement. We also believe that DRA can quickly and easily reconcile that the overall recorded costs reported for the base year in a FERC-USOA format exactly encompasses the same costs reported in the accounting format used by SDG&E and SoCalGas management to operate the companies. DRA testified that its audit found the total adjusted 2005 data to be consistent with total recorded 2005 data.
3.3. Single Application
SDG&E and SoCalGas have filed separate rate applications even after the merger of the two parent companies. Both companies are now subsidiaries of Sempra Energy and, as shown in the record for this proceeding, many functions are performed either by a "corporate center" for both utilities, or within the structure of either one of the two utilities on behalf of both companies. As a result, there was significant duplicate testimony on various shared or allocated services, and many policy issues, as well as mechanical forecast methodologies, which were the same for both applications. The two applications were consolidated, as already noted, and a single investigation was opened and consolidated with the applications to examine the operations of both companies.
No practical benefit appears to arise from separate applications.
Rule 2.1 allows multiple legal entities to file a joint application. Pub. Util. Code § 701 provides the Commission broad discretion to regulate.8 Therefore, we direct SDG&E and SoCalGas to specifically consider and, if feasible, file a single general rate application for Test Year 2012. We note that the unique revenue requirements for the two companies must be separately stated within the application, but, wherever feasible, SDG&E and SoCalGas should avoid duplicate testimony in order to reduce the burden on all parties. Should SDG&E and SoCalGas choose to file two applications we would still direct them to minimize the duplication of testimony.
At the prehearing conference and in the scoping memo parties were urged to consider the use of "lead counsel" to reduce the amount of duplication and to coordinate the limited resources of all intervening parties. We found that as has been common in the past, TURN and UCAN to a large degree and, to a lesser degree, those two, with Aglet appear to have coordinated on many issues. We are concerned, however, that there continues to be a marked degree of duplication between all intervenors and DRA. We again urge parties to think creatively and embrace the "lead counsel" concept and strive to further eliminate duplicate analysis. This request is directed specifically to include DRA and is intended to reduce the duplication, and increase teamwork and coordination, between all parties. (Scoping Memo, pp. 5-6.)
5 See as examples: SCG-13-E, p. 2: "Cost centers: the lowest level organizational unit for which shared services costs are tracked and recorded"; and the Shared Services Reports (SCG/SDG&E-14, Chapter VIII).
6 We expect that with a change to forecasting the test year on a functional basis that there will still be consistency in major categories, such as depreciation expense, or a very clear translation between historical account groupings using the FERC USOA and the companies' management accounting system.
7 Sempra Opening Brief, p. 368.
8 Section 701: The commission may supervise and regulate every public utility in the State and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction.
