XXIV. Clearing Accounts

A. SDG&E Account 163 - Purchasing and Warehousing

SDG&E forecast $6.337 million in 2004 for purchasing and warehousing expenses. In testimony, the applicant described 12 discrete changes from the base year 2001 to derive its 2004 estimate. ORA proposed an adjustment based upon 2002 actual costs compared to forecast differences, that amount to $0.337 million, about 5% of SDG&E's request. The adjustment would take a one data point difference in 2002 expenses, and apply that to the base year and all intervening years. The applicant has made a reasonable forecast of the expected changes from the base year to the test year. We cannot expect perfection and we do not have sufficient reason to believe that the 2002 difference will continue. We will adopt $6.337 million for Test Year 2004.

B. SoCalGas Account 184.2 - Business Solutions

This clearing account includes expenses associated with acquiring operating and maintaining vehicles and construction equipment. ORA effectively had a higher recommendation than SoCalGas' final request for $37.082 million because of changes agreed to in rebuttal to TURN and by not addressing a license fee increase. TURN proposed $2.78 million in adjustments for 25% fewer new vehicles to be consistent with lower employee estimates, lower interest rates for leases, and other miscellaneous adjustments.²⁴⁴ In rebuttal, SoCalGas did not agree with TURN, but did recalibrate three of the adjustments. It recalibrated interest and fuel cost adjustments from $1.5 million down to $1.1 million. For SoCalGas, fleet vehicles declined by $0.13 million based on reductions in other testimony for customer service needs. Additionally, fewer fleet positions (TURN proposed 12 not 19) would result in a $0.368 adjustment. Thus, SoCalGas recalibrates TURN's total adjustment to $1.165 million. SoCalGas disagreed with the TURN's other adjustments.²⁴⁵

As shown in other expense accounts, issues about the size of the labor force generally in this decision, and in the discussion of labor for customer service expense accounts, there is a possibility that not all positions will be filled, and thus not all vehicles will be needed, along with the positions to support them. We will utilize the recalibrated reduction of $1.165 million as a reasonable adjustment for the likely actual needs for vehicles and support positions, and authorize $35.917 million for 2004 in Account 184.2.

C. SDG&E Account 184.2 - Fleet

ORA proposed an adjustment based upon 2002 actual costs compared to forecast differences of 3%. 2001 was the recorded base year for the test year, and then, as discussed previously, successive years are forecast to reach Test Year 2004. ORA therefore adjusted 2004 downward by 3%.²⁴⁶ What is not justified is why this one-time relatively low percentage difference is indicative of 2004 activity. UCAN presented the same witness on SDG&E estimates as TURN for SoCalGas; the adjustments were comparable for fleet lease rates, etc., discussed above. UCAN recommends a reduction of $0.526 million, for a 2004 test year estimate of $25.806 million. We will adopt UCAN's adjustment to be consistent.

D. SoCalGas Account 184.3 - Capital Tool Repair and Reconditioning

TURN argued that SoCalGas selectively increased the escalation for capital tool repairs - a double escalation - because the costs are already subject to the company-wide non-labor escalation factor²⁴⁷ and therefore the forecast should be reduced by $0.047 million. SoCalGas argued the rate of escalation should either be the higher actual rate or the standard rate. We agree with TURN and use a standard rate, otherwise every account potentially becomes an exception. We will reduce Account 184.3 by $0.047 million.

E. SoCalGas Account 184.4 - Customer Services

In this account, SoCalGas recovers the costs of small tools, repairs, uniforms and coveralls for employees charged to Account 879, Customer Service Operations and Information. ORA proposed an adjustment consistent with its adjustment for a lower forecast of workload. Based on the treatment we accord Account 879, we decline to make this adjustment.

F. SoCalGas Account 184.6 - Tools and Uniforms

ORA proposed an adjustment of $1,500,000 based upon its adjusted employee count and a further adjustment to reflect ORA's proposed decreases to gas distribution capital expenses.²⁴⁸ SoCalGas argued that both adjustments are unreasonable; the costs in the account are not directly proportional to employee head counts and that a reduction, if any, to capital costs for gas distribution does not necessarily affect employees' tools and uniforms requirements. Non-Labor costs for contractors are a part of ORA's capital reduction, which would not affect this account.²⁴⁹ We agree that ORA did not show a direct relationship and we will not make ORA's adjustment.

TURN engaged in a detailed analysis of the costs for tools that included consideration of the switch from previously capitalizing costs over $500. TURN proposed that tool costs should be reduced by $0.079 million, based on the capital budget as developed by TURN, and $0.488 million to adjust for "new tools," due to SoCalGas' increased workforce. TURN also proposed a "normalizing" adjustment of $0.328 million for planned tool replacements. Such an adjustment in effect reverses the capital to expense switch, and we will decline to make this adjustment. TURN did not show that there would be only a one-time replacement; it appears to be the ongoing effect of switching to expensing more tools.

As we discuss throughout this decision, we are concerned that the labor estimates are too high, and we question the likelihood of filling all vacant and new positions thus we created the TLCBA. We will adopt the TURN adjustment of $0.488 million for new tools related to work force changes. Replacement employees should be able to use existing tools.

TURN also proposed a reduction of $0.045 million for uniforms, based on employee count. We will not make this adjustment; we are reluctant to try and manage every cost to such detail, and we cannot expect forecast perfection.

²⁴⁴ Ex. 501, pp. 22 - 23.

²⁴⁵ Ex. 129, pp. RAK-1 through RAK-6.

²⁴⁶ Ex. 302, p. 12-4.

²⁴⁷ Ex. 501, p. 4.

²⁴⁸ Ex. 301, p. 8-7.

²⁴⁹ Sempra opening litigation brief, p. 22.