XXXI. ORA's Historical Review
ORA submitted as Ex. 300 the Results of Examination Report for Southern California Gas Company and San Diego Gas & Electric Company that was described as a "review of historic results of operations financial information" that included "applying analytical procedures to financial data." This was not an audit and it was not conducted with the intention of expressing an opinion on the financial statements. The information in this report was available to inform other ORA and intervenor witnesses during the development of their test year recommendations. This decision will address three issues that were not otherwise subsumed in the test year forecasts by ORA.
A. Gain on Sale of Blythe Property
In 2001, SDG&E sold property for a before tax gain of $22 million that at one time had been accounted for in Plant Held for Future Use, which is a rate base account. This land was acquired in 1975 for the Sundesert Nuclear Generating Station, a facility that was never constructed. There is a long history of the proposed plant, its subsequent abandonment and the ratemaking treatment for many of its costs. Some site-related costs were amortized (recovered) in rates and the balance was in rate base for Future Use until 1984 when a portion of the remaining balance was also amortized and a residual amount, $19.5 million, was removed from rate base. ORA summarized this as "ratepayers have paid: (1) the $45 million of non-site-related costs pursuant to D.90405, (2) the $25.5 million of site-related costs amortized pursuant to D.84-04-041, and (3) a return on a ratebase (sic) of $45 million for the period 1979-1984."491 ORA proposed that the gain should be re-allocated (more to ratepayers) and amortized as Miscellaneous Revenues over five-years. ORA re-weighted the allocation based on what it termed "risk exposure." (Ex. 300, p. 2-4.)
SDG&E sold the property in 2001 and allocated the gain between ratepayers and shareholders in proportion to the time the property was in rate base (June 1979 to April 1984) and the time that it was not (April 1984 to November 2001). SDG&E recorded the ratepayer share, as calculated by its method, in its Transition Cost Balancing Account.492 SDG&E cited D.83-12-065 as apposite; it dealt with a property that was a potential power plant site and the Commission allocated a subsequent gain on a shared basis of the time the property was included and then excluded from rate base.493
We disagree with ORA that prior Commission-approved cost recovery is relevant to the disposition of the gain on the remaining asset. The earlier decisions found certain costs were reasonably recoverable from the ratepayers and we will not revisit those costs to use them for allocating the gain on the residual property. We will not make ORA's proposed adjustment. We agree with SDG&E's allocation method because it is consistent with the treatment accorded another abandoned power plant project. We see no reason to depart from SDG&E's use of the Transition Cost Balancing Account; it promptly returns a share of the gain to ratepayers.
B. Independent Audit Fees
ORA proposed an adjustment to the fees for Sempra's independent auditor because SoCalGas and SDG&E restricted ORA's access to five categories of workpapers. ORA determined that there were 21 binders of workpapers for 2001 and 2002, and that it was denied access to 11. If ORA had raised the issue of denied access we would address it; but ORA did not. Instead, ORA proposed in Ex. 300 to reduce the test year expense by one-half to reflect the restriction in access. We will not do so; ORA did not show that the allocation of audit fees to SoCalGas and SDG&E was even remotely based on the size of the work papers. The fees should be allocated based on the proportion of time spent auditing utility and non-utility business activities and an appropriate allocation of corporate audit costs. This decision in no way endorses the restriction of access unilaterally imposed by SoCalGas and SDG&E. ORA must have access to all business records, including auditor work papers, to the maximum extent allowed by the Public Utilities Code and as described in many other Commission decisions.
C. Reconciliation of Base Year 2001
There is no doubt from the record that ORA experienced some difficulty in reconciling the recorded results for the Base Year 2001 to the "Restated" Base Year 2001. SoCalGas and SDG&E shifted costs between accounts to reflect the Test Year 2004 organization of accounts and responsibility for those accounts. We addressed this in part with the Corporate Center; ORA focused on the allocation to the detriment of examining the functions themselves. UCAN, by contrast, correctly honed in on critiquing the function.
We will order SoCalGas and SDG&E to file in accordance with the rate case processing plan, and we restore the NOI and Deficiency process; therefore, we expect ORA, TURN and UCAN to identify reconciliation issues before the application is filed and we expect SoCalGas and SDG&E to rigorously avoid if possible, or otherwise thoroughly document, any "restatement" of the next Base Year. We will consider the adequacy of any restatement explanation when we determine whether SoCalGas and SDG&E have met their burden of proof in the next proceeding.
491 Ex. 300, pp. 2-3 and 2-3; and ORA's opening litigation brief, pp. 258-260.
492 Sempra opening litigation brief, pp. 315-318, and Ex. 104.
493 Ex. 104, p. LS-1 and fn. 1.
