ALJ/JSW/jt2 DRAFT Agenda ID# 5442

Ratesetting

Decision PROPOSED DECISION OF ALJ WONG (Mailed 3/14/2006)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of San Diego Gas & Electric Company (U 902 G) and Southern California Gas Company (U 904 G) for Authority to Integrate Their Gas Transmission Rates, Establish Firm Access Rights, and Provide Off-System Gas Transportation Services.

Application 04-12-004 (Filed December 2, 2004

OPINION REGARDING THE SYSTEM INTEGRATION PROPOSAL

TABLE OF CONTENTS

Title Page

OPINION REGARDING THE SYSTEM INTEGRATION PROPOSAL 11

I. Summary 22

II. Background 22

III. System integration Proposal 44

A. Introduction 44

B. Rainbow Corridor Issues 66

C. System Integration Proposal and D.01-09-056 and D.98-03-073 77

D. Joint Recommendation 88

E. Position of the Parties in Favor of the Proposal 1010

1. SDG&E/SoCalGas 1010

2. Coral 1414

3. Division of Ratepayer Advocates 1717

4. Duke 1818

5. Sempra LNG 1919

6. SCGC 2020

7. TURN 2222

8. Woodside 2424

F. Position of the Parties Opposed to the Proposal 2525

1. IP/Watson/CMTA 2525

2. BHPB 2929

3. Crystal 3131

4. SCE 3333

G. Discussion - System Integration Proposal 3636

1. Introduction 3636

2. Subsidy and Rate Impact Considerations 3838

3. LNG Gas Volume Considerations 4343

4. Gas Price Considerations 4646

5. Infrastructure Investment Considerations 4747

6. Pancaked Rate Considerations 4949

7. Peaking Rate Considerations 5151

8. Allocation Methodology Considerations 5353

9. ITBA Considerations 5656

TABLE OF CONTENTS

(Cont'd)

Title Page

10. Rainbow Corridor Considerations 5858

11. Merger and Reorganization Decisions 6060

12. Joint Recommendation 6262

13. Conclusion 6363

IV. Comments on Draft Decision 6565

V. Assignment of Proceeding 6565

Findings of Fact 6565

Conclusions of Law 7070

ORDER 7171

APPENDIX A

OPINION REGARDING THE SYSTEM INTEGRATION PROPOSAL

I. Summary

This decision addresses the system integration proposal of San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas). The proposal seeks to combine the transmission-related costs of SDG&E and SoCalGas so that customers of each utility share in the transmission costs of both utilities. The combined costs would then be allocated to the customers of SDG&E and SoCalGas to develop the rates shown in Appendix A of this decision. These integrated transmission rates would allow customers of SDG&E and SoCalGas to obtain gas at that rate from any existing or new receipt point on the SDG&E and SoCalGas systems.

In today's decision, we approve the system integration proposal. SDG&E and SoCalGas are permitted to combine the transmission costs of the two utilities, and to develop integrated transmission rates for the various customer classes of both utilities using the cost allocation methodology they proposed. These rates shall go into effect upon the start of the flow of regasified liquefied natural gas (LNG) through Otay Mesa.