ALJ/LRB/epg _ DRAFT CA-22

11/21/2000

Decision REVISED PROPOSED DECISION OF ALJ BYTOF
(Mailed 11/2/2000)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of SOUTHERN CALIFORNIA GAS COMPANY (U 904 G) Under the Catastrophic Event Memorandum Account (CEMA) for Recovery of Costs Related to the El Niño Storms.

Application 99-03-049 (Filed March 19, 1999)

(See Appendix A for List of Appearances.)

TABLE OF CONTENTS

TITLE Page

OPINION 2

I. Summary 2

II. Procedural Background and The Stipulation 3

A. Procedural Background 3

B. The Declared Disaster 6

C. SoCalGas' and ORA's Stipulation 9

D. Standard of Review 10

E. Positions of the Parties 12

F. Review In Light of the Whole Record 13

III. CEMA Applicability and Reasonableness of Costs 16

A. Background 16

B. Applicability of CEMA to Recover Costs For Damage
Attributed to the El Niño-Caused Storms 17

C. Scope of the Disaster 20

D. Damage Attributable to the 1998 El Niño Storms 21

1. SoCalGas' Prior Knowledge of the Hazards 22

2. Landslide Movement and Effect of the 1995 Rainstorms 25

3. Should SoCalGas have relocated these pipelines earlier? 28

4. Timing of the Damage 29

E. Future Consideration of Pipeline Maintenance, Repair,
and Relocation 32

F. Future Consideration of the CEMA 34

IV. Review of the Stipulation 36

V. Cost Allocation 41

A. SoCalGas' Proposed Cost Allocation 41

B. TURN's Proposed Cost Allocation 44

C. ORA's Position 45

D. Discussion 46

VI. Comments on Proposed Decision 53

Findings of Fact 55

Conclusions of Law 60

ORDER 65

Appendix A

OPINION

I. Summary

Southern California Gas Company (SoCalGas) and the Office of Ratepayer Advocates (ORA) present for Commission approval a stipulation regarding SoCalGas' recovery of certain costs attributed to the 1998 El-Niño driven storms, through the Catastrophic Event Memorandum Account (CEMA). The stipulation purports to resolve all issues presented except for The Utility Reform Network's (TURN) issue regarding the appropriate manner in which to allocate the revenue requirement among customer classes. A Proposed Decision was mailed on August 22, 2000 modifying the stipulation to disallow recovery, in future base margin proceedings, of expenses and capital costs that arguably could be traced to the 1998 El Niño-driven storms and allowing SoCalGas to recover a revenue requirement of $4,713,616, reduced by $110,000 in disallowed costs, through 2002, as well as future carrying costs for the capital investments. SoCalGas and ORA filed comments objecting to the Proposed Decision's interpretation of the stipulation to preclude future recovery of capital costs arguably attributable to the 1998 El Niño-driven storms.

Upon review of the comments, we have modified the Proposed Decision, accepting some of the parties' comments and rejecting others. We modify the stipulation to preclude SoCalGas from raising, in future base margin proceedings, only disallowed investments and investments foregone as a part of this stipulation. We provide that SoCalGas is not precluded per se from proposing to recover other costs related to capital investments but specify the manner in which such costs should be requested and will be reviewed. We approve the stipulation as modified and allow SoCal Gas to recover a revenue requirement of $4,713,616, reduced by disallowed costs associated with Work Order 94377, through 2002, as well as future carrying costs for the capital investments.

We provide the opportunity for further comments. In their comments to the Proposed Decision, the stipulating parties should state whether they agree with the modifications to the stipulation. If so, we adopt the stipulation as modified. If not, we reject the stipulation and render this decision based on the evidentiary record developed in this case.

We adopt TURN's recommendation and direct, for this case only, that the costs be allocated to customers based upon function. We direct that SoCalGas address the issue of pipeline location, maintenance, and repair in its next cost-of-service¹ or performance-based ratemaking (PBR) proceeding. Furthermore, we may institute other proceedings in the future to consider seeking a statutory amendment or enacting guidelines that will ensure that the CEMA is not used as a substitute for routine maintenance and repairs or capital projects that have been unjustifiably delayed.