BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Transcription

1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Gas Company (U 904 G) for authority to update its gas revenue requirement and base rates effective on January 1, Application No GENERAL RATE CASE APPLICATION OF SOUTHERN CALIFORNIA GAS COMPANY (U 904 G) December 15, 2010 SCG Doc# KEITH W. MELVILLE DAVID J. GILMORE JOHN A. PACHECO JOHNNY J. PONG LAURA M. EARL Attorneys for Southern California Gas Company 101 Ash Street, 12th Floor San Diego, CA (619) phone (619) facsimile

2 TABLE OF CONTENTS I. EXECUTIVE DIRECTOR S ACCEPTANCE OF THE NOTICE OF INTENT...2 II. SUMMARY OF RELIEF REQUESTED...2 III. LIST AND DESCRIPTION OF TESTIMONY EXHIBITS...2 IV. SUMMARY OF THE PTY RATEMAKING MECHANISM...10 V. OTHER ISSUES...10 A. Regulatory Accounts...10 B. Present and Proposed Rates...11 C. Memorandum Account...11 VI. DESCRIPTION OF REVENUE CHANGES...11 VII. IMPLEMENTATION...12 VIII. STATUTORY AND PROCEDURAL REQUIREMENTS...13 IX. ADDITIONAL DOCUMENTATION...17 LIST OF APPENDICES Appendix A: Statement of Presently Effective and Proposed Gas Rates and Revenues Appendix B: Statement of Account of the Original Cost and Depreciation Reserve Appendix C: Summary of Earnings Appendix D: Financial Statements Appendix E: Service List Governmental Agencies Appendix F: Service List Appendix G: Certificate of Service and Notice of Availability SCG Doc# i

3 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Gas Company (U 904 G) for authority to update its gas revenue requirement and base rates effective on January 1, Application No GENERAL RATE CASE APPLICATION OF SOUTHERN CALIFORNIA GAS COMPANY (U 904 G) Southern California Gas Company (SoCalGas or SCG) respectfully requests authority to update its Test Year 2012 (TY2012) gas revenue requirement and base rates, effective January 1, 2012, and to implement a Post Test Year (PTY) ratemaking mechanism for subsequent years. Incorporated in this General Rate Case (GRC) filing is a TY2012 cost of service study, pursuant to which SoCalGas rates should be set beginning January 1, SoCalGas GRC Application requests the Commission to authorize a $2.124 billion revenue requirement for TY2012. When the impact of commodity costs and other ratemaking items such as regulatory account balances are included, this increase results in a TY2012 system average rate revenue increase of $308 million (7.4%) over the currently effective 2010 level. If approved by the Commission, the effect of this proposed increase, in 2012, on a typical residential customer s monthly bill is an increase of $3.35 (7.7%) at 38 therms/month. 1 The proposed PTY ratemaking mechanism utilizes a starting point set by SoCalGas TY2012 GRC outcome, and would be used to set rates beginning January 1, Rates in the subsequent years will be adjusted annually using separate update formulas for capital-related and operations and maintenance (O&M) expenses. SoCalGas specifically seeks authority to adjust its 2012 revenue requirement consistent with the schedule requirements set forth in the Rate Case Plan and its 2008 GRC Decision (D.) SoCalGas sets forth below additional detail on its proposal and a recommended procedural schedule. 1 A gas commodity component was added to compute the proposed rate increase for core customers. The February 2010 commodity price of $ per therm was used. SCG Doc#

4 I. EXECUTIVE DIRECTOR S ACCEPTANCE OF THE NOTICE OF INTENT On August 6, 2010, SoCalGas tendered its TY2012 GRC Notice of Intent (NOI) in accordance with the Rate Case Plan. On October 15, 2010, the Commission s Executive Director accepted the tendered documents for filing. II. SUMMARY OF RELIEF REQUESTED The GRC Application will seek authorization to revise SoCalGas current base rate revenues to recover its projected costs of SoCalGas gas operations, facilities and infrastructure, and other functions necessary to provide utility services to its customers. SoCalGas requests the Commission to adopt its TY2012 revenue requirement of $2.124 billion. If authorized by the Commission, SoCalGas requests that its revenue requirement be reflected in rates effective on January 1, SoCalGas additionally requests that the Commission adopt its PTY mechanism so that SoCalGas can recover its cost of service in the attrition years leading up to its next GRC filing. Moreover, SoCalGas requests Commission approval of its regulatory balancing and memorandum accounts, as proposed in this filing. III. LIST AND DESCRIPTION OF TESTIMONY EXHIBITS Support for SoCalGas request is provided by the prepared direct testimonies from various witnesses sponsoring specific subjects pertaining to the company s operations, functions, and/or activities. The table below lists the exhibit number, subject matter, and sponsoring witness. The table is followed by a brief description of each of the exhibits. SOCALGAS TESTIMONY EXHIBITS AND SPONSORING WITNESSES EXH# SUBJECT WITNESS SCG-01 Policy Overview Anne Smith SCG-02 Gas Distribution Gina Orozco-Mejia SCG-03 Gas Transmission John L. Dagg SCG-04 Underground Storage James D. Mansdorfer SCG-05 Gas Engineering Raymond K. Stanford SCG-06 Gas Procurement Ibtissam T. Chang SCG-07 Customer Services Customer Service Field Operations & Customer Contact Edward Fong SCG Doc#

5 SCG-08 Customer Services Office Operations J. Steve Rahon SCG-09 Customer Services Information Gillian A. Wright SCG-10 Supply Management & Diverse Business Enterprises Karen L. Sedgwick SCG-11 Fleet Services Hector A. Madariaga SCG-12 Information Technology Jeffrey C. Nichols SCG-13 Operational Excellence (OpEx 20/20) Richard D. Phillips SCG-14 Real Estate, Land & Facilities David G. Taylor SCG-15 Environmental Lisa P. Gomez SCG-16 Safety & Emergency Preparedness Scott D. Drury SCG-17 Corporate Center - General Administration Bruce A. Folkmann SCG-18 Corporate Center - Insurance Maury B. De Bont SCG-19 Compensation, Health & Welfare Debbie S. Robinson SCG-20 Pensions & PBOPs David I. Sarkaria SCG-21 Human Resources, Disability & Workers Compensation Sarah E. Edgar SCG-22 Controller, Regulatory Affairs, and Finance Ken Deremer SCG-23 External Affairs & Legal Cheryl A. Shepherd SCG-24 Shared Services Billing Policy and Process Edward J. Reyes SCG-25 Shared Assets Patrick D. Moersen SCG-26 Rate Base Garry G. Yee SCG-27 Depreciation Bob Wieczorek SCG-28 Taxes Randall G. Rose SCG-29 Working Cash Jack S. Lewis SCG-30 Customers Scott R. Wilder SCG-31 Escalation Scott R. Wilder SCG-32 Miscellaneous Revenues Todd J. Cahill SCG-33 Non-Tariffed Products & Services Robert C. Lane SCG-34 Regulatory Accounts Greg Shimansky SCG-35 Cost Center to FERC Mapping Khai Nguyen SCG-36 Re-Assignment Rates Rajan Agarwal SCG-37 Total Factor Productivity Study Mark Lowry SCG-38 Summary of Earnings Deborah A. Hiramoto SCG-39 Post-Test Year Ratemaking Framework Herbert S. Emmrich SCG-40 Revenues at Present & Proposed Rates Gary Lenart SCG-41 Compliance Andrew E. Steinberg SCG Doc#

6 Witnesses who have workpapers supporting their testimony will have those workpapers offered as evidence; they will be numbered the same as each witness testimony exhibit, but ending with WP or, for capital workpapers, CWP. For example, O&M workpapers for SoCalGas witness Gina Orozco-Mejia (Gas Distribution) will be marked and offered as Exhibit SCG-02-WP, and capital workpapers as Exhibit SCG-02-CWP. Exhibit SCG-01 / Policy Overview testimony provides an overview of the company s structure, anticipated operational and business needs, and new challenges that SoCalGas will face looking forward, to support the TY2012 requests being sponsored by the SoCalGas witnesses. This testimony also provides an explanation of the recent corporate reorganization, including the reasons for the reorganization and the overall cost impact to the utilities as a result of the reorganization. Exhibit SCG-02 / Gas Distribution testimony describes the assets and operations of SoCalGas distribution system, and the O&M costs and capital expenditures needed in TY2012 to maintain and improve the reliability and integrity of its existing infrastructure, and expand its facilities for the purpose of providing safe and reliable gas deliveries to customers. Exhibit SCG-03 / Gas Transmission testimony describes the assets and operations of SoCalGas transmission system, and the O&M costs needed in TY2012 to ensure the functionality and reliability of SoCalGas transmission pipelines. Exhibit SCG-04 / Underground Storage testimony describes activities and the O&M and capital resource needs at SoCalGas gas underground storage sites and operations, and projects to be undertaken to ensure safe and reliable supply of natural gas throughout the SoCalGas territory. Exhibit SCG-05 / Engineering testimony describes the gas engineering operations; the O&M and capital resources needed to maintain, improve, and meet compliance requirements for the SoCalGas system (e.g., pipeline integrity, environmental and air quality); and the capital expenditures needed in TY2012 for the Gas Transmission system. Exhibit SCG-06 / Gas Procurement testimony addresses SoCalGas gas procurement operations and activities, which SoCalGas performs on behalf of its core customers and the core customers of San Diego Gas & Electric Company (SDG&E). SCG Doc#

7 Exhibit SCG-07 / Customer Services-Customer Service Field Operations and Customer Contact testimony describes the activities related to SoCalGas field technicians, meter readers, call centers, and branch offices, and the resource needs for these areas in TY2012. Exhibit SCG-08 / Customer Services-Office Operations testimony describes SoCalGas billing services, measurement data operations, credit and collections, remittance processing, customer service technology support, and customer service staff organizations, and the resource needs for these areas in TY2012. Exhibit SCG-09 / Customer Services-Information testimony describes SoCalGas customer services function of delivering important information to customers, conducting customer research, managing electronic information and services delivery channels, maintaining customer assistance and outreach programs, and providing essential energy-related services to nonresidential customers and residential developers, to name a few, and the resources needed to carry out these activities in TY2012. Exhibit SCG-10 / Supply Management and Diverse Business Enterprises testimony describes the supply management function of managing the overall purchase, distribution, and inventory management of materials, supplies, and services in support of SoCalGas, and the resource needs to perform these activities in TY2012. The Diverse Business Enterprises (DBE) organization resides at SDG&E, and supports both SDG&E and SoCalGas. The testimony describes the DBE organization s activities and its resource needs in TY2012. Exhibit SCG-11 / Fleet Services testimony describes the activities of Fleet Services organization, in serving the transportation needs of the company, as well as its resource needs in TY2012. Exhibit SCG-12 / Information Technology testimony details the costs and activities related to the Information Technology (IT) organization. IT capital and O&M costs are a significant component of the company s overall TY2012 request, given technology s continually increasing role in business and operations. SCG Doc#

8 Exhibit SCG-13 / Operational Excellence (OpEx 20/20) testimony describes the OpEx 20/20 program, which was developed as a set of enterprise, technology-based initiatives across SoCalGas and SDG&E intended to make the utilities more efficient and to help the utilities meet future operational challenges. The testimony presents the TY2012 O&M and capital forecasts to support these initiatives. Exhibit SCG-14 / Real Estate, Land and Facilities testimony describes this organization s activities related to supporting the real estate needs of the company, including office and building leases, rights-of-way, and leasehold improvements, and the resource needs in TY2012. Exhibit SCG-15 / Environmental testimony describes the function, activities, and resource needs of the Environmental Services organization, and addresses the key federal, state, and local environmental programs and mandates that are yielding upward cost pressures within that organization as well as in other operational and functional areas of the company. Exhibit SCG-16 / Safety and Emergency Preparedness testimony describes the activities and resource needs to support the functions responsible for ensuring operational compliance with safety regulations, managing the programs, policies and guidelines to ensure the safety of SoCalGas employees in the field as well as company-wide, and emergency preparedness, response, and recovery services. Exhibit SCG-17 / Corporate Center-General Administration testimony describes the services (and associated costs) provided by Sempra Energy s Corporate Center on behalf of the utilities, and the manner in which these costs are allocated to the utilities. Corporate Center services are provided in areas such as accounting, audits, and tax, in addition to other areas where Corporate Center provides additional or unique support to existing utility departments (e.g., legal, human resources). Exhibit SCG-18 / Corporate Center-Insurance testimony addresses overall insurance costs for the Sempra Energy companies, primarily in the areas of property and liability insurance; the manner in which these costs are allocated to the utilities; and the major drivers responsible for the significant increases in insurance costs for TY2012. SCG Doc#

9 Exhibit SCG-19 / Compensation, Health and Welfare testimony provides an overview of the total compensation and benefits program at SoCalGas, including a description of the company s total compensation philosophy, a discussion of pay components that make up the total compensation program, a detailed review of various benefit programs, and a review of internal compensation controls. Exhibit SCG-20 / Pensions and Post-retirement Benefits Other than Pension (PBOPs) testimony provides an overview of the qualified retirement benefits at SoCalGas, including the pension and postretirement health and welfare plans. These benefits are key components of the total compensation package provided to SoCalGas non-represented and represented employees. Exhibit SCG-21 / Human Resources, Disability and Workers Compensation testimony describes the activities and associated TY2012 costs related to the Human Resources function, in addition to the forecasts for long-term disability and workers compensation costs. This testimony also discusses the costs for the President & Chief Executive Officer and the Chief Operating Officer positions at SoCalGas. Exhibit SCG-22 / Controller, Regulatory Affairs, and Finance testimony describes the TY2012 forecasted general administration resources needed to perform the required accounting, financial planning, regulatory advocacy, case management, project analysis, and treasury functions for the utilities. These functions are necessary in order to provide services to our customers, meet regulatory requirements, and support of internal clients. Exhibit SCG-23 / External Affairs and Legal testimony describes the activities and associated costs of the External Affairs and Legal Departments at SoCalGas, and their resource needs in TY2012. Exhibit SCG-24 / Shared Services Billing Policy and Process testimony describes the policy and process by which utility shared services are identified, allocated, and billed to the entities receiving a service from a utility. This process is in place to ensure that services provided by a utility to other companies within Sempra Energy are appropriately billed out to those companies so that the ratepayers of that utility are not subsidizing costs that are appropriately borne by other companies. SCG Doc#

10 Exhibit SCG-25 / Shared Assets testimony describes the shared assets policy at the utilities, and the shared assets that are at SoCalGas. Exhibit SCG-26 / Rate Base testimony describes the capital planning process at SoCalGas, discusses the components of SoCalGas rate base, and presents the company s rate base forecast for 2010, 2011, and TY2012. Exhibit SCG-27 / Depreciation testimony describes the depreciation study that was conducted to determine the average service lives and future net salvage rates in determining the company s depreciation expense for TY2012, presents its proposed lives and net salvage rates for each asset account, and discusses other matters related to the depreciation and amortization of SoCalGas assets. Exhibit SCG-28 / Taxes testimony describes the different taxes (payroll, income, property, franchise fees) assessed on the company, presents the calculation of SoCalGas tax expense for ratemaking purposes, and discusses other matters related to taxes in the regulatory context. Exhibit SCG-29 / Working Cash testimony presents SoCalGas working cash request for TY2012, and describes the components of the working cash computation. The working cash requirement addresses the situation where SoCalGas shareholders provide the funds which are permanently committed to the business for the purpose of paying operating expenses in advance of receipt of offsetting revenues in rates, as well as the maintenance of minimum bank balances. Exhibit SCG-30 / Customers testimony presents SoCalGas customer and new meter forecasts for TY2012, and the methodology to arrive at those forecasts. Exhibit SCG-31 / Escalation testimony presents the cost escalation factors used in this GRC for TY2012 as well as the PTY. Exhibit SCG-32 / Miscellaneous Revenues testimony presents the TY2012 forecast for miscellaneous revenues, which are comprised of fees and revenues collected by the utility for the provision of specific products or services from non-rate sources. They include such revenues as service establishment charges, reconnection fees and rents. Exhibit SCG-33 / Non-Tariffed Products and Services testimony describes the Non-Tariffed Products and Services proposals for the utilities (e.g., bio-gas conditioning services, combined heat and power services), and the public and ratepayer benefits associated with these projects. SCG Doc#

11 Exhibit SCG-34 / Regulatory Accounts testimony identifies SoCalGas regulatory accounts that are associated with the GRC, presents the forecast of regulatory accounts balances as of December 31, 2011, proposes the disposition of these balances including future ratemaking treatment, and requests approval of a New Environmental Regulation Balancing Account to become effective January 1, Exhibit SCG-35 / Cost Center to FERC Mapping testimony describes the process used by SoCalGas to map its O&M forecasts from a cost center format to a Federal Energy Regulatory Commission (FERC) account format to facilitate the application of re-assignment rates. Exhibit SCG-36 / Re-Assignment Rates testimony describes how SoCalGas proposes to reassign a portion of its general administration and certain O&M expenses to capital, to recognize that certain costs are incurred in support of construction efforts, and presents these reassignment rates. Exhibit SCG-37 / Total Factor Productivity Study testimony presents the study conducted by the Pacific Economics Group Research LLC to calculate the productivity trends of SoCalGas and other U.S. gas distributors. Exhibit SCG-38 / Summary of Earnings testimony presents SoCalGas TY2012 revenue requirement, and describes the components of the Results of Operations model used for this GRC to compute the revenue requirement. Exhibit SCG-39 / Post-Test Year Ratemaking Framework testimony describes the PTY mechanism that will provide SoCalGas with the opportunity to collect sufficient revenues during the Post Test Years ( ) to continue providing safe and reliable service to its customers, while providing shareholders a reasonable opportunity to earn the rate of return authorized by this Commission. Exhibit SCG-40 / Revenues at Present and Proposed Rates presents a comparison of revenues at present and proposed rates for SoCalGas, and describes the bill impacts to customers resulting from the TY2012 GRC request. Exhibit SCG-41 / Compliance testimony describes the compliance items set forth by past GRC decisions which are to be addressed in the current GRC, as well as an update on the status of those items. SCG Doc#

12 IV. SUMMARY OF THE PTY RATEMAKING MECHANISM The proposed PTY ratemaking mechanism is described in the testimony of Herbert Emmrich (Exhibit SCG-39). In summary, the SoCalGas proposed PTY mechanism consists of six components: (1) O&M Expense Adjustment, (2) Capital-Related Cost Adjustment, (3) Medical Cost Adjustment, (4) Z-factor Adjustment (if applicable) (5) an Earnings Sharing Mechanism, and (6) a Productivity Investment Sharing Mechanism. This mechanism will provide SoCalGas with the opportunity to collect sufficient revenues during the post test years to continue providing safe and reliable service to its customers, while providing shareholders a reasonable opportunity to earn the rate of return authorized by this Commission. Compared to SoCalGas current PTY mechanism, the proposed mechanism better aligns ratemaking between rate cases with SoCalGas projected cost structure by providing for annual adjustments to specifically identified cost drivers like utility cost escalation, customer growth and necessary capital investments. SoCalGas is proposing to invest significantly in its infrastructure in the PTY period, and this PTY mechanism, containing a separate and distinct capital adjustment ratemaking mechanism, aligns with this commitment. The proposed PTY ratemaking mechanism will update the revenue requirements in the post test years ( ), under the four-year GRC term proposed by SoCalGas. V. OTHER ISSUES A. Regulatory Accounts The following regulatory accounts and associated ratemaking proposals are addressed in this GRC: 1. The Distribution Integrity Management Program Balancing Account (DIMPBA) overcollection proposed to be incorporated into customer rates with the implementation of the 2012 GRC, to eliminate the DIMPBA, and to transfer any residual balance at the end of 2012 to the Core Fixed Cost Account (CFCA) and Noncore Fixed Cost Account (NFCA). 2. Research Development & Demonstration Expense Account (RDDEA) overcollection proposed to be incorporated into customer rates with the implementation of the TY2012 GRC, and to continue balancing these costs during the next GRC cycle. SCG Doc#

13 3. Polychlorinated Biphenyls Expense Account (PCBEA) undercollection proposed to be incorporated into customer rates with the implementation of the TY2012 GRC, and to eliminate the PCBEA at the end of the amortization period. Any future PCB costs are proposed to be recorded to the Integrated Transmission Balancing Account (ITBA), which would constitute a modification of the ITBA. 4. Propose continued ratemaking treatment for the Pension Balancing Account (PBA) and Post Retirement Benefits Other Than Pension Balancing Account (PBOPBA) as authorized by the Commission. 5. Request to establish the New Environmental Regulation Balancing Account (NERBA) to record authorized revenues and actual costs associated with certain new and proposed greenhouse gas environmental legislation. B. Present and Proposed Rates SoCalGas Application sets forth present and proposed rates in Appendix A, as required by Rule 23 of the Commission s Rules of Practice and Procedure. Present rates are used to forecast gas revenues. These rates are discussed in Exhibit SCG-40. C. Memorandum Account In the event a final Commission decision is not rendered in time for TY2012 rates to take effect January 1, 2012, SoCalGas will seek authorization to establish memorandum accounts to record the difference between the rates currently in effect for natural gas service and the final rates adopted in the GRC. These memorandum accounts would be effective January 1, This treatment was granted by the Commission in SoCalGas last GRC for Test Year 2008 (see D ). VI. DESCRIPTION OF REVENUE CHANGES SoCalGas gas rate revenues under present and proposed rates are shown in the table below, allocated by customer class. SCG Doc#

14 ALLOCATION OF REVENUES UNDER PRESENT AND PROPOSED RATES Revenues at Present Rates ($000) Revenues at Proposed Rates ($000) Present Rates (cents /therm) Proposed Rates (cents/ therm) Rate Change % Rate Class Residential $2,879,821 $3,098, % Core C&I 2 $922,908 $974, % Other $93,130 $95, % Total Core $3,895,858 $4,167, % Non-Core C&I $121,525 $136, % Electric Generation $66,574 $80, % Non-Core Retail $188,099 $216, % Wholesale $15,202 $18, % Other $70,434 $75, % Total System $4,169,593 $4,477, % Note: For comparison purposes, both present and proposed columns include public purpose program surcharges and gas costs at the same rates. The PTY ratemaking framework proposed by SoCalGas in this Application may cause base rates to increase or decrease in the attrition years depending on SoCalGas results under the proposed earnings sharing mechanism, the level of inflation, as measured by the proposed escalation index, and other factors. Revenues are also balanced for through-put. Because some of these factors are outside of SoCalGas control, the company cannot determine at this time whether future rate changes will be positive or negative. VII. IMPLEMENTATION This GRC Application will result in new rates, effective January 1, Implementation of the PTY ratemaking framework is described in Exhibit SCG-39 (witness H. Emmrich). SoCalGas will file an advice letter in the third quarter of each year specifying the application of the PTY formula and resulting rates to be effective January 1 of the following year. SoCalGas will file another advice letter on February 15 of each year, setting forth the results of the performance indicators and the earnings sharing adjustment. 2 C&I refers to Commercial and Industrial customers. SCG Doc#

15 VIII. STATUTORY AND PROCEDURAL REQUIREMENTS A. Statutory Authority for Relief Rule 2.1 SoCalGas files this Application pursuant to Public Utilities Code Sections 451, 454, 491, 701, 728, 729, 740.4, and 795 of the Commission s Rules of Practice and Procedure, and applicable decisions, orders, and resolutions of the Commission. B. Category of Hearing Rule 2.1(c) SoCalGas proposes this Application be categorized as a ratesetting proceeding. C. Need for Hearing Rule 2.1(c) SoCalGas anticipates that evidentiary hearings will be necessary. D. Issues to be Considered Rule 2.1(c) The principal issues to be considered in this proceeding are as follows: 1. Whether SoCalGas proposed TY2012 revenue requirement is just and reasonable, and should be adopted by the Commission; 2. Whether the Commission should authorize SoCalGas to reflect the adopted revenue requirement in rates; 3. Whether SoCalGas regulatory accounts proposals should be adopted; 4. Whether SoCalGas requested regulatory account amortization is just and reasonable; and 5. Whether SoCalGas proposed PTY ratemaking mechanism is just and reasonable, and SoCalGas should be authorized to implement that mechanism through the advice letter process. E. Proposed Schedule Rule 2.1(c) The Rate Case Plan contemplates separate evidentiary hearings for an Applicant s direct testimony and rebuttal testimony. In recent GRC proceedings, the Commission has consolidated these sets of hearings in the interests of efficiency. Moreover, the Commission has also consolidated the GRC proceedings for SoCalGas and SDG&E, since both utilities file their respective Applications at the same time and predominantly share common witnesses. In light of these considerations, SoCalGas suggests the following proposed schedule: SCG Doc#

16 December 15, 2010 January 14, 2011 February 15, 2011 TBD March 2, 2011 April 2, 2011 April 2011 May 2, 2011 June/July 2011 August 2011 September 2011 September 2011 October 2011 November 2011 December 2011 January 1, 2012 Application filed Protests due to Application Prehearing Conference Public Participation Hearings DRA Report served Intervenor Testimony served Discovery on Intervenor Testimony SoCalGas Rebuttal Testimony served Evidentiary Hearings Opening Briefs filed Reply Briefs filed Update Filing and Hearings, if necessary Proposed Decision Commission Decision Final Tariffs filed Implementation F. Legal Name, Principal Place of Business and State of Incorporation Rule 2.1(a) Applicant s legal name is SOUTHERN CALIFORNIA GAS COMPANY. SoCalGas is a public utility corporation organized and existing under the laws of the State of California with its principal place of business at 555 West 5th Street, Los Angeles, California SoCalGas owns natural gas transmission pipelines, compressor plants, distribution pipelines, services and appurtenant meters, regulators, metering and regulating stations, booster stations, general office buildings, regional and district office buildings, general shops, laboratory buildings, warehouses and other storage facilities, supplies and equipment necessary for the operation of its business. In addition, SoCalGas owns underground gas storage reservoirs, transmission and distribution pipelines and facilities used in the provision of safe and reliable gas delivery service to its customers. SCG Doc#

17 G. Articles of Incorporation Rule 2.2 A copy of SoCalGas Restated Articles of Incorporation, as last amended, presently in effect and certified by the California Secretary of State, was previously filed with the Commission on October 1, 1998, in connection with Application (A.) , and is incorporated herein by reference. H. Correspondence and Communications Rule 2.1(b) All correspondence or communications regarding this Application should be addressed to: Ron van der Leeden Southern California Gas Company 555 West 5th Street Los Angeles, CA phone facsimile rvanderleeden@semprautilities.com with a copy to: Keith W. Melville 101 Ash Street, 12th Floor San Diego, CA (619) phone (619) facsimile kmelville@semprautilities.com I. Plant Investment and Accumulated Depreciation Schedule Rule 3.2(a)(4) A general description of SoCalGas' property and equipment was previously filed with the Commission on May 3, 2004 in connection with SoCalGas Application No , and is incorporated herein by reference. A statement of account of the original cost and depreciation reserve attributable thereto is attached to this Application as Appendix B. J. Balance Sheet and Income Statement Rule 3.2(a) SoCalGas Balance Sheet and Income Statement, dated September 30, 2010, is attached to this Application in Appendix D. SCG Doc#

18 K. Statement of Presently Effective and Proposed Gas Rates and Changes Rules 3.2(a)(2) and 3.2(a)(3) SoCalGas Application sets forth present and proposed rates in Appendix A. Present rates are used to forecast gas revenues. These rates are discussed in the Present and Proposed Rates testimony (Exhibit SCG-40), which is being served concurrently with this Application. L. Rate of Return Summary Rules 3.2(a)(5) and 3.2(a)(6) A Summary of Projected Earnings for SoCalGas is contained in Attachment C. M. Statement of Method for Depreciation Rule 3.2(a)(7) SoCalGas depreciates utility plant in its financial statements on a straight-line remaining life basis, according to the estimated useful life of plant property. For federal income tax accrual purposes, SoCalGas generally computes depreciation using the straight-line method for tax property additions prior to 1954 and liberalized depreciation, which includes Class Life and Asset Depreciation Range Systems (ADRS), on tax property additions after 1954 and prior to For financial reporting and ratesetting purposes, SoCalGas uses "flow through accounting" for such properties. For tax property additions in years 1981 through 1986, the company computes its tax depreciation using the Accelerated Cost Recovery System (ACRS). For additions after 1986, SoCalGas computes its tax depreciation using the Modified Accelerated Cost Recovery System (MACRS) and, since 1982, has normalized the effects of the depreciation difference in accordance with the Economic Recovery Tax Act of 1981 and the Tax Reform Act of N. Proxy Statement Rule 3.2(a)(8) A copy of SoCalGas most recent proxy statement, dated April 29, 2010, was provided to the Commission on May 13, 2010, and is incorporated herein by reference. O. Type of Increase to Customers Rule 3.2(a)(10) The GRC Application will seek the Commission s authorization to revise SoCalGas current base rate revenue requirement to recover its projected costs of its operations, as well as owning and operating its natural gas facilities and infrastructure, for the purposes of serving its customers. SCG Doc#

19 P. Statement of Notice, Publication in Newspaper, and Notice to Customers Rules 3.2(b), 3.2(c) and 3.2(d) SoCalGas shall: 1. Within ten (10) days after this Application is filed with the Commission, mail a notice stating in general terms the proposed revisions in rates to those persons listed in Appendix E. The notice will state that a copy of this Application and related exhibits will be furnished by SoCalGas upon written request; 2. Within ten (10) days after this Application is filed with the Commission, publish at least once in a newspaper of general circulation in all counties in which rates are proposed to be made effective, a notice stating in general terms the proposed revisions in rates. The notice will also state that a copy of this Application and related exhibits may be examined at the offices of the California Public Utilities Commission in Los Angeles and in such SoCalGas offices as are specified in said notice. 3. Provide a notice stating in general terms the proposed revisions in rates to all customers affected by the proposed rate changes by including the notice with regular bills transmitted to its customers. IX. ADDITIONAL DOCUMENTATION The following is an index of the attached Appendices to this Application: Appendix A: Statement of Presently Effective and Proposed Gas Rates and Revenues Appendix B: Statement of Account of the Original Cost and Depreciation Reserve Appendix C: Summary of Earnings Appendix D: Financial Statements Appendix E: Service List Governmental Agencies Appendix F: Service List Appendix G: Certificate of Service and Notice of Availability SCG Doc#

20 WHEREFORE, SoCalGas respectfully requests that the Commission: 1. Consider this Application and grant all the relief requested herein; 2. Issue an Order authorizing SoCalGas to make such changes to its tariffs as are consistent with the relief requested herein; and 3. Grant such other and further relief as the Commission finds to be just and reasonable. Respectfully submitted, SOUTHERN CALIFORNIA GAS COMPANY By: /s/ LEE SCHAVRIEN Lee Schavrien Senior Vice President Finance, Regulatory & Legislative Affairs Southern California Gas Company Signed in San Diego, California December 13, 2010 By: /s/ KEITH W. MELVILLE Keith W. Melville Attorney for Southern California Gas Company 101 Ash Street, 12th Floor San Diego, CA (619) phone (619) facsimile Signed in San Diego, California December 15, 2010 SCG Doc#

21 VERIFICATION I, the undersigned, declare: I am an officer of SOUTHERN CALIFORNIA GAS COMPANY, a corporation. The statements in the foregoing document are true of my own knowledge, except as to the matters which are therein stated on information and belief, and as to those matters I believe them to be true. I declare under penalty of perjury that the foregoing is true and correct. Executed at San Diego, California, this 13 day of December /s/ LEE SCHAVRIEN Lee Schavrien Senior Vice President Finance, Regulatory & Legislative Affairs Southern California Gas Company

22 APPENDIX A Statement of Presently Effective and Proposed Gas Rates and Revenues

23 ALLOCATION OF REVENUES UNDER PRESENT AND PROPOSED RATES Revenues at Present Rates ($000) Revenues at Proposed Rates ($000) Present Rates (cents /therm) Proposed Rates (cents/ therm) Rate Change % Rate Class Residential $2,879,821 $3,098, % Core C&I 3 $922,908 $974, % Other $93,130 $95, % Total Core $3,895,858 $4,167, % Non-Core C&I $121,525 $136, % Electric Generation $66,574 $80, % Non-Core Retail $188,099 $216, % Wholesale $15,202 $18, % Other $70,434 $75, % Total System $4,169,593 $4,477, % Note: For comparison purposes, both present and proposed columns include public purpose program surcharges and gas costs at the same rates. *C&I refers to Commercial and Industrial customers. 3 C&I refers to Commercial and Industrial customers.

24 APPENDIX B Statement of Account of the Original Cost and Depreciation Reserve

25 SOUTHERN CALIFORNIA GAS COMPANY Plant Investment and Accumulated Depreciation As of September 30, 2010 ACCOUNT ORIGINAL ACCUMULATED NET BOOK NUMBER DESCRIPTION COSTS RESERVE VALUE INTANGIBLE ASSETS 301 Organization $ 76, , Franchise and Consents 550, ,693 Total Intangible Assets $ 627,150 0 $ 627,150 PRODUCTION: 325 Other Land Rights $ 15,321 (192) 15, Prd Gas Wells Const 4,271,410 (200,459) 4,070, Prd Gas Wells Eqp 454,718 (20,974) 433, Field LInes 1,731,111 (55,575) 1,675, FldMeas&RegStnEquip 520,055 (17,605) Total Production $ 6,992,614 (294,804) $ 6,195,360 UNDERGROUND STORAGE: 350 Land $ 4,539, ,539, SR Storage Rights 17,830,755 (16,865,528) 965, RW Rights-of-Way 25,354 (13,302) 12, Structures and Improvements 35,776,793 (18,940,347) 16,836, Wells 211,794,618 (143,855,535) 67,939, Lines 86,078,113 (92,075,915) (5,997,802) 354 Compressor Station and Equipment 114,272,845 (65,498,933) 48,773, Measuring And Regulator Equipment 5,786,907 (1,449,233) 4,337, Purification Equipment 104,448,764 (59,505,363) 44,943, Other Equipment 20,393,828 (4,287,805) 16,106,023 Total Underground Storage $ 600,947,461 (402,491,960) $ 198,455,501 TRANSMISSION PLANT- OTHER: 365 Land $ 2,786,000 2,786, Land Rights 20,614,437 (13,643,992) 6,970, Structures and Improvements 32,998,974 (20,522,896) 12,476, Mains 1,047,467,045 (511,606,094) 535,860, Compressor Station and Equipment 177,552,929 (99,737,582) 77,815, Measuring And Regulator Equipment 47,361,131 (25,353,841) 22,007, Other Equipment 4,048,503 (2,257,425) 1,791,079 Total Transmission Plant $ 1,332,829,018 (673,121,831) $ 659,707,187 DISTRIBUTION PLANT: 374 Land 28,254,507 28,254, Land Rights 2,646,609 (12,264) 2,634, Structures and Improvements 212,374,648 (55,894,995) 156,479, Mains 2,963,719,558 (1,719,680,631) 1,244,038, Measuring And Regulator Equipment 65,790,612 (47,510,953) 18,279, Services 2,028,754,680 (1,643,853,484) 384,901, Meters 427,113,336 (120,976,776) 306,136, Meter Installation 264,839,715 (148,075,804) 116,763, House Regulators 115,765,921 (48,086,421) 67,679, Other Equipment 25,245,186 (19,411,549) 5,833,637 Total Distribution Plant $ 6,134,504,773 (3,803,502,877) $ 2,331,001,895 GENERAL PLANT: 389 Land 1,243, ,243, Land Rights 74, , Structures and Improvements 124,443,904 (113,795,605) 10,648, Office Furniture and Equipment 487,503,003 (246,073,134) 241,429, Transportation Equipment 681,779 (16,026) 665, Stores Equipment 93,665 (14,205) 79, Shop and Garage Equipment 50,507,562 (23,078,261) 27,429, Laboratory Equipment 6,254,822 (3,741,859) 2,512, Construction Equipment 36,226 (2,675) 33, Communication Equipments 69,210,593 (18,505,911) 50,704, Miscellaneous Equipment 3,717, ,181 4,704,521 Total General Plant $ 743,766,213 (404,240,496) $ 339,525,717 Grand Total $ 8,819,667,229 $ (5,283,651,969) $ 3,535,512,811 Page 1 of 1

26 APPENDIX C Summary of Earnings

27 SOUTHERN CALIFORNIA GAS COMPANY SUMMARY OF EARNINGS NINE MONTHS ENDED SEPTEMBER 30, 2010 (DOLLARS IN MILLIONS) Line No. Item Amount 1 Operating Revenue $2,793 2 Operating Expenses 2,540 3 Net Operating Income $253 4 Weighted Average Rate Base $2,893 5 Rate of Return* 8.68% *Authorized Cost of Capital

28 APPENDIX D Financial Statements Balance Sheet, Statement of Income and Financial Statement

29 SOUTHERN CALIFORNIA GAS COMPANY BALANCE SHEET ASSETS AND OTHER DEBITS SEPTEMBER 30, UTILITY PLANT UTILITY PLANT IN SERVICE $9,131,583, UTILITY PLANT PURCHASED OR SOLD PLANT HELD FOR FUTURE USE COMPLETED CONSTRUCTION NOT CLASSIFIED CONSTRUCTION WORK IN PROGRESS 240,058, ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT (3,822,690,035) 111 ACCUMULATED PROVISION FOR AMORTIZATION OF UTILITY PLANT (28,476,852) 117 GAS STORED-UNDERGROUND 55,520,014 TOTAL NET UTILITY PLANT 5,575,994, NONUTILITY PROPERTY 127,051, ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF NONUTILITY PROPERTY (99,733,839) 123 INVESTMENTS IN SUBSIDIARY COMPANIES OTHER INVESTMENTS SINKING FUNDS OTHER SPECIAL FUNDS 3,000,000 TOTAL OTHER PROPERTY AND INVESTMENTS 30,318,256 Data from SPL as of November 10, OTHER PROPERTY AND INVESTMENTS

30 SOUTHERN CALIFORNIA GAS COMPANY BALANCE SHEET ASSETS AND OTHER DEBITS SEPTEMBER 30, CURRENT AND ACCRUED ASSETS CASH 10,932, INTEREST SPECIAL DEPOSITS OTHER SPECIAL DEPOSITS WORKING FUNDS 91, TEMPORARY CASH INVESTMENTS 59,900, NOTES RECEIVABLE CUSTOMER ACCOUNTS RECEIVABLE 325,315, OTHER ACCOUNTS RECEIVABLE 34,267, ACCUMULATED PROVISION FOR UNCOLLECTIBLE ACCOUNTS (6,573,590) 145 NOTES RECEIVABLE FROM ASSOCIATED COMPANIES 124,718, ACCOUNTS RECEIVABLE FROM ASSOCIATED COMPANIES 3,703, FUEL STOCK FUEL STOCK EXPENSE UNDISTRIBUTED PLANT MATERIALS AND OPERATING SUPPLIES 25,808, MERCHANDISE OTHER MATERIALS AND SUPPLIES STORES EXPENSE UNDISTRIBUTED (250,767) 164 GAS STORED 158,868, PREPAYMENTS 30,372, INTEREST AND DIVIDENDS RECEIVABLE 18, ACCRUED UTILITY REVENUES MISCELLANEOUS CURRENT AND ACCRUED ASSETS 16,092, DERIVATIVE INSTRUMENT ASSETS 3,448, LONG TERM PORTION OF DERIVATIVE ASSETS - HEDGES 3,030,026 TOTAL CURRENT AND ACCRUED ASSETS 789,745, DEFERRED DEBITS 181 UNAMORTIZED DEBT EXPENSE 4,595, UNRECOVERED PLANT AND OTHER REGULATORY ASSETS 950,183, PRELIMINARY SURVEY & INVESTIGATION CHARGES CLEARING ACCOUNTS 488, TEMPORARY FACILITIES MISCELLANEOUS DEFERRED DEBITS 6,333, RESEARCH AND DEVELOPMENT UNAMORTIZED LOSS ON REACQUIRED DEBT 20,845, ACCUMULATED DEFERRED INCOME TAXES 277,211, UNRECOVERED PURCHASED GAS COSTS - TOTAL DEFERRED DEBITS 1,259,657,954 TOTAL ASSETS AND OTHER DEBITS $ 7,655,716,256 Data from SPL as of November 10, 2010

31 SOUTHERN CALIFORNIA GAS COMPANY BALANCE SHEET LIABILITIES AND OTHER CREDITS SEPTEMBER 30, PROPRIETARY CAPITAL COMMON STOCK ISSUED (834,888,907) 204 PREFERRED STOCK ISSUED (21,551,075) 207 PREMIUM ON CAPITAL STOCK OTHER PAID-IN CAPITAL GAIN ON RETIRED CAPITAL STOCK (9,722) 211 MISCELLANEOUS PAID-IN CAPITAL (31,306,680) 214 CAPITAL STOCK EXPENSE 143, UNAPPROPRIATED RETAINED EARNINGS (1,015,525,091) 219 ACCUMULATED OTHER COMPREHENSIVE INCOME 23,000,754 TOTAL PROPRIETARY CAPITAL (1,880,137,460) 6. LONG-TERM DEBT 221 BONDS (1,253,030,026) 224 OTHER LONG-TERM DEBT (12,475,533) 225 UNAMORTIZED PREMIUM ON LONG-TERM DEBT UNAMORTIZED DISCOUNT ON LONG-TERM DEBT 1,829,705 TOTAL LONG-TERM DEBT (1,263,675,854) 7. OTHER NONCURRENT LIABILITIES 227 OBLIGATIONS UNDER CAPITAL LEASES - NONCURRENT (9,851,351) ACCUMULATED PROVISION FOR INJURIES AND DAMAGES (107,924,780) ACCUMULATED PROVISION FOR PENSIONS AND BENEFITS (695,123,235) ACCUMULATED MISCELLANEOUS OPERATING PROVISIONS ASSET RETIREMENT OBLIGATIONS (703,682,480) TOTAL OTHER NONCURRENT LIABILITIES (1,516,581,846) Data from SPL as of November 10, 2010

32 SOUTHERN CALIFORNIA GAS COMPANY BALANCE SHEET LIABILITIES AND OTHER CREDITS SEPTEMBER 30, CURRENT AND ACCRUED LIABILITES NOTES PAYABLE ACCOUNTS PAYABLE (254,502,924) 233 NOTES PAYABLE TO ASSOCIATED COMPANIES ACCOUNTS PAYABLE TO ASSOCIATED COMPANIES (13,094,241) 235 CUSTOMER DEPOSITS (77,181,291) 236 TAXES ACCRUED (12,210,304) 237 INTEREST ACCRUED (19,021,118) 238 DIVIDENDS DECLARED (323,265) 241 TAX COLLECTIONS PAYABLE (12,991,021) 242 MISCELLANEOUS CURRENT AND ACCRUED LIABILITIES (138,425,154) 243 OBLIGATIONS UNDER CAPITAL LEASES - CURRENT (7,158,047) 244 DERIVATIVE INSTRUMENT LIABILITIES (395,893) 245 DERIVATIVE INSTRUMENT LIABILITIES - HEDGES - TOTAL CURRENT AND ACCRUED LIABILITIES (535,303,258) 9. DEFERRED CREDITS 252 CUSTOMER ADVANCES FOR CONSTRUCTION (83,377,442) 253 OTHER DEFERRED CREDITS (117,577,437) 254 OTHER REGULATORY LIABILITIES (1,571,558,194) 255 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS (25,793,267) 257 UNAMORTIZED GAIN ON REACQUIRED DEBT ACCUMULATED DEFERRED INCOME TAXES - ACCELERATED ACCUMULATED DEFERRED INCOME TAXES - PROPERTY (395,195,594) 283 ACCUMULATED DEFERRED INCOME TAXES - OTHER (266,515,904) TOTAL DEFERRED CREDITS (2,460,017,838) TOTAL LIABILITIES AND OTHER CREDITS $ (7,655,716,256) $ - Data from SPL as of November 10, 2010

33 SOUTHERN CALIFORNIA GAS COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS NINE MONTHS ENDED SEPTEMBER 30, UTILITY OPERATING INCOME 400 OPERATING REVENUES $2,792,647, OPERATING EXPENSES $2,033,271, MAINTENANCE EXPENSES 87,819, DEPRECIATION AND AMORTIZATION EXPENSES 230,045, TAXES OTHER THAN INCOME TAXES 55,650, INCOME TAXES 71,601, PROVISION FOR DEFERRED INCOME TAXES 92,466, PROVISION FOR DEFERRED INCOME TAXES - CREDIT (28,871,950) INVESTMENT TAX CREDIT ADJUSTMENTS (1,882,361) GAIN FROM DISPOSITION OF UTILITY PLANT (38) LOSS FROM DISPOSITION OF UTILITY PLANT - TOTAL OPERATING REVENUE DEDUCTIONS 2,540,100,323 NET OPERATING INCOME 252,547, OTHER INCOME AND DEDUCTIONS 415 REVENUE FROM MERCHANDISING, JOBBING AND CONTRACT WORK REVENUES FROM NONUTILITY OPERATIONS EXPENSES OF NONUTILITY OPERATIONS (83,059) 418 NONOPERATING RENTAL INCOME 281, EQUITY IN EARNINGS OF SUBSIDIARIES INTEREST AND DIVIDEND INCOME 257, ALLOWANCE FOR OTHER FUNDS USED DURING CONSTRUCTION 10,461, MISCELLANEOUS NONOPERATING INCOME 36, GAIN ON DISPOSITION OF PROPERTY 7,510 TOTAL OTHER INCOME 10,961, MISCELLANEOUS AMORTIZATION MISCELLANEOUS OTHER INCOME DEDUCTIONS (2,171,817) (2,171,817) TAXES OTHER THAN INCOME TAXES (73,845) INCOME TAXES 1,670, PROVISION FOR DEFERRED INCOME TAXES (2,519,683) PROVISION FOR DEFERRED INCOME TAXES - CREDIT 1,830, INVESTMENT TAX CREDITS 104,954 TOTAL TAXES ON OTHER INCOME AND DEDUCTIONS 1,012,537 TOTAL OTHER INCOME AND DEDUCTIONS 9,802,014 INCOME BEFORE INTEREST CHARGES 262,349,653 NET INTEREST CHARGES* 49,652,474 NET INCOME $212,697,179 *NET OF ALLOWANCE FOR BORROWED FUNDS USED DURING CONSTRUCTION. ($1,248,533) Data from SPL as of November 10, 2010

34 SOUTHERN CALIFORNIA GAS COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS NINE MONTHS ENDED SEPTEMBER 30, RETAINED EARNINGS RETAINED EARNINGS AT BEGINNING OF PERIOD, AS PREVIOUSLY REPORTED $903,797,710 NET INCOME (FROM PRECEDING PAGE) 212,697,179 DIVIDEND TO PARENT COMPANY (100,000,000) DIVIDENDS DECLARED - PREFERRED STOCK (969,798) OTHER RETAINED EARNINGS ADJUSTMENT - RETAINED EARNINGS AT END OF PERIOD $1,015,525,091

35 SOUTHERN CALIFORNIA GAS COMPANY FINANCIAL STATEMENT SEPTEMBER 30, 2010 (a) Amounts and Kinds of Stock Authorized: Preferred Stock 160,000 shares Par Value $4,000,000 Preferred Stock 840,000 shares Par Value $21,000,000 Preferred Stock 5,000,000 shares Without Par Value Preference Stock 5,000,000 shares Without Par Value Common Stock 100,000,000 shares Without Par Value Amounts and Kinds of Stock Outstanding: PREFERRED STOCK 6.0% 79,011 shares $1,975, % 783,032 shares 19,575,800 COMMON STOCK 91,300,000 shares 834,888,907 (b) (c) (d) Terms of Preferred Stock: Full information as to this item is given in connection with Application Nos and , to which references are hereby made. Brief Description of Mortgage: Full information as to this item is given in Application Nos and to which references are hereby made. Number and Amount of Bonds Authorized and Issued: Nominal Par Value Date of Authorized Interest Paid First Mortgage Bonds: Issue and Issued Outstanding in % Series GG, due ,000, ,000,000 12,000, % Series HH, due ,000, ,000,000 13,625,000 Var % Series II, due ,000, ,000,000 10,937,500 Var% Series JJ, due ,000, ,775, % Series KK, due ,000, ,000,000 14,375, % Series LL, due ,000, ,000,000 11,229,167 Other Long-Term Debt 4.750% SFr. Foreign Interest Payment Securities ,877,038 7,475, , % Medium-Term Note, due ,000,000 5,000, ,500