ALJ/RL8/jt2 Date of Issuance 10/1/2019

Decision 19-09-051 September 26, 2019

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of San Diego Gas & Electric

Company (U902M) for Authority, Among
Other Things, to Update its Electric and Gas
Application 17-10-007
Revenue Requirement and Base Rates
Effective on January 1, 2019.

And Related Matter. Application 17-10-008

DECISION ADDRESSING THE TEST YEAR 2019 GENERAL RATE CASES

OF SAN DIEGO GAS & ELECTRIC COMPANY
AND SOUTHERN CALIFORNIA GAS COMPANY

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DECISION ADDRESSING THE TEST YEAR 2019 GENERAL RATE CASES

OF SAN DIEGO GAS & ELECTRIC COMPANY AND SOUTHERN
CALIFORNIA GAS COMPANY .................................................................................... 1
Summary ............................................................................................................................ 2
1. Procedural Background ............................................................................................ 6
2. PPHs and Correspondence ..................................................................................... 13
3. Background of the Applications ............................................................................ 15
3.1. SDG&E’s Application ....................................................................................... 16
3.2. SoCalGas’ Application ...................................................................................... 17
3.3. Shared Services .................................................................................................. 18
4. Analysis Overview................................................................................................... 19
4.1. RAMP Review .................................................................................................... 20
4.1.1. Enterprise Risk Management .................................................................... 23
4.2. Officer Compensation ....................................................................................... 24
4.3. Aliso Canyon Costs and Returning Employees ............................................ 26
5. Request to Adopt a Four-Year GRC Cycle ........................................................... 27
6. Fueling Our Future .................................................................................................. 30
6.1. Position of Intervenors ..................................................................................... 31
6.2. Discussion ........................................................................................................... 32
7. Gas Distribution ....................................................................................................... 33
7.1. SoCalGas ............................................................................................................. 33
7.1.1. Non-Shared O&M ....................................................................................... 36
[Link]. Field Operations & Maintenance ....................................................... 37
[Link]. Asset Management .............................................................................. 40
[Link]. Operations and Management ............................................................. 40
[Link]. Regional Public Affairs ....................................................................... 40
[Link]. Positions of Intervenors ...................................................................... 41
[Link]. Discussion ............................................................................................. 42
[Link].1. Field Operations & Maintenance Issues .................................... 42
[Link].2. Asset Management and Regional Public Affairs ...................... 50
[Link].3. Operations and Management ...................................................... 50
[Link].4. Summary of Non-Shared O&M Costs ........................................ 52
7.1.2. Shared O&M ................................................................................................ 52
7.1.3. Capital .......................................................................................................... 53
[Link]. New Business ........................................................................................ 54

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[Link]. Pressure Betterments ........................................................................... 55

[Link]. Supply Line Replacements ................................................................. 55
[Link]. Main Replacements .............................................................................. 55
[Link]. Service Replacements .......................................................................... 55
[Link]. Main and Service Abandonments ..................................................... 56
[Link]. Regular Stations ................................................................................... 56
[Link]. Cathodic Protection ............................................................................. 56
[Link]. Pipeline Relocations – Freeway ......................................................... 57
[Link]. Pipeline Relocations – Franchise ........................................................ 57
[Link]. Other Distribution Projects & Meter Guards ................................... 57
[Link]. Measurements & Regulation Devices ............................................... 57
[Link]. Capital Tools ......................................................................................... 58
[Link]. Field Capital Support .......................................................................... 58
[Link]. Remote Meter Reading ........................................................................ 58
[Link]. Positions of Intervenors ...................................................................... 58
[Link]. Discussion ............................................................................................. 59
7.2. SDG&E ................................................................................................................ 67
7.2.1. O&M ............................................................................................................. 70
[Link]. Field Operations & Maintenance ....................................................... 70
[Link]. Positions of Intervenors ...................................................................... 72
[Link]. Discussion ............................................................................................. 73
[Link].1. Field Operations & Maintenance Issues .................................... 73
[Link].2. Asset Management and Operations Management ................... 76
7.2.2. Capital .......................................................................................................... 77
[Link]. New Business ........................................................................................ 78
[Link]. System Minor Additions, Relocations, and Retirement ................. 78
[Link]. Meter and Regulator Materials .......................................................... 79
[Link]. Pressure Betterments ........................................................................... 79
[Link]. Distribution Easement ......................................................................... 79
[Link]. Pipeline Relocations – Freeway and Franchise................................ 79
[Link]. Tools and Equipment .......................................................................... 79
[Link]. Code Compliance ................................................................................. 79
[Link]. Replacement of Mains and Services .................................................. 80
[Link]. Cathodic Protection ............................................................................. 80
[Link]. Regulator Station Improvements and Other ................................... 80

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[Link]. CNG Station Upgrades........................................................................ 80

[Link]. Local Engineering ................................................................................ 81
[Link]. Position of Intervenors ........................................................................ 81
[Link]. Discussion ............................................................................................. 82
8. Gas System Integrity ................................................................................................ 88
8.1. SoCalGas ............................................................................................................. 88
8.1.1. Non-Shared Costs ....................................................................................... 89
[Link]. Gas Operations Staff & Training........................................................ 89
[Link]. Pipeline Safety & Compliance ............................................................ 89
[Link]. Damage Prevention ............................................................................. 89
[Link]. Asset Management .............................................................................. 90
[Link]. Gas Contractor Controls ..................................................................... 90
8.1.2. Shared Costs ................................................................................................ 90
[Link]. Gas Operations Staff & Training........................................................ 90
[Link]. Pipeline Safety & Compliance ............................................................ 91
[Link]. Damage Prevention ............................................................................. 91
[Link]. Asset Management .............................................................................. 92
[Link]. Gas Contractor Controls ..................................................................... 92
8.1.3. IT Business Unit Capital Projects ............................................................. 93
8.1.4. Position of Intervenors ............................................................................... 93
8.1.5. Discussion .................................................................................................... 94
8.2. SDG&E ................................................................................................................ 98
8.2.1. Non-Shared Costs ....................................................................................... 99
8.2.2. Shared Costs ................................................................................................ 99
8.2.3. IT Business Unit Capital Projects ........................................................... 100
8.2.4. Discussion .................................................................................................. 100
9. Gas Transmission Operations (O&M) ................................................................ 101
9.1. SoCalGas ........................................................................................................... 101
9.1.1. Non-Shared Costs ..................................................................................... 102
[Link]. Gas Transmission Pipelines .............................................................. 102
[Link]. Compressor Stations .......................................................................... 103
[Link]. Technical Services .............................................................................. 103
[Link]. Positions of Intervenors .................................................................... 103
[Link]. Discussion ........................................................................................... 104
9.1.2. Shared Costs .............................................................................................. 108

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[Link]. Director of Gas Transmission ........................................................... 108

[Link]. Field Operations Managers .............................................................. 108
[Link]. Technical Services Manager ............................................................. 109
[Link]. Discussion ........................................................................................... 109
9.2. SDG&E .............................................................................................................. 109
9.2.1. Non-Shared Costs ..................................................................................... 109
9.2.2. Discussion .................................................................................................. 110
10. Gas Transmission Capital ..................................................................................... 111
10.1. SoCalGas ........................................................................................................... 111
10.1.1. New Pipeline ............................................................................................. 112
10.1.2. Pipeline Replacements ............................................................................. 112
10.1.3. Pipeline Relocations ................................................................................. 113
10.1.4. Compressor Stations ................................................................................ 113
10.1.5. Cathodic Protection .................................................................................. 114
10.1.6. Meter & Regulator .................................................................................... 114
10.1.7. Auxiliary Equipment................................................................................ 115
10.1.8. Position of Intervenors ............................................................................. 115
10.1.9. Discussion .................................................................................................. 116
10.2. Cost Recovery for the North-South Project ................................................. 118
10.2.1. Positions of Intervenors ........................................................................... 118
10.2.2. Discussion .................................................................................................. 119
10.3. SDG&E .............................................................................................................. 120
10.3.1. Capital Projects.......................................................................................... 121
10.3.2. Positions of Intervenors ........................................................................... 122
10.3.3. Discussion .................................................................................................. 122
11. Gas Major Projects ................................................................................................. 125
11.1. O&M .................................................................................................................. 125
11.1.1. Management & Outreach ........................................................................ 126
11.1.2. Project & Construction Management .................................................... 127
11.1.3. Project Controls & Estimating and Gas Contractor Controls ............ 127
11.2. Capital ............................................................................................................... 127
11.2.1. Distribution Operations Control Center ............................................... 127
11.2.2. Pipeline Information Monitoring System ............................................. 128
11.2.3. Methane Monitoring & Fiber-Optic Monitoring .................................. 128
11.2.4. Positions of Intervenors ........................................................................... 129

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11.2.5. Discussion .................................................................................................. 129

12. Gas Engineering ..................................................................................................... 132
12.1. SoCalGas ........................................................................................................... 132
12.1.1. Non-Shared O&M ..................................................................................... 134
[Link]. Gas Engineering ................................................................................. 134
[Link]. Land Services & Right-of-Way ......................................................... 135
[Link]. Positions of Intervenors .................................................................... 136
[Link]. Discussion ........................................................................................... 136
12.1.2. Shared O&M .............................................................................................. 142
[Link]. Director of Gas Engineering ............................................................. 142
[Link]. MRC ..................................................................................................... 142
[Link]. Engineering Design ........................................................................... 143
[Link]. Engineering Analysis Center ............................................................ 143
[Link]. Gas Operations Research and Materials ......................................... 143
[Link]. Position of Intervenors ...................................................................... 144
[Link]. Discussion ........................................................................................... 144
12.1.3. Capital ........................................................................................................ 145
[Link]. Land and Right-of-Way .................................................................... 145
[Link]. Capital Tools & Lab Equipment ...................................................... 145
[Link]. Supervision & Engineering Overheads .......................................... 146
[Link]. Positions of Intervenors .................................................................... 146
[Link]. Discussion ........................................................................................... 146
12.2. SDG&E .............................................................................................................. 148
12.2.1. Positions of Intervenors ........................................................................... 149
12.2.2. Discussion .................................................................................................. 149
13. Underground Storage ............................................................................................ 150
13.1. O&M .................................................................................................................. 151
13.1.1. Non-Shared Costs ..................................................................................... 152
[Link]. UGS and AGS ..................................................................................... 152
[Link]. Storage Risk Management ................................................................ 152
[Link]. SIMP ..................................................................................................... 152
13.1.2. Shared Costs .............................................................................................. 153
13.1.3. Positions of Intervenors ........................................................................... 153
13.1.4. Discussion .................................................................................................. 154
13.2. Capital ............................................................................................................... 156

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13.2.1. Storage Compressors................................................................................ 157

13.2.2. Storage Wells ............................................................................................. 158
13.2.3. Pipelines ..................................................................................................... 160
13.2.4. Storage Purification Systems................................................................... 160
13.2.5. Storage Auxiliary Equipment ................................................................. 161
13.2.6. SIMP ............................................................................................................ 163
13.2.7. Aliso Canyon Turbine Replacement ...................................................... 164
13.2.8. Discussion .................................................................................................. 164
14. Aliso Canyon Turbine Replacement ................................................................... 166
14.1. Project Cost Elements ..................................................................................... 167
14.2. Positions of Intervenors .................................................................................. 169
14.3. Discussion ......................................................................................................... 169
15. Gas Control and System Operations and Planning .......................................... 174
15.1. Non-Shared Costs ............................................................................................ 175
15.1.1. Storage Products Manager ...................................................................... 175
15.1.2. Emergency Services .................................................................................. 175
15.1.3. Positions of Intervenors ........................................................................... 175
15.1.4. Discussion .................................................................................................. 176
15.2. Shared Costs ..................................................................................................... 177
15.2.1. Energy Markets & Capacity Products ................................................... 177
15.2.2. Gas Scheduling .......................................................................................... 178
15.2.3. Gas Transmission Planning ..................................................................... 178
15.2.4. Positions of Intervenors ........................................................................... 178
15.2.5. Discussion .................................................................................................. 179
15.3. Operational Flow Cost Memorandum Account ......................................... 180
15.4. IT Business Unit Capital Projects .................................................................. 182
16. Pipeline Integrity for Transmission and Distribution ...................................... 182
16.1. SoCalGas ........................................................................................................... 184
16.1.1. O&M ........................................................................................................... 184
[Link]. TIMP..................................................................................................... 185
[Link]. DIMP .................................................................................................... 186
16.1.2. Capital ........................................................................................................ 187
16.1.3. Positions of Intervenors ........................................................................... 188
16.1.4. Discussion .................................................................................................. 189
16.2. SDG&E .............................................................................................................. 193

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16.2.1. Positions of Intervenors ........................................................................... 194

16.2.2. Discussion .................................................................................................. 195
17. Pipeline Safety Enhancement Plan (PSEP) ......................................................... 196
17.1. Pressure Test Projects ..................................................................................... 199
17.1.1. Positions of Intervenors ........................................................................... 201
17.1.2. Discussion .................................................................................................. 202
17.2. Miscellaneous PSEP Costs.............................................................................. 207
17.2.1. Allowance for Pipeline Failures ............................................................. 208
17.2.2. Implementation Continuity Costs .......................................................... 208
17.2.3. Program Management Office .................................................................. 208
17.2.4. Discussion .................................................................................................. 208
17.3. Capital Projects ................................................................................................ 209
17.3.1. Replacement Projects ............................................................................... 209
17.3.2. Valve Replacement Plan .......................................................................... 212
17.3.3. Positions of Intervenors ........................................................................... 212
17.3.4. Discussion .................................................................................................. 213
17.4. Fourth Year Projects (2022) ............................................................................ 216
17.5. Project Substitution ......................................................................................... 216
17.6. PSEPBA ............................................................................................................. 217
17.7. Clarification Regarding D.11-06-017 ............................................................ 219
18. Procurement ............................................................................................................ 222
18.1. Gas Procurement (SoCalGas) ........................................................................ 222
18.1.1. O&M ........................................................................................................... 223
18.1.2. IT Business Unit Capital Projects ........................................................... 223
18.1.3. Positions of Intervenors ........................................................................... 224
18.1.4. Discussion .................................................................................................. 224
18.2. Electric and Fuel Procurement (SDG&E) ..................................................... 225
18.2.1. O&M ........................................................................................................... 225
[Link]. Long Term Procurement ................................................................... 225
[Link]. Trading & Scheduling ....................................................................... 226
[Link]. Middle and Back Office ..................................................................... 226
18.2.2. IT Business Unit Capital Projects ........................................................... 227
18.2.3. Discussion .................................................................................................. 227
19. Advanced Metering Infrastructure ..................................................................... 228
19.1. O&M Costs ....................................................................................................... 229

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19.1.1. Discussion .................................................................................................. 229

19.2. Capital ............................................................................................................... 230
19.2.1. AMI Balancing Account (Capital) .......................................................... 230
19.2.2. IT Capital Projects ..................................................................................... 230
[Link]. DCU LTE Upgrade Program ............................................................ 230
[Link]. DCU Software IS Upgrade................................................................ 231
[Link]. DCU Compliance Inspection Work Management ........................ 231
19.2.3. Positions of Intervenors ........................................................................... 231
19.2.4. Discussion .................................................................................................. 231
20. Electric Generation ................................................................................................. 232
20.1. Non-Shared O&M Costs................................................................................. 233
20.1.1. Generation Plant ....................................................................................... 233
[Link]. Otay Mesa Plant ................................................................................. 235
[Link]. Resolution E-4981 ............................................................................... 236
20.1.2. Administration .......................................................................................... 237
20.1.3. SONGS........................................................................................................ 238
20.2. Shared O&M Costs (Resource Planning) ..................................................... 239
20.3. Capital ............................................................................................................... 239
20.4. Position of Intervenors ................................................................................... 240
20.5. Discussion ......................................................................................................... 242
20.5.1. OMEC ......................................................................................................... 242
20.5.2. O&M Costs ................................................................................................ 244
20.5.3. Capital Costs .............................................................................................. 246
21. Electric Distribution ............................................................................................... 247
21.1. O&M Costs ....................................................................................................... 248
21.1.1. RAMP ......................................................................................................... 248
21.1.2. Non-Shared O&M ..................................................................................... 251
[Link]. Reliability & Capacity........................................................................ 252
[Link]. Construction Services ........................................................................ 253
[Link]. Distribution Operations Enterprise GIS ......................................... 255
[Link]. Electric Distribution Operations ...................................................... 255
[Link]. Kearny Operations Services ............................................................. 256
[Link]. Grid Operations .................................................................................. 257
[Link]. Officer .................................................................................................. 258
[Link]. Project Management .......................................................................... 258

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[Link]. Electric Regional Operations ............................................................ 260

[Link]. Skills and Compliance Training ....................................................... 261
[Link]. Service Order Team ........................................................................... 262
[Link]. Substation Construction and Operations ....................................... 262
[Link]. System Protection ............................................................................... 263
[Link]. Distribution and Engineering .......................................................... 263
[Link]. Asset Management ............................................................................ 265
[Link]. Troubleshooting ................................................................................. 265
[Link]. Vegetation Management (Pole Brushing) ...................................... 266
[Link]. Vegetation Management (Tree Trimming) .................................... 266
[Link]. Regional Public Affairs ..................................................................... 268
[Link]. Major Projects ..................................................................................... 268
[Link]. Technology Utilization ...................................................................... 269
[Link]. Compliance Management ................................................................. 269
[Link]. Technology Solutions and Reliability ............................................. 269
[Link]. Emergency Management .................................................................. 270
[Link]. Strategic Planning and Business Optimization ............................. 272
[Link]. Distributed Energy Resources .......................................................... 272
21.1.3. Summary .................................................................................................... 273
21.1.4. Performance Based Ratemaking ............................................................. 273
21.2. Capital ............................................................................................................... 275
21.2.1. IT Capital Projects ..................................................................................... 275
21.2.2. RAMP ......................................................................................................... 276
21.2.3. Primary Cost Categories .......................................................................... 276
[Link]. Capacity/Expansion .......................................................................... 277
[Link]. Equipment/Tools/Miscellaneous ................................................... 279
[Link]. Franchise.............................................................................................. 280
[Link]. Mandated ............................................................................................ 281
[Link]. New Business ...................................................................................... 282
[Link]. Materials .............................................................................................. 284
[Link]. Overhead Pools .................................................................................. 286
[Link]. Reliability/Improvements ................................................................ 288
[Link]. Safety and Risk Management ........................................................... 289
[Link]. Distributed Energy Resources .......................................................... 292
[Link]. Transmission/FERC Driven Projects .............................................. 296

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[Link]. Summary ............................................................................................. 297

[Link]. IT Business Unit Capital Projects ..................................................... 298
22. Customer Service ................................................................................................... 300
22.1. Joint Settlement Motion .................................................................................. 300
22.1.1. Background ................................................................................................ 300
22.1.2. Terms of the Settlement Agreement ...................................................... 302
22.1.3. Standard for Review ................................................................................. 303
22.1.4. Discussion of Settlement Agreement ..................................................... 304
22.2. Customer Services Field and Meter Reading .............................................. 305
22.2.1. SoCalGas .................................................................................................... 306
[Link]. Non-Shared O&M .............................................................................. 306
[Link].1. CS-F ............................................................................................... 306
[Link].1.1. CS-F Operations .................................................................... 307
[Link].1.2. CS-F Supervision .................................................................. 308
[Link].1.3. CS-F Dispatch ........................................................................ 308
[Link].1.4. CS-F Support ......................................................................... 309
[Link].1.5. CS-F MSA Inspection Program ........................................... 309
[Link].2. CS-MR ........................................................................................... 310
[Link].2.1. CS-MR Operations ................................................................ 310
[Link].2.2. CS-MR Clerical ...................................................................... 311
[Link].2.3. CS-MR Supervision and Training ...................................... 311
[Link].2.4. CS-MR Support ..................................................................... 311
[Link].3. Positions of Intervenors .............................................................. 312
[Link].4. Discussion ..................................................................................... 312
[Link]. Shared O&M ....................................................................................... 316
[Link].1. Discussion ..................................................................................... 317
[Link]. Capital Costs ....................................................................................... 317
[Link].1. PACER OCS – Order Reprioritization Project (Phase 1) ....... 318
[Link].2. MSA Inspection Project .............................................................. 318
[Link].3. SoCalGas CS-F Routing .............................................................. 318
[Link].4. FOF Energy Diversion ................................................................ 319
[Link].5. FOF PACER OCS – Order Reprioritization Project
(Phase 2) ........................................................................................ 319
[Link].6. FOF – CS-F PACER Mobile Platform ....................................... 319
[Link]. Summary ............................................................................................. 319

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22.2.2. SDG&E ....................................................................................................... 320

[Link]. O&M..................................................................................................... 320
[Link].1. CS-F Operations ........................................................................... 320
[Link].2. CS-F Supervision ......................................................................... 321
[Link].3. CS-F Dispatch ............................................................................... 321
[Link].4. CS-F Support ................................................................................ 321
[Link]. Capital .................................................................................................. 321
[Link].1. Field Parts Replacement Service (FPRS) Program .................. 322
[Link].2. SORT Extension ........................................................................... 322
[Link]. Positions of Intervenors .................................................................... 322
[Link]. Discussion ........................................................................................... 322
[Link]. Smart Meter Opt-Out Program ........................................................ 325
[Link].1. Smart Meter Opt-Out Balancing Account (SMOBA) ............. 325
[Link].2. Discussion ..................................................................................... 326
22.3. Customer Services Office Operations........................................................... 326
22.3.1. SoCalGas .................................................................................................... 326
[Link]. Non-Shared O&M .............................................................................. 327
[Link].1. Customer Contact Center Operations ...................................... 328
[Link].2. Customer Contact Center Support ........................................... 328
[Link].3. Branch Offices .............................................................................. 329
[Link].4. Billing Services ............................................................................. 329
[Link].5. Measurement Data Operations (MDO) .................................... 329
[Link].6. Credit & Collections .................................................................... 329
[Link].7. Credit & Collections Postage ..................................................... 330
[Link].8. Remittance Processing ................................................................ 330
[Link].9. Remittance Processing Postage ................................................. 330
[Link].10. Customer Service Other Office Ops & Technology ............... 330
[Link].11. Positions of Intervenors .............................................................. 331
[Link].12. Discussion ..................................................................................... 332
[Link]. Shared O&M ....................................................................................... 334
[Link].1. Major Market Credit & Collections .......................................... 334
[Link].2. Payment Processing .................................................................... 334
[Link].3. Manager of Remittance Processing........................................... 335
[Link].4. Discussion ..................................................................................... 335
[Link]. Uncollectible Rate .............................................................................. 335

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[Link]. Capital .................................................................................................. 336

[Link].1. Mandated ...................................................................................... 337
[Link].2. Technical Obsolescence .............................................................. 337
[Link].3. Business Optimization ................................................................ 337
[Link].4. Improving Customer Experience .............................................. 338
[Link].5. Discussion ..................................................................................... 338
22.3.2. SDG&E ....................................................................................................... 338
[Link]. O&M Costs .......................................................................................... 339
[Link].1. Advance Metering Operations (AMO) .................................... 339
[Link].2. Billing ............................................................................................ 340
[Link].3. Credit & Collections .................................................................... 340
[Link].4. Remittance Processing ................................................................ 340
[Link].5. Postage .......................................................................................... 341
[Link].6. Branch Offices .............................................................................. 341
[Link].7. CCC Operations ........................................................................... 341
[Link].8. CCC Support ................................................................................ 341
[Link].9. Customer Operations Support Projects ................................... 341
[Link].10. Positions of Intervenors .............................................................. 342
[Link].11. Discussion ..................................................................................... 343
[Link]. Uncollectible Rate .............................................................................. 349
[Link]. Capital .................................................................................................. 350
[Link].1. Mandated ...................................................................................... 350
[Link].2. Technical Obsolescence .............................................................. 350
[Link].3. Business Optimization ................................................................ 351
[Link].4. Improving Customer Experience .............................................. 351
[Link].5. Position of Intervenors ............................................................... 351
[Link].6. Discussion ..................................................................................... 352
22.4. Customer Services Information ..................................................................... 353
22.4.1. O&M Costs ................................................................................................ 354
[Link]. Non-Shared O&M .............................................................................. 354
[Link].1. Customer Strategy and Engagement ........................................ 355
[Link].2. Customer Assistance ................................................................... 355
[Link].3. Customer Segment Services ....................................................... 356
[Link]. Shared O&M ....................................................................................... 356
[Link].1. Clean Transportation .................................................................. 356

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[Link].2. Renewable Customer Gas Outreach ......................................... 357

[Link]. Position of Intervenors ...................................................................... 357
[Link]. Discussion ........................................................................................... 357
22.4.2. Capital ........................................................................................................ 359
[Link]. Data Driven Customer Communications ....................................... 359
[Link]. My Account Additional Self-Service Features............................... 359
[Link]. My Account Customer Engagement Improvements .................... 360
[Link]. Optimizing Self-Service Payment Extensions................................ 360
[Link]. My Account Alignment..................................................................... 360
[Link]. Customer Experience......................................................................... 360
[Link]. AB 802 Building Benchmarking ....................................................... 360
[Link]. GT-NC Rate Changes ........................................................................ 360
[Link]. Transactional and Regulatory .......................................................... 360
[Link]. Discussion ........................................................................................... 361
22.5. Customer Services Information and Technology ....................................... 361
22.5.1. O&M Costs ................................................................................................ 362
[Link]. Non-shared O&M .............................................................................. 362
[Link].1. Residential Customer Services .................................................. 363
[Link].2. Business Services ......................................................................... 364
[Link].3. Marketing, Research, and Analysis .......................................... 364
[Link].4. Customer Programs, Pricing, and Other Office (CP&P) ....... 365
[Link]. Shared O&M ....................................................................................... 365
[Link].1. Business Strategy and Development ........................................ 365
[Link].2. Low Emission Vehicle Program ................................................ 366
[Link]. Positions of Intervenors .................................................................... 366
[Link]. Discussion ........................................................................................... 367
22.5.2. Capital ........................................................................................................ 371
[Link]. Business Optimization ...................................................................... 371
[Link]. Improving Customer Service ........................................................... 371
[Link]. Mandated ............................................................................................ 372
[Link]. Discussion ........................................................................................... 372
22.6. Customer Service Technologies, Policies, & Solutions .............................. 372
22.6.1. Non-Shared O&M ..................................................................................... 373
[Link]. Research, Development, & Demonstration .................................... 373
[Link]. Policy & Environmental Solutions Non-Shared Services ............ 374

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22.6.2. Shared O&M .............................................................................................. 375

[Link]. Policy & Environmental Solutions Shared Services ..................... 375
[Link]. Business Strategy and Development ............................................... 376
22.6.3. Positions of Intervenors ........................................................................... 376
22.6.4. Discussion .................................................................................................. 377
23. Supply Management & Logistics and Supplier Diversity ............................... 381
23.1. SoCalGas ........................................................................................................... 381
23.1.1. Non-Shared Costs ..................................................................................... 381
[Link]. Procurement/Category Management ............................................ 381
[Link]. Inventory Management ..................................................................... 382
[Link]. Supplier Diversity .............................................................................. 382
[Link]. Office Services .................................................................................... 383
23.1.2. Shared Costs .............................................................................................. 383
[Link]. VP, Supply Management & Logistics ............................................. 383
[Link]. Policy & Integration ........................................................................... 383
23.1.3. IT Business Unit Capital Projects ........................................................... 383
23.1.4. Positions of Intervenors ........................................................................... 383
23.1.5. Discussion .................................................................................................. 385
23.2. SDG&E .............................................................................................................. 387
23.2.1. Non-Shared Costs ..................................................................................... 387
23.2.2. Shared Costs .............................................................................................. 388
23.2.3. Positions of Intervenors ........................................................................... 388
23.2.4. Discussion .................................................................................................. 389
24. Fleet Services and SoCalGas Facility Operations .............................................. 390
24.1. SoCalGas ........................................................................................................... 391
24.1.1. Non-Shared O&M Costs .......................................................................... 392
[Link]. Ownership Costs ................................................................................ 392
[Link]. Maintenance Operations ................................................................... 394
[Link]. Fleet Management .............................................................................. 394
[Link]. Facility Operations ............................................................................. 394
24.1.2. Shared O&M Costs ................................................................................... 395
24.1.3. Position of Intervenors ............................................................................. 395
24.1.4. Discussion .................................................................................................. 397
[Link]. Summary ............................................................................................. 402
24.1.5. Capital ........................................................................................................ 403

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[Link]. Infrastructure & Improvements (Capital) ...................................... 403

[Link]. Safety & Environmental .................................................................... 407
[Link]. Bakersfield Multi-Use Facility .......................................................... 408
[Link]. Facility Energy Management Systems ............................................ 409
[Link]. Fleet Projects ....................................................................................... 409
[Link]. Natural Gas Vehicle Refueling Stations.......................................... 409
24.1.6. IT Business Unit Capital Projects ........................................................... 410
24.2. SDG&E .............................................................................................................. 411
24.2.1. Non-Shared Costs ..................................................................................... 411
[Link]. Ownership Costs ................................................................................ 412
[Link]. Maintenance Operations ................................................................... 412
[Link]. Fleet Management .............................................................................. 412
24.2.2. Shared O&M Costs ................................................................................... 413
24.2.3. IT Business Unit Capital Projects ........................................................... 413
24.2.4. Positions of Intervenors ........................................................................... 413
24.2.5. Discussion .................................................................................................. 413
[Link]. Summary ............................................................................................. 415
25. Real Estate and SDG&E Land Services and Facilities ...................................... 416
25.1. SoCalGas ........................................................................................................... 416
25.1.1. Non-Shared O&M ..................................................................................... 416
[Link]. Branch Offices and Corporate Real Estate ..................................... 416
[Link]. Discussion ........................................................................................... 416
25.1.2. Shared O&M .............................................................................................. 417
[Link]. GCT Rents ........................................................................................... 417
[Link]. Telecom Rower Rents ........................................................................ 417
[Link]. Positions of Intervenors .................................................................... 417
[Link]. Discussion ........................................................................................... 418
25.2. SDG&E .............................................................................................................. 418
25.2.1. Non-Shared O&M ..................................................................................... 419
[Link]. Facility Operations ............................................................................. 419
[Link]. Land Services ...................................................................................... 420
[Link]. Rents and Operating Expenses ........................................................ 420
25.2.2. Shared O&M .............................................................................................. 421
[Link]. Facilities Operations .......................................................................... 421
[Link]. Corporate Real Estate ........................................................................ 423

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[Link]. Capital Programs ............................................................................... 423

[Link]. Real Estate – Planning ....................................................................... 423
[Link]. Real Estate – Resources ..................................................................... 424
[Link]. Corporate Center Maintenance ........................................................ 424
25.2.3. Capital ........................................................................................................ 425
[Link]. Land Blanket ....................................................................................... 425
[Link]. Structures and Improvements Blanket ........................................... 426
[Link]. Safety/Environmental Blanket ........................................................ 426
[Link]. Miscellaneous Equipment Blanket .................................................. 426
[Link]. Security Blanket .................................................................................. 427
[Link]. Infrastructure and Reliability Blanket ............................................. 427
[Link]. Remodels and Reconfigurations Blanket ....................................... 427
[Link]. Business Unit Expansions Blanket .................................................. 427
[Link]. Alternative Energy System Allowance Budget ............................. 428
[Link]. Land Services Archibus System ....................................................... 428
[Link]. CP6 Call Center Tenant Improvements .......................................... 428
[Link]. RB Data Center CRAC Replacements ............................................. 429
[Link]. CP6 Transmission Energy Management System .......................... 429
[Link]. Mission Control Critical Asset Hardening ..................................... 429
[Link]. CP East Tenant Improvements ........................................................ 429
[Link]. Moreno Valley Improvements ......................................................... 430
[Link]. RB Data Center Reliability Improvements ..................................... 430
[Link]. Positions of Intervenors .................................................................... 430
[Link]. Discussion ........................................................................................... 431
26. Environmental Services......................................................................................... 437
26.1. SoCalGas ........................................................................................................... 437
26.1.1. Non-Shared Services ................................................................................ 438
[Link]. Environmental Programs .................................................................. 438
[Link]. NERBA ................................................................................................. 439
[Link].1. Positions of Intervenors .............................................................. 439
[Link].2. Discussion ..................................................................................... 440
26.1.2. Shared Services ......................................................................................... 441
[Link]. Director of Environmental Services ................................................ 441
[Link]. Environmental Programs .................................................................. 441
26.2. SDG&E .............................................................................................................. 442

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26.2.1. Non-Shared Services ................................................................................ 442

[Link]. Environmental Field Operations ..................................................... 442
[Link]. Hazardous Material & Waste Management .................................. 442
[Link]. Site Assessment Mitigation............................................................... 443
[Link]. Environmental Programs .................................................................. 443
[Link]. Environmental Permitting, Project Management and
Post-Construction............................................................................... 443
[Link]. NERBA ................................................................................................. 444
[Link]. Environmental Lab ............................................................................ 444
26.2.2. Shared Services ......................................................................................... 445
[Link]. Environmental Services Director ..................................................... 445
[Link]. VP Operations Support ..................................................................... 445
[Link]. Environmental Communications .................................................... 445
27. Information Technology ....................................................................................... 446
27.1. SoCalGas ........................................................................................................... 447
27.1.1. O&M Costs ................................................................................................ 447
[Link]. Applications ........................................................................................ 447
[Link]. Infrastructure ...................................................................................... 447
[Link]. IT Support ........................................................................................... 448
[Link]. Positions of Intervenors .................................................................... 448
[Link]. Discussion ........................................................................................... 449
27.1.2. Capital ........................................................................................................ 450
[Link]. Gears Upgrade .................................................................................... 452
[Link]. Lease Accounting and Reporting System ...................................... 452
[Link]. Virtual Desktop Expansion............................................................... 452
[Link]. Out-of-Band Management ................................................................ 452
[Link]. Self Support Small Cap ..................................................................... 452
[Link]. Fan – Voice Radio and Dispatch ...................................................... 453
[Link]. Communications Tip Top Shelter Replacement ............................ 453
[Link]. Communications Mount David Shelter Replacement .................. 453
[Link]. Communications Reliability Shelter Replacement (Blythe) ........ 453
[Link]. Communications Reliability Shelter Replacement
(Cactus City Ridge) ............................................................................ 453
[Link]. Communications Reliability Shelter Replacement
(Mt. Solomon) ..................................................................................... 454

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[Link]. Communications Reliability Shelter Replacement

(White Water) ..................................................................................... 454
[Link]. Session Border Controllers Refresh ................................................. 454
[Link]. Software Defined Data Center ......................................................... 454
[Link]. Office 365 Enablement and Adoption ............................................. 454
[Link]. SAP ECC on HANA .......................................................................... 454
[Link]. GIS Mobile Replacement ................................................................... 455
[Link]. Sensitive Data Protection .................................................................. 455
[Link]. Web Portal and Application Modernization ................................. 455
[Link]. Software Defined Data Center Refresh ........................................... 455
[Link]. Big Data Advanced Analytic Enablement ...................................... 455
[Link]. Enterprise Business Process Management Workflow .................. 456
[Link]. Environmental Tracking Enhancements ........................................ 456
[Link]. SAP Business Intelligence and Analytics Upgrade ....................... 456
[Link]. Source Code Management Modernization .................................... 456
[Link]. Enterprise Data Layer ........................................................................ 456
[Link]. Network Core Refresh ....................................................................... 457
[Link]. Enterprise Desktop Refresh .............................................................. 457
[Link]. Business Continuity Enhancement .................................................. 457
[Link]. Converged Computing Infrastructure ............................................ 457
[Link]. Local Area Network Refresh (2018) ................................................ 457
[Link]. Local Area Network Refresh (2019) ................................................ 458
[Link]. Private Network Refresh (2018) ....................................................... 458
[Link]. Private Network Refresh (2019) ....................................................... 458
[Link]. Wide Area Network Refresh (2018) ................................................ 458
[Link]. Wide Area Network Refresh (2019) ................................................ 458
[Link]. Conference Room AV Upgrade ....................................................... 459
[Link]. Converged Computing Infrastructure (2017) ................................ 459
[Link]. Pure Storage Upgrades ..................................................................... 459
[Link]. FOF Operational Awareness ............................................................ 459
[Link]. Discussion ........................................................................................... 460
27.2. SDG&E .............................................................................................................. 461
27.2.1. O&M ........................................................................................................... 461
[Link]. Positions of Intervenors .................................................................... 462
[Link]. Discussion ........................................................................................... 463

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27.2.2. Capital Projects.......................................................................................... 464

[Link]. Private Network Refresh................................................................... 465
[Link]. Transmission Communication Reliability Improvement ............ 466
[Link]. SCADA Radio Replacement and Expansion ................................. 466
[Link]. Out-of-Band Management ................................................................ 466
[Link]. ADMS Phase 3 .................................................................................... 466
[Link]. Data Warehouse and Hadoop Platform Upgrade ........................ 467
[Link]. Electronic Bill Presentment and Payment ...................................... 467
[Link]. MDT Technology Obsolescence 2018/2019 ................................... 467
[Link]. MDT Technology Obsolescence 2016/2017 ................................... 467
[Link]. LTE Communications Network ....................................................... 467
[Link]. Downtown SCADA Modernization ................................................ 468
[Link]. Enterprise Desktop Refresh .............................................................. 468
[Link]. Server 2016 Enterprise Environment .............................................. 468
[Link]. Mainframe Capacity Hardware Upgrade ...................................... 468
[Link]. Private Network Expansion and Refresh Phase 3 ......................... 469
[Link]. Private Network Expansion and Refresh Phase 4 ......................... 469
[Link]. Transmission Communications Enhancement Phase II ............... 469
[Link]. NOC Modernization .......................................................................... 469
[Link]. Self Support Small Cap ..................................................................... 470
[Link]. WAN Life Cycle Extension ............................................................... 470
[Link]. Private Network Expansion & Refresh Phase 5 ............................ 470
[Link]. Mainframe Capacity Upgrade ......................................................... 470
[Link]. Smart Grid Endpoint Protection ...................................................... 470
[Link]. Discussion ........................................................................................... 471
28. Cybersecurity .......................................................................................................... 472
28.1. RAMP ................................................................................................................ 473
28.2. SoCalGas ........................................................................................................... 474
28.2.1. O&M Costs ................................................................................................ 474
28.2.2. Capital ........................................................................................................ 476
[Link]. Enterprise Threat Intelligence .......................................................... 477
[Link]. Threat Identification Systems ........................................................... 477
[Link]. Cloud Access Security Breaker Cloud Data Use ........................... 477
[Link]. Critical Gas Infrastructure Protection ............................................. 478
[Link]. Enterprise Source Code Security ..................................................... 478

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[Link]. Firewall Security................................................................................. 478

[Link]. Information Security Zone Rebuild ................................................. 479
[Link]. Multi Factor Authentication Refresh .............................................. 479
[Link]. My Account Multi Factor Authentication ...................................... 479
[Link]. Public Key Infrastructure Rebuild ................................................... 479
[Link]. E-Mail Spam Protection .................................................................... 479
[Link]. Security Orchestration ....................................................................... 480
[Link]. Web Application and Database Firewalls ...................................... 480
[Link]. Wired Network Preventative Controls ........................................... 480
[Link]. Insider Threat Detection/Prevention .............................................. 481
[Link]. Network Security Monitoring .......................................................... 481
[Link]. Perimeter Tap Infrastructure Design .............................................. 481
[Link]. SCG Network Anomaly Detection Phase I .................................... 481
[Link]. SSL Decryption ................................................................................... 482
[Link]. Threat Detection Systems ................................................................. 482
[Link]. Forensics Systems Rebuild ............................................................... 482
[Link]. Incident Response Secure Collaboration ........................................ 482
[Link]. Threat Response Systems .................................................................. 483
[Link]. Threat Recovery Systems .................................................................. 483
[Link]. Converged Perimeter Systems ......................................................... 483
[Link]. Host Based Protection ....................................................................... 484
[Link]. Discussion ........................................................................................... 484
28.3. SDG&E .............................................................................................................. 486
28.3.1. O&M ........................................................................................................... 486
[Link]. Security Policy & Awareness ........................................................... 487
[Link]. Director- Information Security ......................................................... 487
[Link]. Information Security Programs ....................................................... 488
[Link]. Security Engineering ......................................................................... 488
[Link]. Security Operations ........................................................................... 488
[Link]. Security Contracts .............................................................................. 489
28.3.2. Capital ........................................................................................................ 489
[Link]. Compliance Records Management.................................................. 490
[Link]. Critical Infrastructure Protection ..................................................... 491
[Link]. Smart Grid Substation Gateway Security Phase 2 ........................ 491
[Link]. Network Anomaly Detection Phase 3 ............................................. 491

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[Link]. Electric Distribution Operations (EDO) Network Security

Architecture Redesign ....................................................................... 492
[Link]. Active Directory Domain Controllers for Distribution ................ 492
[Link]. Distribution Operations Multifactor Authentication ................... 492
[Link]. Distribution Remote Thermal Unit (RTU) Password and
Configuration Management ............................................................. 493
[Link]. Field Area Network Security ............................................................ 493
[Link]. Privilege Access Management ......................................................... 493
[Link]. Distribution End Point Protection ................................................... 494
[Link]. Discussion ........................................................................................... 494
29. Corporate Center – General Administration ..................................................... 495
29.1. RAMP ................................................................................................................ 496
29.1.1. Records Management............................................................................... 496
29.1.2. Workplace Violence .................................................................................. 497
29.2. Cost Allocation Methodology ....................................................................... 497
29.3. Shared Services ................................................................................................ 499
29.3.1. Finance........................................................................................................ 499
[Link]. Positions of Intervenors .................................................................... 502
[Link]. Discussion ........................................................................................... 503
29.3.2. Legal, Compliance, and Governance ..................................................... 504
29.3.3. Human Resources and Administration................................................. 506
[Link]. Positions of Intervenors .................................................................... 508
[Link]. Disucssion ........................................................................................... 508
29.3.4. Corporate Strategy and External Affairs ............................................... 509
[Link]. Discussion ........................................................................................... 512
29.3.5. Facilities and Assets ................................................................................. 513
[Link]. Discussion ........................................................................................... 515
29.3.6. Pension and Benefits ................................................................................ 515
[Link]. Positions of Intervenors .................................................................... 517
[Link]. Discussion ........................................................................................... 517
29.4. Oncor Transaction ........................................................................................... 518
29.4.1. Discussion .................................................................................................. 519
29.4.2. TURN’s Proposed Forecast ..................................................................... 522
29.5. IT Business Unit Capital Projects .................................................................. 523
29.6. Update Filing ................................................................................................... 523

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30. Corporate Center – Insurance .............................................................................. 523

30.1. Cost Allocation ................................................................................................ 524
30.2. Shared Services ................................................................................................ 524
30.2.1. Property Insurance ................................................................................... 525
[Link]. Position of Intervenors ...................................................................... 526
[Link]. Discussion ........................................................................................... 526
[Link]. Positions of Intervenors .................................................................... 531
[Link]. Discussion ........................................................................................... 531
[Link]. Liability Insurance Premium Balancing Account ......................... 533
30.2.2. Surety Bonds .............................................................................................. 536
31. Compensation and Benefits .................................................................................. 536
31.1. Compensation .................................................................................................. 538
31.1.1. Base Pay...................................................................................................... 538
31.1.2. Incentive Compensation Plan ................................................................. 539
[Link]. Non-Executive ICP ............................................................................ 539
[Link]. Executive ICP ...................................................................................... 540
31.1.3. Long-Term Incentive Plan ....................................................................... 540
31.1.4. Special Recognition Awards ................................................................... 540
31.1.5. Positions of Intervenors ........................................................................... 541
31.1.6. Discussion .................................................................................................. 542
31.2. Benefits .............................................................................................................. 545
31.2.1. Health Benefits .......................................................................................... 545
31.2.2. Welfare Benefits ........................................................................................ 547
31.2.3. Retirement Benefits .................................................................................. 548
31.2.4. Other Benefit Programs ........................................................................... 549
31.2.5. Positions of Intervenors ........................................................................... 550
31.2.6. Discussion .................................................................................................. 551
[Link]. Health Benefits ................................................................................... 551
[Link]. Welfare Benefits.................................................................................. 552
[Link]. Retirement Benefits ............................................................................ 553
[Link]. Other Benefit Programs ..................................................................... 554
32. Pensions and Post-Retirement Benefits Other than Pension ........................... 555
32.1. Pension .............................................................................................................. 555
32.1.1. Positions of Intervenors ........................................................................... 558
32.1.2. Discussion .................................................................................................. 559

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32.2. PBOP.................................................................................................................. 563

32.2.1. Positions of Intervenors ........................................................................... 564
32.2.2. Discussion .................................................................................................. 564
33. Human Resources, Safety, and Worker’s Compensation & Long-Term
Disability ................................................................................................................. 565
33.1. SoCalGas ........................................................................................................... 565
33.1.1. Non-Shared O&M ..................................................................................... 566
[Link]. CEO, President & COO, Chief HR, and CAO................................ 566
[Link]. Human Resources Department ........................................................ 566
[Link]. Worker’s Compensation & Long-Term Disability ........................ 568
33.1.2. Position of Intervenors ............................................................................. 569
33.1.3. Discussion .................................................................................................. 570
33.1.4. Shared O&M .............................................................................................. 575
[Link]. HR Diversity ....................................................................................... 575
[Link]. HR Services ......................................................................................... 575
[Link]. Discussion of Shared Services .......................................................... 576
33.1.5. Capital ........................................................................................................ 576
33.2. SDG&E .............................................................................................................. 576
33.2.1. Non-Shared O&M ..................................................................................... 577
33.2.2. Shared O&M .............................................................................................. 579
33.2.3. Positions of Intervenors ........................................................................... 580
33.2.4. Discussion .................................................................................................. 581
34. Administrative & General .................................................................................... 583
34.1. SoCalGas ........................................................................................................... 584
34.1.1. A&F Division ............................................................................................. 584
34.1.2. Legal Division ........................................................................................... 586
34.1.3. Regulatory Affairs Division .................................................................... 586
34.1.4. External Affairs Division ......................................................................... 588
34.1.5. Positions of Intervenors ........................................................................... 588
34.1.6. Discussion .................................................................................................. 589
34.2. SDG&E .............................................................................................................. 591
34.2.1. A&F Division ............................................................................................. 592
34.2.2. Legal Division ........................................................................................... 593
34.2.3. Regulatory Affairs Division .................................................................... 594
34.2.4. External Affairs Division ......................................................................... 595

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34.2.5. Positions of Intervenors ........................................................................... 595

34.2.6. Discussion .................................................................................................. 596
34.2.7. TPCBA ........................................................................................................ 597
34.3. Meals and Entertainment ............................................................................... 599
34.4. IT Business Unit Capital Projects .................................................................. 600
35. Shared Services and Shared Assets Billing, Capital Reassignment, and
Business Segmentation .......................................................................................... 601
35.1. Shared Services Billings .................................................................................. 601
35.2. Shared Assets Billings ..................................................................................... 603
35.3. Capital Reassignment ..................................................................................... 604
35.4. Business Segmentation Allocation ................................................................ 604
35.5. Electric Transmission Allocation .................................................................. 605
35.6. Positions of Intervenors .................................................................................. 605
35.7. Discussion ......................................................................................................... 606
36. Rate Base .................................................................................................................. 607
36.1. SoCalGas ........................................................................................................... 608
36.1.1. Rate Base Components............................................................................. 608
[Link]. Fixed Capital ....................................................................................... 608
[Link]. Working Capital ................................................................................. 609
[Link]. Other Deductions ............................................................................... 609
[Link]. Deductions for Reserves ................................................................... 610
36.1.2. Positions of Intervenors ........................................................................... 610
36.1.3. Discussion .................................................................................................. 611
36.2. SDG&E .............................................................................................................. 613
36.2.1. Rate Base Components............................................................................. 613
[Link]. Fixed Capital ....................................................................................... 613
[Link]. Working Capital ................................................................................. 614
[Link]. Other Deductions ............................................................................... 614
[Link]. Deductions for Reserves ................................................................... 614
36.2.2. Positions of Intervenors ........................................................................... 615
36.2.3. Discussion .................................................................................................. 616
37. Depreciation ............................................................................................................ 618
37.1. SoCalGas ........................................................................................................... 619
37.1.1. Positions of Intervenors ........................................................................... 621
37.1.2. Discussion .................................................................................................. 621

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37.2. SDG&E .............................................................................................................. 623

37.2.1. Positions of Intervenors ........................................................................... 624
37.2.2. Discussion .................................................................................................. 625
38. Taxes ........................................................................................................................ 628
38.1. SoCalGas ........................................................................................................... 629
38.1.1. Payroll Taxes ............................................................................................. 629
[Link]. Discussion ........................................................................................... 630
38.1.2. Property Taxes .......................................................................................... 632
[Link]. Discussion ........................................................................................... 633
38.1.3. Income Taxes ............................................................................................. 633
[Link]. Changes from TCJA ........................................................................... 634
[Link]. Tax Memorandum Account ............................................................. 636
[Link]. Positions of Intervenors .................................................................... 637
[Link]. Discussion ........................................................................................... 637
38.1.4. Franchise Fees ........................................................................................... 640
[Link]. Discussion ........................................................................................... 641
38.1.5. Summary .................................................................................................... 641
38.2. SDG&E .............................................................................................................. 642
38.2.1. Payroll Taxes ............................................................................................. 643
38.2.2. Property Taxes .......................................................................................... 643
[Link]. Discussion ........................................................................................... 644
38.2.3. Income Taxes ............................................................................................. 645
38.2.4. Franchise Fees ........................................................................................... 646
38.2.5. Summary .................................................................................................... 646
38.3. 2018 TCJA Revenue Requirement Adjustment and Other Issues ............ 647
39. Working Cash ......................................................................................................... 649
39.1. SoCalGas ........................................................................................................... 649
39.1.1. Positions of Intervenors ........................................................................... 651
39.1.2. Discussion .................................................................................................. 652
39.1.3. Summary .................................................................................................... 658
39.2. SDG&E .............................................................................................................. 658
39.2.1. Positions of Intervenors ........................................................................... 659
39.2.2. Discussion .................................................................................................. 660
[Link]. Recurring issues from SoCalGas portion ....................................... 660
[Link]. Unique issues for SDG&E ................................................................. 662

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39.2.3. Summary .................................................................................................... 663

40. Customer Forecasts ................................................................................................ 663
40.1. SoCalGas ........................................................................................................... 664
40.1.1. Positions of Intervenors ........................................................................... 665
40.1.2. Discussion .................................................................................................. 665
40.2. SDG&E Gas Customers .................................................................................. 665
40.2.1. Positions of Intervenors ........................................................................... 666
40.2.2. Discussion .................................................................................................. 666
40.3. SDG&E Electric Customers ............................................................................ 668
40.3.1. Positions of Intervenors ........................................................................... 668
40.3.2. Discussion .................................................................................................. 669
41. Cost Escalation ....................................................................................................... 670
41.1. Discussion ......................................................................................................... 671
42. Miscellaneous Revenues ....................................................................................... 671
42.1. SoCalGas ........................................................................................................... 672
42.1.1. Miscellaneous Revenue Accounts .......................................................... 674
[Link]. Customer Service Revenues ............................................................. 674
[Link]. Rents from Gas Property................................................................... 675
[Link]. Other Gas Revenues .......................................................................... 676
42.1.2. Positions of Intervenors ........................................................................... 678
42.1.3. Discussion .................................................................................................. 678
42.2. SDG&E .............................................................................................................. 681
42.2.1. Miscellaneous Revenue Accounts (Electric Department) ................... 683
[Link]. Miscellaneous Service Revenues ..................................................... 683
[Link]. Rent from Electric Property .............................................................. 684
[Link]. Other Electric Revenues .................................................................... 685
42.2.2. Miscellaneous Revenue Accounts (Gas Department) ......................... 685
42.2.3. Positions of Intervenors ........................................................................... 685
42.2.4. Discussion .................................................................................................. 686
43. Regulatory Accounts ............................................................................................. 688
43.1. SoCalGas ........................................................................................................... 688
43.1.1. Disposition of Regulatory Account Balances ....................................... 688
[Link]. Research Development and Demonstration Expense Account
(RDDEA) ............................................................................................. 688

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[Link]. Distribution Integrity Management Program Balancing

Account (DIMPBA) ............................................................................ 689
[Link]. Energy Data Request Memorandum Account (EDRMA) ............ 689
[Link]. Operational Flow Cost Memorandum Account (OFCMA) ......... 689
[Link]. Fire Hazard Prevention Memorandum Account (FHPMA)........ 690
[Link]. Advanced Meter Opt-Out Program Balancing Account
(AMOPBA) .......................................................................................... 690
[Link]. Aliso Canyon Memorandum Account (ACMA) ........................... 691
[Link]. Aliso Canyon True-Up Tracking Account (ACTTA) .................... 691
43.1.2. Closure of Existing Regulatory Accounts ............................................. 692
[Link]. FERC Settlement Proceeds Memorandum Account (FSPMA).... 692
[Link]. Deductible Tax Repairs Benefits Memorandum Account
(DTRBMA) .......................................................................................... 692
43.1.3. Continuation of Existing Regulatory Accounts ................................... 693
[Link]. Pension Balancing Account (PBA) and Post-Retirement
Benefits Other Than Pension Balancing Account (PBOPBA) ...... 693
[Link]. New Environmental Regulation Balancing Account (NERBA) .. 693
43.1.4. Modification of Regulatory Accounts ................................................... 693
[Link]. Core Fixed Cost Account (CFCA).................................................... 693
[Link]. Advanced Infrastructure Balancing Account (AMIBA) ............... 693
[Link]. Discontinuation of Service Establishment Changes (SEC) .......... 694
[Link]. Transmission Integrity Management Program Balancing
Account (TIMPBA) and DIMPBA ................................................... 694
[Link]. Storage Integrity Management Program Balancing Account
(SIMPBA) ............................................................................................. 695
43.1.5. Creation of New Regulatory Accounts ................................................. 695
[Link]. Pipeline Safety Enhancement Plan Balancing Account
(PSEPBA) ............................................................................................. 695
[Link]. Morongo Rights-of-Way Memorandum Account
(MROWMA) ....................................................................................... 695
[Link]. Morongo Rights-of-Way Balancing Account ................................. 696
43.1.6. Informational Discussion of Other Regulatory Accounts .................. 696
[Link]. Tax Memorandum Account (TMA) ................................................ 696
[Link]. Compression Balancing Account (CSBA), Biogas
Conditioning-Upgrading Services Balancing Account

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TABLE OF CONTENTS (con’t)

Title Page

(BCSBA), and Distributed Energy Resources Services

Balancing Account (DERSBA) .......................................................... 696
[Link]. Master Meter Balancing Account (MMBA).................................... 696
43.2. SDG&E .............................................................................................................. 697
43.2.1. Closure of Existing Regulatory Accounts ............................................. 697
[Link]. Assembly Bill (AB) 802 Memorandum Account (AB802MA) ..... 697
[Link]. Alternative Fuel Vehicle Memorandum Account (AFVMA) ...... 697
[Link]. Community Choice Aggregation Implementation Balancing
Account (CCAIBA) ............................................................................ 697
[Link]. California Solar Initiative Performance-Based Incentive
Memorandum Account (CSIPMA) .................................................. 697
[Link]. DTRBMA ............................................................................................. 698
[Link]. EDRMA ............................................................................................... 698
[Link]. Non-Residential Submetering Memorandum Account
(NRSMA) ............................................................................................. 698
[Link]. Residential Disconnect Memorandum Account (RDMA) ........... 698
[Link]. Real-Time Energy Metering Memorandum Account
(RTEMMA) .......................................................................................... 699
[Link]. Smart Meter Opt-Out Balancing Account (SMOBA) .................... 699
43.2.2. Continuation of Existing Regulatory Accounts ................................... 699
[Link]. FHPMA ................................................................................................ 699
[Link]. NERBA ................................................................................................. 699
[Link]. PBA and PBOPBA .............................................................................. 699
[Link]. San Onofre Nuclear Generation Station Balancing Account
(SONGSBA) ......................................................................................... 700
43.2.3. Modification of Existing Regulatory Accounts .................................... 700
[Link]. New Energy Metering Aggregation Memorandum Account
(NEMAMA) ........................................................................................ 700
[Link]. TIMPBA and DIMPBA ...................................................................... 700
[Link]. Tree Trimming Balancing Account (TTBA) ................................... 700
43.2.4. Creation of New Regulatory Accounts ................................................. 701
[Link]. LIPBA ................................................................................................... 701
[Link]. Otay Mesa Acquisition Balancing Account (OMABA) ................ 701
43.2.5. Informational Discussion of Other Regulatory Accounts .................. 701
[Link]. TMA ..................................................................................................... 701

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TABLE OF CONTENTS (con’t)

Title Page

[Link]. MMBA ................................................................................................. 701

44. Summary of Earnings ............................................................................................ 702
44.1. RO Calculation Elements ............................................................................... 703
44.2. Discussion ......................................................................................................... 704
45. Post-Test Year Ratemaking ................................................................................... 704
45.1. Applicants’ Proposal ....................................................................................... 705
45.2. Positions of Intervenors .................................................................................. 705
45.2.1. ORA, FEA, and Long Beach .................................................................... 705
45.2.2. UCAN ......................................................................................................... 706
45.2.3. TURN .......................................................................................................... 706
45.3. Discussion ......................................................................................................... 706
45.3.1. O&M Adjustment ..................................................................................... 708
45.3.2. Capital Additions Adjustment ............................................................... 708
45.3.3. Impact of AB 1054 on PTY Capital Expenditures ................................ 710
45.3.4. Z-Factor Mechanism................................................................................. 711
45.3.5. ARAM and CIS Benefits .......................................................................... 712
45.3.6. Update Filings for PTYs ........................................................................... 713
46. Presentation of Rate ............................................................................................... 713
46.1. SoCalGas ........................................................................................................... 713
46.1.1. Positions of Intervenors ........................................................................... 714
46.1.2. Discussion .................................................................................................. 714
46.2. SDG&E .............................................................................................................. 716
46.2.1. Positions of Intervenors ........................................................................... 716
46.2.2. Discussion .................................................................................................. 716
47. Results of Examinations (ORA Audit) ................................................................ 717
47.1. Discussion ......................................................................................................... 718
48. Mobilehome Park Utility Upgrade Program ..................................................... 718
48.1. SoCalGas ........................................................................................................... 719
48.1.1. Positions of Intervenors ........................................................................... 719
48.1.2. Discussion .................................................................................................. 720
48.2. SDG&E .............................................................................................................. 720
48.2.1. Positions of Intervenors ........................................................................... 721
48.2.2. Discussion .................................................................................................. 721
49. Accessibility Issues ................................................................................................ 721
49.1. Summary of Major Terms .............................................................................. 722

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TABLE OF CONTENTS (con’t)

Title Page

49.2. Discussion ......................................................................................................... 723

50. Category and Need for Hearing .......................................................................... 724
51. Comments on the Proposed Decision ................................................................. 724
52. Assignment of Proceeding .................................................................................... 725
Findings of Fact ............................................................................................................. 725
Conclusions of Law ...................................................................................................... 762
ORDER ........................................................................................................................... 775

Attachment A – Glossary of Terms

Attachment B – 2019 GRC Statement of Earnings
Attachment C – 2019 GRC Revenue Comparisons
Attachment D – 2019 GRC PTY Details

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DECISION ADDRESSING THE TEST YEAR 2019 GENERAL RATE CASES

OF SAN DIEGO GAS & ELECTRIC COMPANY
AND SOUTHERN CALIFORNIA GAS COMPANY

Summary
Today’s decision addresses the test year (TY) 2019 general rate case (GRC)
applications of San Diego Gas & Electric Company (SDG&E), and Southern
California Gas Company (SoCalGas).1
The decision adopts a TY2019 revenue requirement of $1.990 billion for
SDG&E’s combined operations ($1.590 billion for electric and $0.400 billion for its
gas operations)2 which is $212.504 million lower than the $2.203 billion that
SDG&E had requested in its update testimony.3 The adopted revenue
requirement represents an increase of $107.378 million or a 5.70 percent increase
over the current revenue requirement for 2018.4 Based on a high-level estimate,
it is anticipated that a typical residential inland electric customer5 will see a
monthly bill increase of 0.70 percent or $1.106 while an average residential gas

1 A Glossary of terms used in this decision is attached as Attachment A.

2 Attachment B of this decision contains the Summary of Earnings which reflects the revenue
requirements adopted for SoCalGas and SDG&E.
3In Application (A.) 17-10-007, SDG&E had originally requested a combined gas and electric
revenue requirement of $2.199 billion representing an increase of $218 million (an 11 percent
increase) over the 2018 costs that consumers are paying.
4Attachment C contains 2019 revenue requirement comparisons for SDG&E and SoCalGas
showing the current rates and the rates to be adopted for 2019.
5 Using 500 kilowatts per hour (kWh) in a month.
6 The amount was derived using an estimated system average rate percentage change.

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customer7 can expect to see a monthly bill increase of 13.7 percent or $4.76 for gas
services.
For SoCalGas, the decision adopts a TY2019 revenue requirement of
$2.770 billion which is $166.109 million lower than the $2.937 billion that
SoCalGas had requested in its update testimony.8 The adopted revenue
requirement represents an increase of $314.356 million or a 12.80 percent increase
over the current revenue requirement for 2018. Based on a high-level estimate, it
is anticipated that an average residential customer9 can expect to see an average
monthly bill increase of 9.1 percent or $3.98.
The decision also adopts post-test year (PTY) revenue requirement
adjustments for SDG&E of $134.157 million for 2020 (a 6.74 percent increase) and
$102.493 million for 2021 (a 4.83 percent increase).10 For SoCalGas, the PTY
revenue requirement adjustments are $219.539 million for 2020 (a 7.92 percent
increase) and $149.551 million for 2021 (a 5.00 percent increase).
The adopted revenue requirement and PTY increases for SDG&E will
provide the necessary funds to allow it to operate its electric and natural gas
transmission and distribution system safely and reliably and to fulfill customer
service functions at reasonable rates.

7 Using 25 therms per month.

8In A.17-10-008, SoCalGas had originally requested a revenue requirement of $2.99 billion
representing an increase of $480 million (a 19.1 percent increase) over the 2018 costs that
consumers are paying.
9 Using 35 therms per month.
10 Attachment D contains details regarding SDG&E’s and SoCalGas’ PTYs.

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For SoCalGas, the adopted revenue requirement and PTY increases will
provide the necessary funds to allow it to operate its natural gas transmission,
gas distribution, and gas storage systems safely and reliably and to fulfill
customer service functions at reasonable rates.
The adopted revenue requirements and PTY adjustments for SDG&E and
SoCalGas were arrived at after thorough analysis and review of the record which
includes over 500 exhibits consisting of testimony, workpapers, and other
exhibits from utility and intervenor witnesses. Over 20 days of evidentiary
hearings were conducted between July and August of 2018 and 18 intervenors
actively participated in the proceedings by submitting testimony, conducting
cross examination during hearings, and filing motions and briefs.
A large part of the revenue requirement increases represent costs for
incremental safety-related programs and activities that are being added to the
GRC for the first time as a result of the Risk Assessment Mitigation Phase
(RAMP). The Commission developed a risk-based framework and the RAMP
phase requires SDG&E and SoCalGas to identify key safety risks and to propose
programs to mitigate these risks. Many of these programs are being approved
and the funding allows SDG&E and SoCalGas to perform increased mitigation
efforts to mitigate key safety risks such as wildfires caused by SDG&E
equipment, catastrophic damage from pipeline failures and third party dig-ins,
employer, employee, contractor, and public safety, and other key risks identified
in Applicants’ RAMP report. Applicants are the first utilities to incorporate
RAMP into their GRC filings and these costs are being included in Applicants’
respective revenue requirements for the first time in TY2019.
In addition, costs for SoCalGas’ Pipeline Safety Enhancement Plan
consisting of 11 pressure test projects, 10 pipeline replacement projects, and

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284 valve replacement projects are being included in SoCalGas’ GRC application
for the first time pursuant to Decision 16-08-003 and these costs are reflected in
SoCalGas’ revenue requirement for the first time in TY2019.11
The decision requires SDG&E and SoCalGas to track officer salaries,
bonuses, and benefits that are embedded with other costs in their respective
Officer Compensation Memorandum Accounts (OCMA). The OCMA balances
shall be trued-up in Applicants’ respective year-end adjustment filings for 2019
and the amounts refunded to ratepayers. The above costs were not able to be
removed without causing undue delay and prejudice to parties because the
statutory change to Pub. Util. Code § 706 which no longer allowed recovery of
such costs took effect on January 1, 2019 when evidentiary hearings had already
been concluded and final briefs had been submitted.
Costs arising from the Aliso Canyon gas leak incident are not included in
the GRCs and have been removed from historical information relied on by
witnesses. The decision also incorporates 2019 impacts from the Tax Cuts and
Jobs Act (TCJA) and directs SDG&E and SoCalGas to file separate Advice Letters
with the Commission’s Energy Division to begin the process of returning to
ratepayers 2018 tax savings from the TCJA. 2018 revenue impacts are outside the
scope of the TY2019 GRCs.
The decision also denies the Joint Motion for Adoption of Settlement
Agreement between Applicants and Small Business Utility Advocates primarily
because the proposed Settlement Agreement does not discuss the revenue
impacts of the various commitments made in the proposed Settlement

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Agreement and provides no assurance that funding for other needs will not be
diverted to meet these commitments.
Finally, the decision denies Applicants’ requests to include a third PTY
(2022) in their respective GRC cycles. The decision finds that a determination as
to whether a three-year or four-year GRC cycle should be adopted must be
applied uniformly to all large investor owned utilities that are regulated by the
Commission. In addition, the appropriate term for the GRC cycle is currently
being considered in Rulemaking (R.) 13-11-006 and the decision defers any
decision regarding this issue to R.13-11-006. If a decision adopting a four-year
GRC cycle is made in R.13-11-006, SDG&E and SoCalGas are required to file a
petition to modify this decision.
1. Procedural Background
On October 6, 2017, San Diego Gas & Electric Company (SDG&E) filed its
General Rate Case (GRC) application requesting authority to establish its
revenue requirement and to update base rates for its electric and natural gas
services for the period from January 1, 2019 through December 31, 2022.
Southern California Gas Company (SoCalGas) also filed its GRC
application on October 6, 2017 requesting authority to establish its revenue
requirement and to update base rates for its natural gas service for the period
from January 1, 2019 through December 31, 2022.
The proceedings were consolidated in the assigned Administrative Law
Judge (ALJ) ruling dated November 8, 2017 pursuant to Rule 7.4 of the Rules of
Practice and Procedure (Rules). Consolidation promotes efficiency, minimizes
conflicts in schedule, and promotes a more timely resolution of the two related
applications.

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Protests and Responses to the applications were filed by the following:

Protests:
a. Consumer Federation of California (CFC) on November 15,
2017;12
b. Southern California Generation Coalition (SCGC) on
November 16, 2017;
c. Shell Energy North America (US) L.P. (Shell Energy), Office of
Ratepayer Advocates (ORA),13 Office of the Safety Advocate
(OSA), Indicated Shippers (IS), City of Long Beach Gas & Oil
Department (Long Beach), The Utility Reform Network (TURN),
and Direct Access Customer Coalition (DACC), all on November
17, 2017;
d. The National Diversity Coalition (NDC) on November 20, 2017;
and
e. Jason Zeller on November 22, 2017.
Responses:
a. Southern California Edison Company (SCE) on October 19, 2017;
b. Pacific Gas and Electric Company (PG&E) on October 27, 2017;
and
c. Environmental Defense Fund (EDF), and Coalition of California
Utility Employees (CUE) on November 17, 2017.

12CFC filed a notice of name change on March 27, 2018 changing its name from Consumer
Federation of California to Consumer Federation of California Foundation.
13SB 854 (Stats. 2018, ch. 51) amended Pub. Util. Code § 309.5(a) such that ORA is now named
the Public Advocate’s Office of the Public Utilities Commission. However, because a majority
of the pleadings and exhibits filed or received into evidence were filed under the name ORA or
refer to this party as ORA, this decision shall refer to this entity as ORA.

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Motions for party status were filed by the following entities and party
status was granted as follows:
a. Center for Accessible Technology (CforAT) on October 20, 2017 –
motion was granted on October 30, 207;
b. Utility Consumers Action Network (UCAN) on December 5, 2017
– motion was granted on December 18, 2017;
c. Union of Concerned Scientists (UCS) on December 15, 2017 –
motion was granted on December 20, 2017;
d. Sierra Club on December 18, 2017 – motion was granted on
December 20, 2017;
e. San Diego Consumers Action Network (SDCAN) and Small
Business Utility Advocates (SBUA) both on January 5, 2018 –
both motions were granted on January 8, 2018;
f. Federal Executive Agencies (FEA) on January 8, 2018 – motion
was granted on January 9, 2018;
g. Agricultural Energy Consumers Association (AECA) on
January 26, 2018 – motion was granted on February 2, 2018; and
h. Protect Our Communities Foundation (POC) on May 1, 201814 –
motion was granted on May 17, 2018.
i. California State University (CSU) on June 25, 2018 – motion was
granted on July 5, 2018.
j. City of Lancaster (Lancaster) on July 5, 2018 – motion was
granted on July 9, 2018.
k. A motion to intervene was filed by Tenaska Marketing Ventures
on April 24, 2018 – motion was granted on April 27, 2018.
On November 22, 2017, a joint motion for protective order was filed by
SDG&E and SoCalGas (collectively, Applicants) to facilitate discovery and

14Applicants filed a Response on May 4, 2018 opposing POC’s motion and POC filed a Reply to
the Response on May 9, 2018.

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exchange of confidential materials. No protests to the joint motion were filed

and subsequently, the joint motion was granted on December 13, 2017.
On November 27, 2017, Applicants filed a joint reply to the protests and
responses.
A Prehearing Conference (PHC) was held on January 10, 2018. At the
PHC, the issues, procedural schedule and other procedural matters relating to
the proceedings were discussed. Applicants were also required to serve
supplemental testimony concerning the impact of proposed increases in rates on
disconnections due to non-payment and supplemental testimony on tax issues.
On January 29, 2018, the assigned Commissioner issued a Scoping
Memorandum and Ruling (Scoping Memo) setting forth the scope of issues and
procedural schedule. An ALJ ruling was issued on February 5, 2018 clarifying
the procedural schedule set forth in the Scoping Memo.
On January 31, 2018 EDF and SCGC filed respective position briefs and
comments on the issue of Lost and Unaccounted for Gas (LUAF). Reply
comments on LUAF were filed by TURN on February 8, 2018, and EDF on
February 9, 2018. Joint reply comments were filed by Sierra Club and UCS, and
SDG&E and SoCalGas on February 9, 2018. On March 8, 2018, the assigned
Commissioner issued a ruling denying EDF’s request to include LUAF in the
scope of the proceedings.15
On March 9, 2018, Applicants filed a motion to amend the Scoping Memo
requesting that the portion in sub-issue “f” concerning whether changes are

15The ruling also stated that LUAF should instead be raised in R.15-01-008 and SoCalGas’
Triennial Cost Allocation Proceeding.

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needed to the reconnection process for gas customers be removed from the scope
of the GRC. Responses opposing Applicants’ motion were filed by CUE and
TURN on March 26, 2018. Applicants filed a Reply on April 5, 2018. The
assigned Commissioner amended the Scoping Memo on April 30, 2018, granting
Applicants’ motion and adding another sub-issue on whether Applicants have
sufficient resources to implement their reconnection process.
On March 27, 2018, SDG&E and SoCalGas filed a joint motion for authority
for each of them to establish a GRC memorandum account. Applicants’ joint
motion was granted by the ALJ ruling on June 7, 2018.
On April 20, 2018, the assigned ALJ issued a ruling establishing public
participation hearings (PPH) in three different locations for SDG&E and six
locations for SoCalGas. PPHs for SDG&E were held on June 13, 26, and 28, 2018
and for SoCalGas on May 29, June 12, 14, 19, 20, and 21, 2018.
On April 24, 2018, SCGC filed a motion to compel discovery and a motion
to shorten the response time to its motion to compel discovery. Responses to
SCGC’s motion were filed by Applicants and EDF on May 1, 2018. SCGC filed a
Reply to Applicants’ Response on May 4, 2018. SCGC’s motion to compel
discovery was denied in the ALJ ruling on June 18, 2018.
On May 7, 2018, SDG&E filed a motion for leave to serve supplemental
testimony of David Geier and William Speer. The motion was granted by the
ALJ ruling on May 25, 2018.
On May 9, 2018, POC filed a motion for official notice of certain facts
contained in a Form 10-K filing by SDG&E and a Form 10-Q filing by Calpine
Corporation with the Securities and Exchange Commission. POC’s motion for
official notice was granted by the ALJ ruling on June 20, 2018.

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On May 14, 2018, POC filed leave to submit supplemental testimony.

SDG&E filed a Response on May 29, 2018 opposing POC’s motion. POC’s
motion was granted in the ALJ ruling on June 4, 2018.
On May 29, 2018, SDG&E filed a motion to strike the direct testimony of
POC. The motion to strike was denied by the ALJ ruling on June 6, 2018.
On June 18, 2018, Applicants filed a joint motion for official notice of
related proceedings and for clarification that certain issues raised by EDF and
SCGC are outside the scope of the proceedings. Responses to Applicants joint
motion were filed by SCGC on June 27, 2018 and EDF on June 28, 2018. A ruling
was made by the assigned ALJ during the evidentiary hearing on July 10, 2018
granting the motion for official notice of related proceedings. The ruling also
clarified that all core balancing issues and storage issues regarding Aliso Canyon
are outside the scope of the GRC.16 On September 17, 2018, the assigned ALJ
issued a follow-up ruling resolving a remaining issue in the joint motion and
ruled that EDF’s requests regarding improvements to backbone transmission and
storage services are outside the scope of the GRC proceedings.
Evidentiary hearings were held from July 9, 2018 to August 8, 2018, and on
August 28, 2018. Corrections to the hearing transcripts were adopted by the ALJ
ruling on September 20, 2018.
Pursuant to the Commission’s Rate Case Plan, SDG&E and SoCalGas
served Update Testimony on August 24, 2018.

16 Transcript Volume 11 at 579 to 580.

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On August 13, 2018, SDG&E and SoCalGas filed a brief regarding their
evidentiary objections to Exhibit 475.17 Sierra Club and UCS filed their
opposition brief regarding Exhibit 475 on August 21, 2018. During the August
28, 2018 hearing, a ruling was made striking portions of Exhibit 475.18
On August 30, 2018, Sierra Club and UCS filed a motion for
reconsideration of the ALJ ruling regarding Exhibit 475. Applicants filed a
Response on September 7, 2018 and Sierra Club and UCS filed a Reply to
applicants’ response on September 14, 2018. The motion for reconsideration was
denied by the ALJ ruling on October 3, 2018.
On September 17, 2018, the assigned ALJ issued a ruling admitting the
update exhibits and joint comparison exhibits into the record.
Opening Briefs were filed by the following parties on September 21, 2018:
Sierra Club and UCS; CUE; NDC; ORA; SDCAN; SCGC; TURN; Lancaster;
SDG&E and SoCalGas; IS; UCAN; Long Beach; SBUA; OSA; FEA; CFC; EDF; and
POC.
Reply Briefs were filed on October 12, 2018 by the following: SBUA; FEA;
UCAN; CUE; NDC; ORA; TURN; Lancaster; POC; SDG&E and SoCalGas; OSA;
Long Beach; Sierra Club and UCS; TURN; SCGC; and SDCAN.

17Exhibit 475 was provisionally accepted into evidence on August 8, 2018 pending a ruling on
the evidentiary objections of SDG&E and SoCalGas.
18Motion to strike Exhibit 475 was granted to the following: Attachment 10; Attachment 13;
page 2, lines 11 to 19 and lines 15 to 21; page 34, line 18 to page 35, line 1 including footnotes 167
to 169; page 36, line 16 to page 40, line 14 including footnotes 179 to 182; page 40, line 21 to
page 41, line 1; and page 43, line 12 to page 44, line 18 including footnote 223. See transcript
Volume 30 at 2765 to 2766.

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On October 23, 2018, SDG&E and SoCalGas filed a Joint Motion to Strike
Portions of OSA’s Opening Brief. OSA filed a Response on November 7, 2018
and SDG&E and SoCalGas filed a Joint Reply to OSA’s Response on November
19, 2018.
On March 5, 2019, SDG&E, SoCalGas, and SBUA filed a Joint Motion for
Adoption of Settlement Agreement. The three parties also filed a separate
motion on the same day for extension of time to file the joint motion for
settlement agreement more than 30 days after close of evidentiary hearings. The
motion for extension of time was granted by the ALJ Ruling on April 18, 2019.
The proceedings are deemed submitted on March 5, 2019 upon the filing of
the Joint Motion for Adoption of Settlement Agreement between SDG&E,
SoCalGas, and SBUA.
2. PPHs and Correspondence
A total of nine PPHs were held in different locations within the service
territories of SDG&E and SoCalGas regarding their GRC applications. 19 The
PPHs were held in order to receive comments from the utilities’ customers
regarding the impact of the application on them.
Some of the PPH locations included Information Sessions where
informational and educational materials were provided to members of the public
immediately prior to a PPH. Members of the public were also given the
opportunity to ask questions about basic information regarding the application
and questions about the Commission from representatives of the Commission’s
Public Advisor’s Office (PAO) and Energy Division as well as billing and service

PPHs were held in El Cajon, Escondido, and Chula Vista for SDG&E and in Visalia, Palmdale,
19

Oxnard, Inglewood, Long Beach, and Riverside for SoCalGas.

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questions from representatives of the utility. Parties that chose to be present

such as the ORA were also given the opportunity to be present to answer
questions regarding their participation in the proceeding.
Many speakers at the PPHs stated that they are on fixed incomes and
cannot afford the proposed rate increase which they view to be a large increase
from current rates. Some stated that they pay a lot for electricity and cannot even
afford to run their air conditioner or heater. Some also stated that the different
tiers are not working and that the utilities’ shareholders should be responsible
for the utilities’ mistakes.
However, there were also speakers representing small business, local
organizations, chamber of commerce organizations, first responders, and
suppliers to the utilities that expressed support for reasonable rate increases
necessary for capital investments and to improve infrastructure, maintain
programs, and safety spending. Some speakers also expressed that SDG&E and
SoCalGas work with local organizations to maintain affordable services.
In addition to comments at the PPHs, letters and emails were sent to the
PAO concerning the two GRC applications.
Much of the correspondence received opposes the proposed rate increases.
Ratepayers state that they are on fixed incomes or are unemployed or
underemployed and would be adversely impacted and cannot afford further
increases in their utility bills. Several customers that have fixed or limited
incomes point out that the minimal increases to Social Security is not enough to
keep pace or offset the large increases the utility has been asking for. These
customers add that they also have to contend with inflation from other sources
such as food, insurance, and medical expenses. Some comments state that the

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proposed rate increases should be greatly reduced and that specifically,

SDG&E’s electric rates are among the highest in the country.
There were also comments stating that proposed rate increases are
excessive and not justified because of the reduced costs of fuel and natural gas.
Others pointed out that administrative costs, executive compensation, and the
utilities’ profits and revenues are too high and that the utilities should be
responsible for the increased costs which resulted from their mistakes,
mismanagement, and lack of financial planning.
Some comments specifically oppose the purchase of the Otay Mesa Energy
Center and explain the purchase is unnecessary, discourages the formation of
Community Choice Aggregation (CCA), and that the utilities should be moving
away from relying on fossil fuels.
Some of the correspondences received from local organizations and
institutions, chamber of commerce organizations, and businesses support the
proposed rate increases and state that these are necessary for enhanced reliability
and security including cyber security, upgrades to facilities and modernization of
infrastructure, enhanced protections to the environment, greenhouse gas (GHG)
reduction, funding of programs for outreach, education, research and
development, and to aid to low income residents.
3. Background of the Applications
SDG&E and SoCalGas are subsidiaries of Sempra Energy (Sempra), a
San Diego-based energy services holding company whose subsidiaries provide
electricity, natural gas and value-added products and services in California.
SDG&E is a regulated public utility that provides electric and gas service
to approximately 3.6 million people through 1.4 million electric meters and

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

873,000 natural gas meters. SDG&E’s service territory spans 4,100 square miles
in San Diego county and southern Orange county.
SoCalGas operates and maintains a natural gas distribution and
transmission system and delivers energy to 21.8 million consumers through
5.9 million gas meters. SoCalGas’ service territory encompasses approximately
24,000 square miles of diverse terrain throughout Central and Southern
California, from Visalia to the Mexican border.
The two GRC applications seek to determine SDG&E’s and SoCalGas’
revenue requirement and base rates for Test Year (TY) 2019 and the post-test year
(PTY) periods of 2020 and 2021. In addition, both utilities are requesting to add a
third attrition year covering PTY2022, to their three-year rate case cycle. Rates
are to be effective beginning January 1, 2019.
3.1. SDG&E’s Application
SDG&E’s GRC application seeks Commission authority to update its
current revenue requirement and base rates to recover projected costs of using its
electric and gas facilities, infrastructure, and other necessary functions, to
provide safe and reliable electricity and natural gas services to its customers.
SDG&E is also requesting the adoption of its proposed PTY mechanism for
attrition years 2020, 2021, and 2022, and for approval of the regulatory balancing
and memorandum accounts set forth in its testimony.
SDG&E is requesting a total of $2.199 billion ($1.766 billion for electric and
$433 million for natural gas) for costs to provide service in 2019. If approved,
this would equate to an increase of $218 million, or an 11 percent increase over
2018 costs that consumers are paying. A typical inland residential customer
using 500 kWh in a month and 25 therms per month would expect to see a

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

monthly bill increase of around $13.70 per month. The new rates are to be
effective beginning January 1, 2019.
In addition to its request for 2019, SDG&E’s requested cost increases for
attrition years 2020, 2021, and 2022 are as follows: (a) for 2020, an additional
$151 million or a 6.9 percent increase from 2019 costs; (b) for 2021, an additional
$120 million or a 5.1 percent increase over 2020 costs; and (c) for 2022, an
additional $122 million or a 4.9 percent increase over 2021 costs.
Many parties to the proceeding reviewed SDG&E’s application and
recommend various adjustments to SDG&E’s requests.
3.2. SoCalGas’ Application
SoCalGas’ GRC application requests that the Commission authorize
SoCalGas’ proposed adjustments to its current revenue requirement and base
rates to recover projected costs for gas operations, facilities, infrastructure, and
other functions necessary to provide utility services to its customers. SoCalGas
also requests the adoption of its proposed PTY mechanism for attrition years
2020, 2021, and 2022, and approval of the regulatory balancing and
memorandum accounts set forth in its testimony.
SoCalGas is requesting a total of $2.99 billion for costs to provide service in
2019. If approved, this would result in an increase of $480 million or
19.1 percent, over the authorized revenue requirement for 2018. An average
residential customer not under the California Alternate Rates for Energy (CARE)
program using 35 therms per month would expect to see a bill increase of around
$7.54 per month. The new rates are to be effective beginning January 1, 2019.
For attrition years 2020 to 2022, SoCalGas’ requested increases are:
$237 million or 8.1 percent in 2020; $193 million or 6.1 percent in 2021; and
$202 million or 6.0 percent in 2022.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

Parties to the proceeding also reviewed SoCalGas’ application and

recommend various adjustments to SoCalGas’ requests.
3.3. Shared Services
SDG&E and SoCalGas are related companies due to their corporate
structure of being owned by the same parent company and because they are in
the same business of providing utility services to customers. Thus, there are
some services that are shared between these two utilities and with their
corporate parent, Sempra.
Shared services are activities performed by functional areas at one utility
(or at Sempra’s corporate center) for the benefit of (i) the other utility, (ii) the
corporate center, or (iii) an unregulated affiliate. A shared service provided by
SDG&E, SoCalGas, or the corporate center, will be allocated and billed to the
entity or entities receiving the service and the utility receiving the shared service
will include the costs that were allocated and billed to it.
On the other hand, non-shared services are activities provided by
functional areas at one utility that benefit only the utility performing the activity.
These costs are not allocated and billed out to other entities. For non-shared
services provided to the utility by the corporate center, the costs are treated as
service costs consistent with how outside vendor costs are treated.
These topics are discussed more thoroughly in sections 29 and 35 of this
decision where we discuss general administration functions of Sempra’s
Corporate Center, and shared services and shared assets billing of SDG&E and
SoCalGas.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

4. Analysis Overview
This section provides a general overview of how we analyzed the revenue
requirement and other requests of SDG&E and SoCalGas, including requests
relating to the utilities’ Risk Assessment Mitigation Phase (RAMP).
The decision generally follows the topical analysis and discussion
presented by parties in their briefs. The decision will examine each major topic,
analyze and resolve all issues in each topic, and as applicable, determine the
appropriate and reasonable funding amounts based on Applicants’ requests and
alternative proposals by various parties.
In each section, we describe the background of the particular costs that are
being addressed and will then separately look into issues affecting SDG&E and
SoCalGas. This is followed by a discussion of each utility’s Operations and
Maintenance (O&M) costs and Capital costs. The positions of various parties are
summarized, followed by a discussion of each request and issues raised,
including objections and counter-proposals by various parties.
We have reviewed all the exhibits in these proceedings pertaining to each
section as well as the evidentiary hearing transcripts. We also reviewed the
arguments made and positions raised by the parties in their briefs. We then
considered, reviewed, and evaluated all the evidence and all the issues,
positions, and arguments raised by parties as well as the state of the economy
and the economic outlook described in the parties’ exhibits and briefs in deciding
what costs for TY2019 are reasonable and what should be adopted in each section
of the decision.
Attachment B of this decision contains the adopted summary of earnings
tables for SDG&E and SoCalGas, and contains the adjustments that we adopt to
the revenue requirements of SDG&E and SoCalGas. The summary of earnings

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

table sets forth all of the components of the revenue requirement consisting of
the total O&M costs, and the capital-related costs that are necessary to support
Applicants’ respective rate base. The summary of earnings tables shown in
Attachment B reflects all of the costs or methodologies we have found to be
reasonable as inputs into the Results of Operation (RO) model, which is used by
the Applicants to generate the revenue requirement amount that is needed to
allow SDG&E and SoCalGas to earn the authorized rate of return on their
investments.
The above review and evaluation process results in the revenue
requirements that are appropriate for SDG&E and SoCalGas to provide safe and
reliable service at just and reasonable rates, as required by Pub. Util. Code § 451.
4.1. RAMP Review
This GRC application is the first by a regulated utility to fully incorporate
risk mitigation activities using the risk-informed framework developed by the
Commission in the Safety Modeling Assessment Proceeding (S-MAP) and the
Applicants’ RAMP proceeding.20 Applicants submitted testimony providing a
roadmap of the RAMP risks that were incorporated into this GRC application.21
The testimony also provided context on viewing the funding requests through
the lens of risk management. Testimony that incorporates RAMP-identified risks
presents the proposed spending as a risk mitigation activity.

20The S-MAP proceeding addresses applications A.15-05-002 (SDG&E), A.15-05-003 (PG&E),

A.15-05-004 (SoCalGas) and A.15-05-005 (SCE). The Commission opened Order Instituting
Investigations (I.16-10-015 and I.16-10-016) to review the RAMP submission of SDG&E and
SoCalGas.
21 Exhibit 5.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

The SMAP, RAMP, and spending accountability process to integrate risk

mitigation activities into the GRC began in 2014 and is still being refined. In
April 2019, the Commission adopted 26 safety metrics for which utilities are to
report their progress toward the risk mitigation goals set out in the GRCs. 22 In
addition, the recently closed and future SMAP proceedings have evaluated and
will continue to evaluate the minimum elements to be used by large utilities for
risk mitigation analysis in future RAMP and GRC applications. The Commission
also approved improvements to Risk Mitigation Accountability and the Risk
Spending Accountability reports, which will require additional internal tracking
processes and tools to measure how well identified risks are actually being
mitigated, and the risk reduced per dollar spent.
When they submitted this GRC in 2017, Applicants were the first utilities
to incorporate RAMP into their GRC filings. The Commission’s guidance was
more limited at that time, and reporting was limited to safety-related activities
that correspond to one or more of the Company’s key safety risks scoring four or
more in the Safety, Health and Environment category. As a result, Applicants
selected activities from the RAMP Report that they thought should be further
reviewed for inclusion in the GRC. Those activities were then assigned to GRC
subject matter areas, and the risk mitigation activities were evaluated as part of
determining specific requests in the GRCs. The specific RAMP-driven funding
requests were then incorporated into witnesses’ GRC forecasts.
In reviewing the RAMP-driven portions of witness testimony in this GRC,
we find that many of the activities identified by Applicants as flowing from the

22 D.19-04-020.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

RAMP and mitigating risk are activities that were already being performed by
Applicants and were included in prior GRCs. Since Applicants designate both
the risks and the mitigation activities as RAMP-related, and re-evaluated using a
risk-based approach and framework, the general result is witness testimony that
states that numerous activities are in fact mitigation of key risks, often leading to
higher cost forecast. In fact, a considerable portion of the Applicants’ requested
increase in revenue requirement is comprised of RAMP-related requests.
We find that witness testimony that incorporates RAMP-driven requests
identifies the total amounts associated with RAMP, but in many instances,
provides little information about the activities themselves. Instead,
RAMP-related activities are integrated with O&M and capital requests for each
cost center.
Because the RAMP portion in Applicants’ requests is not presented as
separate and distinct from the non-RAMP portions, our review of funding
requests for each cost center was informed by the Applicants’ 2016 RAMP
Report, but in many instances our decision is not based on risk mitigation but
rather on standard GRC methods, such as the quality of the forecast,
counterarguments by intervenors, and whether a given showing met the burden
of proof.
We note that as set out in our April S-MAP and RAMP decision, the
Sempra utilities will file their next RAMP on November 30, 2019 using the
advanced S-MAP methodology with risk-spend efficiency scores. That RAMP
filing will be incorporated into Applicants’ next GRC filing on September 1, 2020,

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

for Test Year 2022. The first Risk Mitigation Accountability Report prepared by
Applicants using these improved tools will be available in 2021.23
Several parties expressed concern about relying on findings made during
the RAMP process citing various weaknesses. We considered these issues in our
review of RAMP-related requests and did not use findings made in the RAMP
process as the sole reason for approving requests. We also find it more prudent
to integrate RAMP into the GRC process now rather than wait until the process is
completely developed. As stated above, the RAMP process continues to be
refined and we expect that future RAMP integration in future GRC filings will
provide better answers to the core questions of what spending is proposed to
mitigate risks, and how has past spending reduced risk per dollar spent.
Answers to those questions are not readily available to us here.
At this time, we also strongly encourage OSA to actively participate in
SDG&E’s and SoCalGas’ next RAMP proceedings. We support and share OSA's
goals to advocate for the improvement of Applicants’ safety management and
safety performance although we note that the majority of OSA's testimony in
these proceedings focus on safety culture enhancements and practices and not
revenue requirements. These issues are more appropriately raised and
addressed in the Applicants’ RAMP proceedings and we look forward to OSA's
continued participation in future RAMP and GRC proceedings.
4.1.1. Enterprise Risk Management
Enterprise Risk Management (ERM) is the process of planning and
organizing the activities of SoCalGas and SDG&E in order to minimize the effects

23 Id. at 31.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

of risk on capital and earnings. Applicants’ ERM program facilitates the

integration of risk into the review of enterprise risks with an emphasis on safety,
prioritization of effective mitigation measures, and the investment
decision-making process.
Applicants are requesting $7.035 million in shared O&M costs for TY2019
which is $2.462 million higher than 2016 recorded costs. Costs for the ERM
program will fund activities of the vice-president group, the director of
Operational Risk Management group, and the director of ERM & Compliance
group. The above groups develop risk frameworks and implement risk
management practices. Applicants explain that the increase in funding will be
used to obtain support from industry experts and fund increased activities.
We reviewed Applicants’ testimony and find the forecast of $7.035 million
for TY2019 reasonable and should be approved. The requested funding level
will allow Applicants to support new activities and continued maturity of risk
management practices. Parties do not oppose Applicants’ ERM forecast.
4.2. Officer Compensation
Pursuant to Senate Bill (SB) 901, Public Utilities Code section 706 has been
amended prohibiting certain investor owned utilities (IOUs) including SDG&E
and SoCalGas, from recovering from ratepayers any annual salary, bonus,
benefits, or other consideration of any value (compensation and benefits), paid to
an officer and requires that compensation instead be funded solely by
shareholders.
The pertinent portion of the revised Section 706 reads as follows:
“(a) For purposes of this section, “compensation” means any annual
salary, bonus, benefits, or other consideration of any value, paid to
an officer of an electrical corporation or gas corporation.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

(b) An electrical corporation or gas corporation shall not recover

expenses for compensation from ratepayers. Compensation shall be
paid solely by shareholders of the electrical corporation or gas
corporation.”
SB 901 was signed into law on September 21, 2018 and the revision to
Section 706 became effective on January 1, 2019 or the first day of the TY2019
period for both SDG&E and SoCalGas. Pursuant to the above, the Commission
issued Resolution E-496324 requiring SDG&E and SoCalGas (among other IOUs),
to establish Officer Compensation Memorandum Accounts (OCMA) to track
compensation paid to an officer pursuant to the revised Section 706. The OCMA
was effective beginning January 1, 2019 until closed at the direction of the
Commission.
Because the above events took place at a time when evidentiary hearings
in these GRCs had already been concluded and all active parties had already
filed opening and reply briefs in support of their final positions in the
proceedings, we find that it would not be prudent and will cause unnecessary
delay to the prejudice of all parties, ratepayers, the public, and the regulatory
process, to require SDG&E and/or SoCalGas to revise their testimonies in order
to extract the portions of costs that pertain to officer compensation and benefits
as these costs are typically embedded in multiple costs and forecasts presented
throughout the GRC. For example, costs centers containing officer compensation
and benefits within the definition of the revised Section 706 such as a Chief
Executive Officer (CEO), President, or Vice President (VP) will also include
salaries and benefits of staff and other support personnel for that working group

24 Resolution E-4963 was issued on December 13, 2018.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

as well as non-labor costs. This would be true even for cost centers that are titled
CEO or Vice President of a particular division, department, unit, or working
group.
Thus, the approach taken by this decision with regards to officer
compensation and benefits is to disallow funding for cost centers that are entirely
made up of officer compensation and benefits. For cost centers that are only
partially made up of such costs, the reasonableness of such costs are reviewed
and authorized as a whole and inclusive of office compensation and benefits.
However, SDG&E and SoCalGas shall comply with Resolution E-4963 and track
these costs through their respective OCMAs. These amounts shall then be
trued-up and refunded to ratepayers as part of SDG&E’s and SoCalGas’
respective year-end annual regulatory account balance update Advice Letter
filings for 2019. SDG&E and SoCalGas shall include a list of the officer positions
and the corresponding amounts for each position. This list will be granted
confidential treatment and submitted under seal. In addition, the amounts
tracked in the OCMA are to be taken into account by the post-test year (PTY)
mechanisms that will be adopted in this decision to calculate SDG&E’s and
SoCalGas’ respective revenue requirements for PTYs 2020 and 2021. These
amounts are to be excluded from the revenue requirements in PTYs 2020 and
2021.
4.3. Aliso Canyon Costs and Returning Employees
Pursuant to Decision (D.)16-06-054, all additional costs that have stemmed
from the Aliso Canyon gas leak incident that was first discovered on October 23,

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

2015 are excluded from this GRC25 and have been removed from historical cost
information. To help remediate the leak, SoCalGas temporarily reassigned
certain employees and utility staff to perform various remediation functions. In
this GRC cycle, these employees and utility staff are now returning to their
regular assignments to perform their regular functions. As with most
organizations, management must have the ability to redirect staff to perform
emergency work and to address urgent issues and the Commission does not
intend to micromanage utility operations to that extent as this is neither efficient
nor necessary. Furthermore, the reassigned employees and utility staff were not
permanently reassigned to perform Aliso Canyon gas leak duties and their
regular duties and responsibilities did not go away. Therefore, this decision will
address their regular duties and responsibilities moving forward. In addition, if
any work had been deferred as a result of the temporary reassignment, such
work must be performed within the labor costs that will be authorized in this
decision and in addition to the regular work that the returning employees and
utility staff regularly perform and no additional funds will be authorized to
perform such deferred work.
5. Request to Adopt a Four-Year GRC Cycle
SDG&E and SoCalGas both request the inclusion of a 3rd attrition year or
calendar year 2022 into their current three-year TY2019 GRC cycle. Applicants
state that over the past several years, the GRC filing process has become much
more complex and subject to extended delays both in the filing process and the
timeframe for the issuance of a decision. Applicants cite to new processes and

25 D.16-06-054 OP 12 at 332.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

reviews such as the RAMP filings and new reporting requirements such as those
that have been required in by the S-MAP. Applicants add that the process is
projected to become even more complex as the minimum required elements for
the RAMP filings is being further refined by the S-MAP as the process continues
to evolve and a four-year GRC term would free up scarce resources to allow the
Applicants to maintain their focus on safe and reliable operations and customer
responsibilities.26 A four-year GRC cycle will allow Applicants, intervenors, and
the Commission more flexibility to manage the integrated S-MAP, RAMP, and
GRC proceedings.
ORA strongly supports the request and states that a four-year GRC term
allows for better utility financial and operational management of spending and
investment.27 On the other hand, CUE, IS, SCGC, SBUA, and TURN all
recommend the continuation of the three-year cycle. These intervenors argue
that a third attrition year does not add to or assure more time in processing
S-MAP and RAMP requirements and creates a longer gap between the
Commission’s periodic review of Applicants’ operations. Also, because the
S-MAP and RAMP processes are both in their early stages, more frequent
feedback from utilities and intervenors and review by the Commission may be
required.
ORA, SDG&E and SoCalGas made a similar request in Applicants’ TY2016
GRCs as part of a separate settlement agreement and filed a related petition for
modification of D.14-12-025 in order to change the current three-year GRC cycle

26 Exhibit 242 at JAM-3 and Exhibit 245 at KJD-2 to 3.

27 Exhibit 426 at 16.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

into a four-year cycle. The Commission denied the petition but directed the
Commission’s Energy Division to conduct a workshop to explore whether a
four-year GRC cycle is more appropriate. A workshop was conducted on
January 11, 2017 and a workshop report was issued by the Energy Division on
March 8, 2018. Comments to the workshop report were filed by various parties
in Rulemaking (R.)13-11-006 and the Commission expects to issue a decision on
the matter.
In their requests to adopt a four-year GRC cycle, Applicants and ORA do
not state or suggest that the reasons and circumstances cited in support of a
four-year GRC cycle only apply to SDG&E and SoCalGas and not to the two
other large utilities that file cyclical GRC applications with the Commission,
namely, PG&E and SCE. Thus, absent any circumstances or events in a
particular GRC cycle that specifically differentiates one or more of these large
energy utilities mentioned, we find that a decision as to whether a three-year and
four-year GRC cycle should be adopted should be applied uniformly to SDG&E,
SoCalGas, PG&E and SCE. Moreover, the appropriate term for the GRC cycle is
currently being considered in R.13-11-006 following the workshop and comment
process in that proceeding and a decision in said proceeding would be uniformly
applied, and rightfully so, to SDG&E, SoCalGas, PG&E and SCE.
Following the above reasoning, this decision does not resolve or make
conclusions regarding the underlying and substantive reasons and arguments
that either support or seek denial of Applicants’ request and instead defers any
decision regarding this issue to R.13-11-006.
We therefore deny Applicants’ request in these proceedings to change
their current three-year GRC cycle into a four-year cycle, and Applicants should
seek substantive and procedural guidance in R.13-11-006. The GRC period

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

considered in this decision is TY2019 and attrition years 2020 to 2021. Proposals
under various topics as well as testimony and other evidence made in these
proceedings concerning 2022 are not discussed further in this decision. If a
decision adopting a four-year GRC cycle is made in R.13-11-006, Applicants shall
file a petition for modification of this decision.
6. Fueling Our Future
Fueling Our Future (FOF) is an enterprise wide initiative which is
designed to provide an opportunity to examine how SDG&E and SoCalGas
approach, organize, and execute work, with a focus and goal of achieving
operational efficiency.28 FOF focuses on innovating and modernizing process to
meet the future needs of Applicants’ business and strives to improve
performance by better leveraging people, processes, and technology. Applicants
state that FOF is part of an overall policy and culture of seeking continuous
improvement where the company and its employees continue to seek new ways
of doing business in order to increase efficiency of core operations and customer
service.
The FOF project phase was commenced in 2016 and consisted of 18 weeks
of structured work including identification, refinement, evaluation, and
prioritization of ideas within each functional area. The project phase culminated
in a final decision-making process to move forward and execute selected ideas.
The FOF team members consisted of group leaders and associates, catalyst team
members and associates, and core support team members, and team associates
from the different functional units within SDG&E and SoCalGas. Sempra also

28 Exhibit 222 at HDS/RC-1.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

engaged the services of a third-party consulting firm, EHS Partners (EHS), which
worked with teams to manage the process methodology, structuring analytics,
and idea surfacing. EHS also provided the framework to help identify, evaluate,
and prioritize initiatives. A total of 450 initiatives were selected for
implementation from 2016 to 2019. These initiatives are currently in various
stages ranging from completed projects to projects that are still being
conceptualized.
Savings generated from FOF activities are passed to ratepayers in the form
of reductions to the revenue requirement. Table HS/RC-1 and RC-2 in Exhibit
22229 shows the impacted cost centers for SoCalGas and SDG&E respectively,
and the corresponding reductions to the TY2019 forecast for each of these cost
centers. Total savings for SoCalGas is $42.760 million and for SDG&E
$26.231 million. Savings for each cost center were forecast using a zero-based
method and were derived using input from subject matter experts.
6.1. Position of Intervenors
ORA reviewed Applicants’ testimony, hundreds of pages of workpapers
and conducted discovery. ORA had several issues with supporting
documentation for several projects but in conclusion, does not oppose
Applicants’ forecast of FOF net benefits for TY2019.
TURN recommends that Applicants’ estimated savings be passed on to
ratepayers but also recommends that FOF Project Phase costs for the 18-week
period in which structured FOF planning work was conducted be identified and
deducted from 2016 base year revenues as these costs represent a one-time

29 Id. at HDS/RC-8 to 9.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

expense that will not be repeated as part of Applicants’ ordinary course of

business moving forward.
6.2. Discussion
We recognize Applicants’ commitment to continue to seek increased
operational efficiencies of core operations and customer service. With respect to
the FOF forecast, we agree with both ORA and TURN that a few of the projects
that ORA examined did not include proper support for the savings that were
forecast.
However, in a data response to ORA, Applicants stated they are
committed to realizing the FOF savings identified in direct testimony whether or
not the savings are realized.30 Thus, even if some projects are not implemented,
the savings forecast for those projects have already been included in the GRC
application and these savings will be deducted from requested budgets
nonetheless. Some of the projects have also been completed and the savings
from these can be readily identified. Therefore, we find that the forecast for FOF
savings of $42.760 million for SoCalGas and $26.231 million for SDG&E should
be authorized.
As stated previously, the savings in each cost category affected are being
used as a reduction for the requested TY2019 budget for such cost category.
These reductions from FOF are described in various testimonies in support of
cost categories where they appear in. Because we are already approving these
forecast savings in this section, we do not further discuss whether these savings
calculations should be adopted when we discuss other sections that have a FOF

30 Exhibit 399 at 4.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

component. Instead, we simply apply the reductions that were already applied
by SDG&E and SoCalGas to their TY2019 requests for those sections.
Regarding TURN’s recommendation to deduct project costs incurred
during the 18-week Project Phase, we agree with Applicants that these FOF
activities fall within the umbrella of activities aimed at improving efficiencies
and developing improvement programs. Therefore, we find these activities are
not one-time and are continuous activities that are routinely being performed in
the course of business. We also accept Applicants’ explanation that routine work
was not deferred and were re-assigned during the 18 weeks of the FOF Project
Phase and that many of the employees that performed FOF-related work were
exempt employees that continued to partly support their regular duties. In
addition, we find that the savings generated from FOF activities offset labor costs
that may have been incurred despite the re-assignment of regular work and
partial work performed by exempt employees. Also, none of the costs paid to
EHS were allocated to Applicants and were instead all retained by Sempra.
Based on the foregoing, we find it reasonable to reject TURN’s proposal to
deduct any Project Phase costs, particularly labor costs for employees’
participation.
7. Gas Distribution
This section examines the SDG&E and SoCalGas forecasts and requests
relating to operating and maintaining their respective gas distribution systems
and for constructing new gas distribution facilities needed to provide safe, clean,
and reliable delivery of natural gas to their customers.
7.1. SoCalGas
SoCalGas’ gas distribution system consists of a network of approximately
100,586 miles of interconnected gas mains, services, and associated pipeline

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

facilities.31 The primary function of this pipeline network is to deliver natural

gas from SoCalGas’ transmission system to approximately 5.9 million customer
meters.
The TY2019 forecast for O&M costs is $148.154 million which is
$31.522 million higher than 2016 adjusted, recorded expenses. For capital costs,
SoCalGas is requesting $278.473 million for 2017, $324.801 million for 2018, and
$347.842 million for 2019.32 By comparison, recorded costs for 2016 were
$301.472 million. Key work categories to maintain system integrity include leak
repairs; locating and marking of gas facilities to avoid third-party damage; leak
surveys; system renewal; and operations, maintenance, and construction needs.
Part of the requested costs is driven by risk mitigation activities pursuant
to the RAMP process. The table below summarizes key risks being mitigated
and the estimated O&M and capital costs for the mitigation activities that are
planned to be undertaken. These costs are embedded in the O&M and capital
costs being requested by SoCalGas and the reasonableness of these costs are
reviewed in the O&M and capital sections that they appear in.

31 Exhibit 07 at GOM-02.
32Revised the forecast from $278.473 million to $284.802 million for 2017 and $324.801 million to
$322.769 million for 2018 in the Update Testimony (Exhibit 514) at Attachment H.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

RAMP Risk 2017 2018 2019

Catastrophic Damage Involving
n/a n/a $18,177,000
Third-Party Dig-Ins (O&M)
Employee, Contractor, Customer, and
n/a n/a $9,826,000
Public Safety (O&M)
Catastrophic Damage Involving
High-Pressure Pipeline Failure n/a n/a $59,000
(O&M)
Catastrophic Damage Involving
Medium-Pressure Pipeline Failure n/a n/a $33,945,000
(O&M)
RAMP-related O&M total n/a n/a $62,007,000
Catastrophic Damage Involving
$3,800,000 $2,500,000 $0
Third-Party Dig-Ins (capital)
Employee, Contractor, Customer, and
$3,871,000 $3,304,000 $2,204,000
Public Safety (capital)
Catastrophic Damage Involving
High-Pressure Pipeline Failure $207,000 $207,000 $207,000
(capital)
Catastrophic Damage Involving
Medium-Pressure Pipeline Failure $6,196,000 $7,487,000 $8,271,000
(capital)
RAMP-related capital total $14,074,000 $13,498,000 $10,682,000

Most of the RAMP activities were already being performed, but new and
enhanced safety-related activities to mitigate risk have been included as a result
of the RAMP process. O&M costs for incremental activities are $11.526 million
out of the $62.007 million total O&M amount being requested for RAMP-related
activities.
Catastrophic Damage Involving Third-Party Dig-Ins
According to SoCalGas, damages resulting from excavation activity
represents the greatest safety threat to its pipeline infrastructure with potential
catastrophic consequence to public safety.33 Damage can range from minor

33 Exhibit 07 at GOM-18.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

scratches and dents to ruptures with uncontrolled release of natural gas.

Mitigation activities include training, locating and marking, pipeline observation,
and standardizing location equipment.
Employee, Contractor, Customer, and Public Safety
SoCalGas manages this risk through mitigation actions that have been
implemented and developed over many years. New activities have been added
pursuant to the RAMP process. Mitigation actions include employee training,
personal protective and safety equipment, above and below-ground pipeline and
facility inspections, confined space air monitoring system for field personnel, and
upgrading coveralls and fresh air equipment.
Catastrophic Damage Involving High-Pressure Pipeline Failure
Activities to manage this risk include maintenance, training and
qualification of pipeline personnel, application of corrosion control and cathodic
protection, and emergency preparedness and odorization activities.
Catastrophic Damage Involving Medium-Pressure Pipeline Failure
SoCalGas manages mitigation of this risk by complying with applicable
federal and state regulations.
The TY2019 forecasts incorporate $4.742 million in O&M savings from
FOF. Also, costs relating to the Aliso Canyon gas leak incident are excluded
from the forecast and from historical costs.
7.1.1. Non-Shared O&M
The total forecast for non-shared O&M costs is $147.879 million which is
$31.936 million higher than 2016 costs. SoCalGas’ workforce consists of 1,900
distribution system employees which include front-line construction crews,
technical planners, and field engineers. Non-shared O&M cost categories are
composed of Field Operations & Maintenance, Asset Management, Operations

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

Management & Training, and Regional Public Affairs. The table below
summarizes the costs for each cost category.

Change from
Non-shared O&M 2019
2016
Field Operations & Maintenance $129,116,000 $30,449,000
Asset Management $6,965,000 -($1,206,000)
Operations and Management $7,378,000 $1,733,000
Regional Public Affairs $4,420,000 $960,000
Total $147,879,000 $31,936,000

[Link]. Field Operations & Maintenance

A majority of the O&M costs under this category relate to expenses to
address the physical condition of SoCalGas’ gas distribution system. Activities
performed can be classified as preventive, corrective, or supportive. The
following table provides a more detailed breakdown of the different cost centers
comprising Field Operations & Maintenance.

Change from
Field Operations & Maintenance 2019
2016
Locate & Mark $16,050,000 $2,422,000
Leak Survey $10,711,000 $3,631,000
Measurement & Regulation $14,888,000 $1,057,000
Cathodic Protection $18,322,000 $3,919,000
Main Maintenance $20,772,000 $9,389,000
Service Maintenance $16,997,000 $6,658,000
Field Support $21,069,000 $1,667,000
Tools, Fittings & Materials $10,307,000 $1,706,000
Total $129,116,000 $30,449,000

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

Locate & Mark

Owners of underground facilities are required by federal34 and state35
regulation to identify substructures at locations of planned excavations.
Activities include locating and marking underground pipelines, conducting job
observations, and performing pothole operations and depth check. A linear
trend forecast was utilized to account for increased work anticipated in the TY.
Increased costs are due to new federal, state, and local regulations and increase
in construction activities.
Leak Survey
This cost category includes expenses associated with federal and state
pipeline safety regulations requiring SoCalGas to survey its gas distribution
system for leakage.36 Pipelines are routinely surveyed at one, three, or five-year
intervals depending on the pipe material involved, the operating pressure,
existence of cathodic protection, and proximity to various population densities.
Special leak surveys are performed as needed or on more frequent cycles.
SoCalGas utilized a historical linear trend for its forecast as it projects increased
leak survey requirements. Costs incurred are based on the amount of pipeline
footage requiring leak survey and frequency of the surveys.
Measurement & Regulation
Includes costs for maintaining and operating regular stations, customer
meters, and associated components. Activities are driven by pipeline safety and

34 49 CFR §192.
35 Cal. Gov’t Code §§ 4126, et seq.
36 49 CRF § 192.723 and Commission General Order 112-F.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

other regulations. A five-year linear trend was utilized to develop the forecast as
costs are expected to continue increasing due to pipeline growth and because the
system continues to age.
Cathodic Protection
Cathodic protection reduces corrosion of pipes in the distribution system.
Maintenance work is also conducted to replace magnesium anodes that are no
longer able to provide the required protection level for pipelines. Once again, a
linear trend was utilized as costs are expected to continue increasing due to
regulatory requirements.
Main Maintenance
Activities under this cost category are to meet federal and state pipeline
safety regulations and to extend the life of distribution main pipelines. Activities
also include leak evaluations, leak repair, service alterations, and miscellaneous
maintenance. Costs are once again expected to keep increasing and so a
historical linear trend was utilized to develop the forecast.
Service Maintenance
Service maintenance activity consists of evaluation and repair of service
leaks, service alterations, customer meter alterations and meter guard
replacements, and miscellaneous service and customer meter maintenance.
Costs were forecast using a linear trend because costs are expected to keep
increasing.
Field Support
The Field Support group conducts a variety of support services to
complete daily Gas Distribution O&M activities. This includes field supervision,
clerical support, dispatch operations, materials support, and removal of

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

abandoned mains. A five-year historical average was used to develop the

forecast.
Tools, Fittings, and Materials
This workgroup contains the purchase of small tools, small pipe fittings,
pipeline materials, and miscellaneous installation materials used during
construction and maintenance activities. Costs were forecast using a historical
linear trend as costs are expected to keep increasing due to increased
construction activities.
[Link]. Asset Management
Asset Management is responsible for the evaluation of the condition of the
distribution system which includes maintaining asset records, identification of
corrective maintenance solutions, and coordinating with field personnel. Costs
were forecast using a historical linear trend because the level of work supported
such as maintenance work, general construction work, municipality work, and
customer-generated activities, are generally expected to keep increasing.
[Link]. Operations and Management
This workgroup includes Operations Leadership and Field Management
activities. Operations Leadership is responsible for the organization’s vision and
direction and setting and ensuring that objectives are met while Field
Management is responsible for overall management of the workforce dedicated
to the Gas Distribution pipeline maintenance and installation activities. Costs
were forecast using a five-year historical linear trend because of increased and
new activities that are projected.
[Link]. Regional Public Affairs
The primary focus of the Regional Public Affairs group is to support Field
Operations by working with regional and local governments and municipal

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

districts on issues relating to permits, proposed regulations, franchises, and

emergency preparedness and response. Regional Public Affairs also informs
county and city officials as well as special districts regarding issues that impact
customers and serves as the point of contact for construction activities, customer
programs, service inquiries, etc. A five-year average plus incremental increases
was utilized to arrive at the TY2019 forecast.
[Link]. Positions of Intervenors
Comments to the O&M section were provided by ORA, TURN, CUE and
CFC.
ORA recommends a total of $118.037 million for non-shared O&M costs
which is $29.842 million lower than SoCalGas’ requested amount of
$147.879 million. Generally, ORA does not oppose the underlying activities
being funded and much of the difference between ORA’s recommendation and
SoCalGas’ is due to ORA’s proposal of utilizing a two-year average using 2016
and 2017 recorded costs as opposed to SoCalGas’ forecast methodologies which
were mostly based on a five-year linear trend. ORA proposes using a two-year
average for Operations and Management and all the Field Operations &
Maintenance sub-categories except for Main Maintenance, Field Support, and
Tools, Fittings, and Materials. For these three sub-categories, ORA recommends
using 2016 recorded costs for Main Maintenance and Field Support and a
five-year average for Tools, Fitting, and Materials. ORA also recommends using
2016 recorded costs for Operations and Management. ORA does not dispute the
forecasts for Asset Management and Regional Public Affairs.
TURN recommends a reduction of $14.909 million from SoCalGas’
forecast. TURN recommends a five-year average for Main Maintenance and
supports ORA’s recommendation of a two-year average for Service Maintenance.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

TURN also objects to the incremental funding for leak backlogs stating that this
could overlap with SoCalGas’ request in Advice Letter 5211 pursuant to SB 1371.
CFC recommends a reduction of $0.500 million for SoCalGas’ forecast for
Cathodic Protection.
CUE recommends an increase of $13.159 million from SoCalGas’ forecast.
CUE recommends increases in Locate and Mark, Aldyl-A leak survey, meter set
assembly maintenance, and standbys for observation on high-pressure pipelines.
CUE also recommends that SoCalGas should eliminate its leak backlog by the
end of this GRC cycle and to move to a three-year leak survey cycle.
[Link]. Discussion
[Link].1. Field Operations & Maintenance
Issues
This section will address the various issues relating to Field Operations &
Maintenance and the eight sub-categories that comprise it. The common issue of
the appropriate forecast methodology is addressed concurrently.
Forecast Methodology
SoCalGas generally utilized a historical linear trend to develop its forecasts
except for Leak Survey and Field Support. SoCalGas’ rationale for these cases is
that costs have been increasing year after year and it expects this trend to
continue. We examined Table 11-4 of Exhibit 40637 which shows recorded costs
from 2012 to 2016. From said table however, the year over year increase in costs
is only present for Locate and Mark, Measurement & Regulation, and Cathodic
Protection. For said categories, we find the application of a historical linear trend
to develop the forecasts is reasonable and appropriate. For Main Maintenance;

37 Exhibit 406 at 8.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

Service Maintenance; and Tools, Fitting & Materials; costs are shown to fluctuate
and so a linear trend does not appear to be appropriate. For Leak Survey, we
find SoCalGas’ forecast methodology of basing its forecast on the amount of
pipeline footage requiring leak survey and frequency of leak surveys to be
appropriate especially because the amount of pipeline requiring survey has
increased. For Field Support, we find that recorded costs from 2015 to 2017 are
more reflective of current costs as compared to the five-year average from 2012 to
2016.
Locate & Mark
As stated in our discussion above regarding forecast methodology,
recorded data from 2012 to 2016 supports SoCalGas’ assertion that costs have
been increasing. Based on the evidence presented, we find it reasonable that
Locate & Mark costs will continue to increase due to regulations and increase in
construction activities. CUE recommends an additional $0.915 million based on
additional upward trend from SB 661, also known as the Dig Safe Act of 2016,
which requires additional notification from excavators which in turn increases
Locate & Mark activities. However, SoCalGas states that its forecast already
takes into account additional work anticipated from SB 661. CUE also proposes
an increase for Locate & Mark standby-time for job observation on high-pressure
pipelines but an increased standby-time trend was also already incorporated in
SoCalGas’ forecast. Thus, we find that CUE’s recommended increases are
already embedded in SoCalGas’ proposed costs and not necessary. Parties do
not object to the incremental adjustments presented by SoCalGas for its base
forecast and we find that the testimony supports these costs. Based on the above,
we find that SoCalGas’ proposed forecast of $16.050 million for Locate & Mark
should be approved.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

Leak Survey
Historical costs for Leak Survey went up from $6.704 million in 2013 to
$8.000 million in 2014 but decreased to $7.172 million in 2015 and to $7.080
million in 2016. ORA suggests that these recorded expenses show a steady
declining trend. In this case, we find it appropriate to examine 2017 costs in
order to determine whether the trend continued but find that costs in 2017 went
up to $7.955 million. Based on the above, we disagree with ORA that there is a
declining trend. In addition, SoCalGas shows in Figure GOM-04 of Exhibit 1038
that the footage for leak survey has generally increased which requires more leak
survey activities. New meter set installations are also expected to grow which
also increases the number of leak survey activities. Thus, we find SoCalGas’ base
forecast of $8.320 million to be more reasonable.
With regards to incremental costs, ORA recommends $0 funding for
Bi-Annual High-Pressure Leak Survey while CUE recommends an additional
$99,000 for the Aldyl-A Survey and $0.500 million to do a field comparison using
leak detection technology from a company called Picarro. CUE also recommends
moving to a three-year inspection cycle for all pipes not already subject to more
frequent inspections.
We find the funding for the Bi-Annual High-Pressure Leak Survey to be
necessary as the activity is required by GO 112-F and supports risk mitigation
activities pursuant to reducing the RAMP risk of Catastrophic Damage Involving
High-Pressure Pipeline Failure. SoCalGas does not oppose CUE’s
recommendation of additional funding for Aldyl-A Survey and admits that the

38 Exhibit 10 at GOM-24.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

number of miles used for the forecast was lower than the current actual data.
Thus, we agree with CUE’s proposed increase. Regarding CUE’s request to
move to a three-year inspection cycle and to require a field comparison using
Picarro leak detection technology, we find that these requests are outside the
scope of this GRC and are already being addressed in R.15-01-008, the Gas Leak
Abatement OIR addressing the requirements imposed by SB 1371.
Based on the above, we find that $99,000 should be added to SoCalGas’
TY2019 forecast of $10.711 million resulting in an amount of $10.810 million that
should be approved for Leak Survey.
Measurement & Regulation
As stated in our discussion on forecast methodology, historical data
supports SoCalGas’ assertion that costs have been increasing and we find it
reasonable that costs will continue to increase for this category due to aging of
infrastructure components requiring more maintenance and inspections as well
as pipeline growth. We also agree with the incremental costs presented in
SoCalGas’ testimony and parties do not oppose these incremental costs.
Therefore, we find that SoCalGas’ proposed forecast of $14.888 million should be
approved.
Cathodic Protection
As stated in our discussion on forecast methodology, historical data also
supports SoCalGas’ position that costs have been increasing and we find it
reasonable that costs will continue to increase for this category due to increasing
regulatory requirements and increased risk mitigation activities. CFC
recommended a $0.500 million reduction but SoCalGas points out that CFC’s

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

recommendation relies on data from the Department of Transportation for the

gas distribution system and not specific data for cathodic protection.39 Thus, we
find SoCalGas’ forecast to more reliable. We also agree with the incremental
costs presented in SoCalGas’ testimony and parties do not oppose these
incremental costs. Therefore, we find that SoCalGas’ proposed forecast for
Cathodic Protection of $18.322 million should be approved.
Main Maintenance
Costs for Main Maintenance ranged from $9.773 million to $16.103 million
from 2012 to 2016 with increases and decreases in costs fluctuating from year to
year. Thus, we disagree with SoCalGas that costs are continuing to increase
based on recorded costs. SoCalGas states that costs associated with mitigation
actions associated with RAMP are embedded in its based forecast of
$16.016 million but the testimony does not clearly identify these costs and
discuss whether these RAMP activities are historical RAMP activities or whether
incremental RAMP activities are included. In reviewing historical costs, we find
that a three-year average from 2014 to 2016 is more reflective of projected costs
and so we find it reasonable to authorize $13.498 million as the base cost. TURN
had recommended a five-year average, but we find that costs in 2013 are not
reflective of more recent costs and so we find it more reasonable to consider costs
from 2014 onwards.
SoCalGas separated the costs for leak repairs from its base forecast and we
have no objection to the $6.00 million being requested. SoCalGas presented
sufficient testimony that explains that said amount is for the 7,670 main leaks

39 Exhibit 10 at GOM-45

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

that are to be addressed in 2017 and 2018 which were not reflected in the PTYs of
the TY2016 GRC. CUE recommends an additional $10.905 million for leak
repairs stating that the inventory of leak repairs is expected to grow. However,
the cost for leak repairs is only for the backlog of 7,670 main leaks to be repaired
in 2017 and 2018. Additional leaks are expected to be addressed in SB 1371 and
should not be counted here.
Based on the above, we find it reasonable to authorize $18.254 million for
Main Maintenance after applying $6 million in incremental costs and the
reduction of $1.244 million in FOF savings.
Service Maintenance
Costs for Service Maintenance ranged from $7.514 million to $11.613
million from 2012 to 2016 with increases and decreases in costs fluctuating from
year to year. Similar to our rationale for Main Maintenance, we disagree with
SoCalGas that costs are continuing to increase based on recorded costs.
SoCalGas once again states that costs associated with mitigation actions
associated with RAMP are embedded in its base forecast of $12.334 million, but
as we stated in the discussion for Main Maintenance, SoCalGas’ testimony does
not clearly identify these embedded costs and does not discuss whether these
RAMP activities are historical RAMP activities or whether incremental RAMP
activities are included. In our review of historical costs, we find that a three-year
average from 2014 to 2016 is more reflective of projected costs and so we find it
reasonable to authorize $11.110 million as the base cost. TURN recommended a
five-year average, but we find that costs in 2013 are not reflective of more recent
costs and so we find it more reasonable to consider costs from 2014 onwards.
ORA objects to and recommends zero funding for the incremental costs
requested for meter set assembly maintenance activities, meter guard activities,

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

and inaccessible meter set assembly disconnections. CUE recommends an

additional $0.170 million to the $1.523 million requested for meter set assembly
maintenance activities.
The meter set assembly maintenance and meter guard activities are
pursuant to a focused inspection program to comply with atmosphere corrosion
requirements and to perform a more thorough inspection of all aspects of meter
set assemblies that also require more skilled meter readers. The requested
incremental costs are to address work inventory that had developed in 2016 and
2017 as a result of the more thorough inspections. On the other hand, the
requested cost for inaccessible meter set assembly disconnections are in support
of the restoration of 709 inaccessible meters and are being undertaken to mitigate
risks associated with safety and gas system integrity. Based on our review, we
find the activities described above necessary and the amounts requested
reasonable. We therefore find that the incremental funding requested for meter
set assembly maintenance activities, meter guard activities, and inaccessible
meter set assembly disconnections should be approved. With respect to CUE’s
recommendation for an additional $0.170 million, SoCalGas states that it expects
to be able to meet its projected volume of work for TY2019 within its requested
funding level and so we find that the additional amount recommended by CUE
is not necessary.
Based on the above, we find that $15.773 million should be approved for
Service Maintenance representing an alternative base forecast of $11.110 million
based on a three-year average and SoCalGas’ requested incremental amount of
$4.663 million.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

Field Support
Costs for Field Support ranged from $20.791 million to $21.545 million
from 2012 to 2014. In 2015, costs dropped to $19.916 million and then to
$19.402 million in 2016. Because of the apparent shift in costs, we find it useful in
this case to consider costs in 2017 as it adds an additional year and a more
current one for determining the proper trend for Field Support costs. Costs for
2017 were $19.055 million. With this additional data, we find that a three-year
average from 2015 to 2017 is more appropriate for determining base costs for
TY2019. The decrease in costs beginning in 2015 appears to have been
maintained in 2016 and 2017. SoCalGas argues that RAMP-related and other
incremental activities are expected for the TY but we find that such incremental
work should be reflected in incremental costs rather than in base costs which is
derived from a historical average. Thus, we find it reasonable to authorize base
costs for Field Support at $19.458 million which is the three-year average from
2015 to 2017. This amount should be adjusted to $19.947 million after applying
incremental expenses of $1.075 million and a reduction of $0.586 million for FOF
to which we have no objections to.
Tools, Fitting, and Materials
Historical costs have gone up and down from 2012 to 2016 and we find
that a historical linear trend is not supported by historical data. SoCalGas argues
that increased level of work is expected but we find that such increase in work, if
true, should be reflected as an adjustment to the historical average that was used
in this case. Thus, we find SoCalGas’ forecast methodology to be inappropriate
in this case. However, costs generally appear to have increased over the
fluctuations between increases and decreases and we find that a three-year
average from 2014 to 2016 is more reflective of current costs rather than ORA’s

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

recommendation of a five-year average. Thus, for base costs, we find it

reasonable to authorize $8.728 million. This amount should be adjusted to
$9.614 million after applying additions for incremental work that we find are
justified by the testimony. ORA objects to the incremental costs for meter guard
activities but we find that this cost supports necessary funding for meter guard
replacements.
[Link].2. Asset Management and
Regional Public Affairs
SoCalGas utilized a historical linear trend for its forecast for Asset
Management although historical costs as shown in Table 11-20 of Exhibit 40640
shows that costs decreased in 2015 and 2016. However, the application of FOF
savings results in a forecast that is lower than any of the recorded costs from
2012 to 2016 and so we have no objections to SoCalGas’ resulting forecast.
For Regional Public Affairs, we agree with ORA that the forecast is
comparable to historical spending as shown in Table 11-22 of Exhibit 406.41 Thus,
we find that SoCalGas’ forecast should be adopted.
Based on the above, we find it reasonable to adopt SoCalGas’ forecasts of
$6.965 million and $4.420 million respectively for Asset Management and
Regional Public Affairs.
[Link].3. Operations and Management
Table 11-21 of Exhibit 406 shows the recorded costs from 2012 to 2016.42
Except for 2014, costs have generally been increasing by around $0.500 million

40 Exhibit 406 at 38.

41 Id. at 42.
42 Id. at 39.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

each year. Thus, we find that SoCalGas’ use of a historical linear trend for its
base forecast is reasonable. The TY2019 forecast also accounts for projected
increases in 2017 and 2018 that are not shown in Table 11-21.
ORA also objects to the incremental funding for six Full-Time Equivalents
(FTEs) and $0.112 million for resumption of employees previously re-assigned to
support work related to the Aliso Canyon gas leak incident. The record shows
that the six employees were hired in 2017 and ORA’s argument is that these are
already captured in the 2017 revenue requirement. We agree with SoCalGas that
the 2017 revenue requirement is derived from the TY2016 revenue requirement
plus the applicable PTY adjustment for inflation and increased costs and does not
capture the additional six FTEs being requested that were not part of the TY2016
GRC. Thus, we find it proper for SoCalGas to request these incremental
additions in this GRC. For the returning employees previously re-assigned, costs
for these employees had been excluded when they were re-assigned and we find
it appropriate to include the associated costs for these employees now that they
are returning to their regular duties. However, as we explained in section 4 of
this decision, if any work had been deferred as a result of the temporary
reassignment, such work must be performed within the labor costs that will be
authorized in this decision and in addition to the regular work that the returning
employees and utility staff regularly perform and no additional funds shall be
authorized to perform such deferred work.
Based on the above, we find it reasonable to adopt SoCalGas’ forecast of
$7.378 million.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

[Link].4. Summary of Non-Shared O&M

Costs
To summarize the above discussion of non-shared O&M costs, SoCalGas’
requested amounts for Asset Management ($6.965 million), Operations and
Management ($7.378 million), and Regional Public Affairs ($4.420 million)
should be approved.
For Field Operations & Maintenance, the following amounts should be
approved:
Locate & Mark: $16.050 million
Leak Survey: $10.810 million
Measurement & Regulation: $14.888 million
Cathodic Protection: $18.322 million
Main Maintenance: $18.254 million
Service Maintenance: $15.773 million
Field Support: $19.947 million
Tools, Fittings, & Materials: $9.614 million
7.1.2. Shared O&M
Shared O&M costs are comprised of expenses incurred for Operations
Leadership & Support as the activities by this group benefits both SDG&E and
SoCalGas. Costs for this workgroup relate to expenses incurred for Field
Services Leadership & Operations Assessment which provides leadership and
sets goals and direction for the Gas Distribution organization. The forecast for
TY2019 is $0.275 million which is $0.414 million less than 2016 costs. A
zero-based method was utilized to develop the forecast because certain historical
costs are no longer applicable.
Parties do not object to SoCalGas’ shared O&M forecast and we find it
reasonable to approve the TY2019 forecast of $0.275 million. We find the forecast

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

to be supported by the evidence. The zero-based43 method to develop the

forecast is appropriate because certain historical costs have been shifted to other
cost centers.
7.1.3. Capital
As stated previously, SoCalGas capital forecasts are $278.473 million for
2017, $324.801 million for 2018, and $347.842 million for 2019. The table below
provides a breakdown of the requested capital costs.

43A zero-based method utilizes a forecasting method that determines the projected budget for
operations based on necessity rather than on historical spending. Management starts from zero
and determines all expenses that are necessary for operations. All expenses must be necessary
in order to be included in the projected budget and no expenses are automatically added based
on historical spending.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

Capital 201744 2018 2019

New Business $36,632,000 $45,313,000 $50,393,000
Pressure Betterments $23,088,000 $23,088,000 $23,088,000
Supply Line Replacements $4,209,000 $4,209,000 $4,209,000
Main Replacements $33,711,000 $33,711,000 $33,711,000
Service Replacements $28,538,000 $31,470,000 $34,403,000
Main & Service Abandonments $9,256,000 $10,522,000 $11,787,000
Regulator Stations $8,636,000 $14,636,000 $19,436,000
Cathodic Protection Capital $6,320,000 $8,434,000 $9,511,000
Pipeline Relocations – Freeway $7,837,000 $7,837,000 $7,837,000
Pipeline Relocations - Franchise $17,894,000 $17,894,000 $17,894,000
Other Distribution Projects &
$3,656,000 $11,596,000 $11,596,000
Meter Guards
Measurement & Regulation
$22,266,000 $29,547,000 $37,037,000
Devices
Capital Tools $14,386,000 $14,220,000 $12,322,000
Field Capital Support $61,317,000 $70,292,000 $74,618,000
Remote Meter Reading $727,000 $2,032,00045 $0
Total $278,473,000 $324,801,000 $347,842,000

[Link]. New Business

New Business provides for changes and additions to the existing gas
distribution system to connect new residential, commercial, and industrial
customers. This includes installations of gas mains and services, meter set
assemblies,46 and the associated regulator stations to provide service to

44The following 2017 capital forecasts were revised to the following amounts in the Update
Testimony (Exhibit 514) at Attachment H: New Business $43.342 million, Supply Line
Replacements $1.833 million, Service Replacement $35.205 million, Main & Service
Abandonments $9.312 million, Regulator Stations $6.427 million; Cathodic Protection Capital
$8.264 million, Pipeline Relocations – Freeway $1.402 million, Pipeline Relocations – Franchise
$13.200 million, Other Distribution Projects & Meter Guards $5.704 million, Field Capital
Support $65.384 million, Remote Meter Reading $1.278 million.
Revised from $2.032 million to $0 million in the Update Testimony (Exhibit 514) at
45

Attachment H.
46 Exhibit 7 at GOM-99.

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customers. Costs were forecast using the projected new meter sets multiplied by
the cost per meter.
[Link]. Pressure Betterments
Pressure Betterments are projects performed on a continuing basis to
maintain system reliability and service for all customers as new load (from new
customers) is added to the distribution system. A five-year historical average
was used to develop the forecast.
[Link]. Supply Line Replacements
Supply Line Replacements consists of expenditures to replace
high-pressure distribution pipelines also known as supply lines. The
distribution supply line consists of 3,700 miles of pipeline constructed between
the early 1920s to the present and the condition of these supply lines is constantly
assessed and evaluated to determine whether replacement, localized repair, or
abandonment is necessary. SoCalGas utilized a five-year average to develop its
forecast.
[Link]. Main Replacements
Activities under Main Replacements include installation of new mains to
replace existing ones, main replacements in advance of public infrastructure
projects, and service line replacements, existing service line tie-overs and meter
set rebuilds in connection with newly installed replacements mains.
Replacements are due to leakage and anticipated leakages, defects, corrosion,
deterioration of pipes, and to meet cathodic protection mandates. SoCalGas
forecasts continuing main replacements at the five-year historical average rate.
[Link]. Service Replacements
Service Replacements are for routine replacement of isolated distribution
service pipelines to maintain system reliability. The main drivers for Service
Replacements are leakage and corrosion. Service Replacement costs associated

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with main replacements are captured in the forecast for main replacements. The
forecast was developed using a five-year historical average.
[Link]. Main and Service Abandonments
Costs for this project are associated with the abandonment of distribution
mains and services without installation of replacement pipeline. This primarily
occurs when pipeline is no longer needed for current pipeline operations and is
not expected to be needed in the future such as when a city or state requests the
vacating and demolition of public property, when a customer cancels service due
to a building demolition, when temporary service becomes inactive or is
terminated, etc. A linear trend was utilized to develop the forecasts.
[Link]. Regular Stations
Costs for this project are associated with the upgrade, relocation, and
replacement of regulator stations due to design obsolescence, active corrosion,
deteriorating vaults or equipment, exposure to flooding, hazardous traffic
conditions, safety, etc. According to SoCalGas, due to the large number of
regulator stations that are beyond their average life expectancy, SoCalGas is
proposing an accelerated replacement rate at which it replaces regulator stations
by adding an incremental replacement of 8 in 2018 and 18 in 2019 in addition to
its base forecast. A base year forecast plus incremental costs was used to develop
the forecasts.
[Link]. Cathodic Protection
This project concerns the installation and replacement of cathodic
protection on pipelines. Cathodic Protection is a method for mitigating external
corrosion on steel pipelines. A five-year linear trend was utilized for the forecast.

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[Link]. Pipeline Relocations – Freeway

This project is for relocation and alteration of SoCalGas facilities in
response to external requests and as specified by agreements with state and local
agencies. A five-year average was utilized for the forecast.
[Link]. Pipeline Relocations – Franchise
This project is for relocation and alteration of SoCalGas facilities in
response to external requests and as specified by agreements with city and
county agencies. A five-year average was utilized for the forecast.
[Link]. Other Distribution Projects & Meter
Guards
Other Distribution Projects cover construction projects not covered under
franchise agreements, freeway work, or in other capital budget cost categories.
These were forecast using a five-year average. Meanwhile, Meter Guards are
routinely installed to protect meter set assemblies. Meter Guard costs were
forecast using a zero-based methodology.
[Link]. Measurements & Regulation Devices
This project involves meters, regulators, gas energy measurement systems,
and electronic pressure monitors. The expenditures involved are associated with
replacements, repair, purchase of materials, and supporting new customers. The
project also ensures accurate measurement of gas consumption, providing
service to new customers, complying with rules and regulations governing gas
metering, and public safety. A zero-based forecast was utilized for meters and
gas energy measurement systems while a base year method was applied to
electronic pressure monitors. For regulators, the forecast was based on the
average regulator prices multiplied by the new business and installation
requirements.

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[Link]. Capital Tools

This project is for the replacement of existing tools that are damaged,
broken, technologically outdated, or have outlived their useful lives. SoCalGas
utilized a five-year historical linear trend to develop its forecasts.
[Link]. Field Capital Support
This project provides funding for a broad range of activities such as project
planning, local engineering, clerical support, field dispatch, field management
and supervision, updating of mapping products, and off-production time for
support personnel and field crews that install Gas Distribution capital assets.
Costs were forecast based on the level of historical costs as a percentage of
construction costs incurred. The resulting labor ratio based on a five-year
average was calculated at 32.7 percent.
[Link]. Remote Meter Reading
This project is for changing curb meters that are incompatible with
Advanced Metering Infrastructure (AMI) technology. According to SoCalGas,
there are 26,000 meters that are affected. A zero-based method was used to
develop the forecasts.
[Link]. Positions of Intervenors
ORA and CUE provided comments to SoCalGas’ capital requests and
TURN provided comments regarding clothing and gear provided during safety
fairs and civic and community events.
ORA proposes using recorded costs for 2017 for all capital projects. The
forecasts for Pressure Betterments, Main Replacements, and Measurement &
Regulation Devices were not opposed other than the recommendation to utilize
2017 recorded costs instead of the 2017 forecasts.
ORA opposes the linear trend methodology used for Service
Replacements, Main and Service Abandonments, Cathodic Protection, and

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Capital Tools. ORA also opposes the five-year averages used for one component
of New Business and Pipeline Relocations – Freeway and Franchise. ORA
recommends a two-year average for Regulator Stations and opposes any
incremental funding. ORA also opposes funding for Remote Meter Reading in
2018, arguing that this AMI-related project should have been concluded in 2017.
Lastly, ORA recommends zero funding for meter guards.
CUE proposes an additional $5.936 million for Supply Line Replacements
in 2019 based on a replacement rate of 4.7 miles as opposed to SoCalGas’
proposal of just under two miles. CUE also recommends that an additional
25 incremental regulator stations be replaced on top of the 18 incremental
replacements proposed by SoCalGas. CUE’s proposal adds $13.800 million to
SoCalGas’ requested amounts.
TURN recommends the removal of clothing and gear provided during
safety fairs and civic and community events from 2016 costs.
[Link]. Discussion
ORA’s Recommendation to Use 2017 Recorded Costs
ORA recommends using 2017 recorded costs instead of SoCalGas’ 2017
forecasts for all the proposed capital projects for Gas Distribution. With respect
to the use of 2017 recorded costs versus 2017 forecasts, the rate case plan requires
that the GRC application use the most recent data available at the time the
application is filed. In this case, the GRC application was filed in late 2017 and so
the most recent data available at the time of preparing and filing the application
is the base year or 2016 data.
As the application progresses, it is often the case that newer data becomes
available such as 2017 recorded data in this instance. While we note that
recorded costs for 2017 are more accurate and more recent than the 2017 forecasts

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that are included in the application, we find that it is not feasible to constantly
update data for the entire application. It is also not practical to update all data in
the GRC because of the vast amounts of data included in the application.
As such, we find that selectively updating only certain data or in this case
applying 2017 recorded costs in some instances but not in others may lead to
inconsistent results. This is because not all data that was submitted with the
application is being updated. For example, updating select data to 2017 recorded
costs in one area which results in a lower value than the 2017 forecast would be
inconsistent if another update in a different area would result in a higher value
than the forecast but was not applied.
We do however recognize that there are instances where it is prudent,
necessary, and reasonable to apply updated data in select areas and we exercise
our discretion in doing so in appropriate cases. But for this GRC, based on the
explanation above, we will generally not apply select updating of data if the sole
reason for doing so is simply to update data without any explanation why the
updated data should be applied. In this case, we find it more appropriate to
apply the 2017 forecasts for all the capital projects.
Approved Forecasts
We reviewed all the proposed capital projects for Gas Distribution to
determine the necessity and reasonableness of each project as well as the
proposed costs. We reviewed the testimony presented, the accompanying
workpapers that provide specific details for each project, pertinent sections of the
RAMP report associated with the four risks being mitigated in this section, and
arguments raised by parties in briefs.
Based on our analysis and review of each proposed project, we find the
following capital projects: (a) Pressure Betterments; (b) Main Replacements;

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(c) Measurement & Regulation Devices; (d) New Business (e) Supply Line
Replacements; (f) Service Replacements; (g) Main and Service Abandonments;
(h) Regulator Stations; (i) Cathodic Protection; (j) Pipeline Relocations – Freeway;
(k) Pipeline Relocations – Franchise; and (l) Other Distribution Projects and
Meter Guards to be necessary and also find the requested funding levels for the
above projects to be reasonable.
With respect to the above projects, we find that SoCalGas provided
sufficient evidence to support and justify these projects. The above-mentioned
projects support system reliability of SoCalGas’ gas distribution system, promote
safety, and allow SoCalGas to provide adequate service to its customers. We also
find the various forecast methodologies utilized to be reasonable and
appropriate.
ORA opposes the five-year average for one component of New Business
and argues that using base year costs is more reliable. New Business costs are
composed of new business construction, advanced metering infrastructure, new
business trench reimbursements and new business forfeitures. ORA takes no
issue with the first three but recommends using base year costs for the Main &
Stub component of new business forfeitures. New business forfeitures are
credits that a new business customer reimburses to SoCalGas for the cost of
unused or underutilized facilities constructed at their request. Figure II of
Exhibit 40647 shows the five-year credits received for Main & Stub forfeitures.
The figure shows that credits for 2016 of $4.912 million are more than double
than in any other year and ORA does not provide sufficient testimony for the

47 Exhibit 406 at 50.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

sharp increase and why it expects this trend to continue. On the other hand, we
find that a five-year average in this case better reflects costs over time and
normalizes highs and lows of fluctuating costs. SoCalGas also states that
forfeitures are impacted by housing and construction events over a 10-year
period which supports a forecast that takes into consideration costs over a longer
period. Based on the above, we find SoCalGas’ forecasts for New Business to be
more appropriate.
CUE proposes an additional $5.936 million for Supply Line Replacements
in 2019 based on a replacement rate of 4.7 miles as opposed to SoCalGas’
proposal of just under two miles. However, the need for replacements are based
a variety of factors and tend to vary from year to year and we find that a
five-year average better reflects these fluctuations as a longer period of time
accounts for year to year increases and decreases.
ORA opposes the linear trend methodology used in developing the
forecast for Service Replacements but Figure GOM-19 in Exhibit 1048 shows that
costs have been increasing each year from 2012 to 2016. In addition, SoCalGas’
forecasts include embedded RAMP-related mitigation activities which ORA’s
forecast does not take into account. Thus, we find it reasonable to approve
SoCalGas’ requested forecasts for Service Replacements. CUE proposes
replacing an additional number of non-bare steel services that are over 67 years
old by the end of 2019. However, SoCalGas argues that age is not the only
consideration used for replacement. In any case, the linear trend forecasts means
that the projected replacement rate will increase moving forward.

48 Exhibit 10 at GOM-100.

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Similarly, for Main and Service Abandonments, Figure GOM-20 and

Figure GOM-21 of Exhibit 1049 show that costs and the number of main and
service abandonment orders have been increasing each year since 2012 which
supports SoCalGas’ forecast methodology as opposed to ORA’s recommendation
of utilizing a two-year average.
For Regulator Stations, SoCalGas applied a base year forecast for its base
forecast and states that costs for 2017 were lower than 2016 because of delays.
SoCalGas adds that planning and permitting have been completed and that it
intends to undertake the delayed construction. Thus, we find that a base year
forecast is reasonable and appropriate for 2017, 2018, and 2019 base costs as costs
generally appear to be increasing as shown in Figure GOM-22 of Exhibit 10.50
The base costs also include embedded costs for RAMP-related projects that aim
to mitigate key risks identified in the RAMP Report. For the incremental funding
in 2018 and 2019 to replace an additional 8 and 18 regulator stations, we find the
request to be reasonable in light of SoCalGas’ aging infrastructure. SoCalGas
also clarifies that age alone is not the sole criteria used for replacement and that
factors such as safety, integrity, and reliability concerns are considered.
Regarding CUE’s proposal for an additional replacement of 25 regulators, we
find that this premature at this time. However, we agree with CUE that
SoCalGas should develop some sort of ranking system for regulator
replacements. SoCalGas should include this information in its next GRC and
should use this ranking system as part of the basis for determining its proposed

49 Id. at GOM-104 to 105.

50 Id. at GOM-107.

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regulator replacement rate in its next GRC. For this GRC however, we find that
SoCalGas’ proposed forecasts for Regulator Stations should be adopted.
ORA recommends a three-year average for Cathodic Protection arguing
that there is no clear up or down cost trend. However, Figure GOM-24 of Exhibit
1051 shows that although costs decreased from 2014 to 2015, the general trend is
an upward increase. In addition, SoCalGas’ forecasts include embedded costs for
RAMP-related activities. Thus, we find SoCalGas’ forecast methodology to be
more appropriate.
ORA also opposes the five-year averages used for both Freeway and
Franchise Pipeline Relocations citing more recent trends but as explained by
SoCalGas, work on these projects are driven by requests from and agreements
with external sources such as state and local agencies and city and county
agencies and so costs are driven more by timing and volume of such requests.
To capture such fluctuations, we find that a longer period of historical data is
more appropriate to develop the forecasts rather than ORA’s recommended
three-year average.
With respect to Meter Guards, ORA based its analysis on the assumption
that the funding for Meter Guards represents incremental funding being
requested on top of SoCalGas’ base forecast. However, SoCalGas separated its
forecasts for Other Distribution Capital Projects and Meter Guards and so the
funding being requested for Meter Guards reflects base activities and not
incremental or additional funding. We have no objections to the forecast

51 Id. at GOM-177.

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methodologies utilized by SoCalGas and find that its requested amounts for this
project should be approved.
Based on the above reasons, we find that SoCalGas’ requested forecasts for
the above-named projects should be approved.
Modified Forecasts
We find that the forecasts for: (a) Capital Tools, (b) Field Capital Support,
and (c) Remote Meter Reading should be modified as discussed below.
ORA objects to the linear trend utilized for Capital Tools and recommends
a two-year average from 2016 and 2017. ORA also objects to the incremental
funding of $2.500 million to standardize locate and mark tools in 2018. Figure
GOM-29 in Exhibit 10 shows the costs for Capital Tools from 2012 to 2016 as well
as SoCalGas’ projected base and total costs for 2017 to 2019.52 While we agree
that costs have risen from 2012 to 2016, the figure shows that costs rose sharply
in 2016 but slightly declined in 2017. Based on the figure, we are not certain that
costs will continue to rise at the pace that SoCalGas projects and find it more
appropriate to authorize 2016 recorded costs of $9.665 million as the base cost for
2017, 2018, and 2019. We agree with the incremental $3.800 million for 2017 to
standardize locate and mark tools but agree with ORA that the additional
$2.500 million for 2018 to continue standardizing locate and mark tools do not
appear to be necessary. We also have no objections to the additional $1.100
million in 2018 for confined space air monitoring or the need for the
$1.667 million for Nomex coveralls and fresh air upgrades but find that this
amount should be moved from 2017 to 2018 because the project has been

52 Exhibit 10 at GOM-132.

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delayed. The above changes result in authorization of $13.465 million for 2017,
$12.432 million for 2018, and $9.665 million for 2019.
For Field Capital Support, we agree with the forecast methodology of
32.7 percent of constructions costs. SoCalGas’ calculation for total construction
costs must be modified to take into account and reflect the total construction
costs being authorized for Gas Distribution capital projects in this section.
For Remote Meter Reading, we agree with ORA that funding for AMI
deployment concluded in 2017. SoCalGas states that because of a manufacturing
issue, deployment of curb meter transmission units have been delayed but are
scheduled to be completed in 2018. However, as ORA points out, funding for
completing curb meter transmission unit replacements was previously granted to
SoCalGas so a delay in deployment should not require additional funding. Thus,
we find that SoCalGas’ requested funding of $0.727 million for 2017 should be
granted. SoCalGas’ request of $2.032 million for 2018 was removed in SoCalGas’
Update Testimony (Exhibit 514) at H-2.
Other Issues
TURN states that clothing and other gear containing the utility’s name and
logo (excluding uniforms and hard hats) should not be funded by ratepayers.
For Gas Distribution, the amount in question for 2016 was $44,966.53 SoCalGas
states that these items are sometimes provided to employees during safety fairs
and safety celebrations and are not intended for promotional and image building
purposes. SoCalGas adds that these items containing SoCalGas’ name and logo
are also used at safety fairs and other civic and community events so customers

53 Exhibit 494 at 77 to 78.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

and other members of the public can easily identify SoCalGas employees in case
they have questions or concerns. These types of clothing and gear are also
provided to Regional Public Affairs members so they can be easily identified and
respond to inquiries during emergencies or operational incidents. Based on the
foregoing, we find that the above items are being used for reasonable purposes
in connection with safety-related and public events that provide benefits to
ratepayers. We therefore deny TURN’s proposal to remove $44,966 for clothing
and gear from 2016 costs.
7.2. SDG&E
SDG&E’s gas distribution system consists of a network of approximately
14,148 miles of interconnected gas mains, services, and associated pipeline
facilities.54 The primary function of this pipeline network is to deliver natural
gas from SDG&E’s transmission system to approximately 878,100 customer
meters covering an area of 1,400 miles.
The TY2019 forecast for O&M costs is $29.553 million which is
$3.755 million higher than 2016 adjusted, recorded expenses. For capital costs,
SDG&E requests $50.666 million55 for 2017, $91.606 million for 2018, and
$110.993 million for 2019. By comparison, recorded costs for 2016 were
$61.557 million. The O&M forecasts incorporate a total of $0.517 million in
savings from FOF.

54 Exhibit 11 at GOM-02.
Revised from $50.666 million to $75.757 million in Update Testimony (Exhibit 514) at
55

Attachment I.

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Key work categories to maintain system integrity include leak repairs,

locating and marking of gas facilities to avoid third-party damage, leak surveys,
and system renewal, and high-pressure pipeline documentation.
Many of SDG&E’s Gas Distribution cost centers have the same heading,
primary functions, activities, and cost drivers as the corresponding cost centers
described and discussed in the SoCalGas portion and so reference to the
SoCalGas section describing the cost center functions and activities is made
whenever appropriate.
As was the case with SoCalGas, part of the requested SDG&E costs are
driven by risk mitigation activities pursuant to the RAMP process. The table
below summarizes key risks being mitigated and the estimated O&M and capital
costs for the mitigation activities that are planned to be undertaken. These costs
are embedded in the O&M and capital costs requested by SDG&E and the
reasonableness of these costs is reviewed in the O&M and capital sections that
they appear in.

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RAMP Risk 2017 2018 2019

Catastrophic Damage Involving
n/a n/a $3,102,000
Third-Party Dig-Ins (O&M)
Employee, Contractor, Customer, and
n/a n/a $3,148,000
Public Safety (O&M)
Catastrophic Damage Involving
Medium-Pressure Pipeline Failure n/a n/a $8,046,000
(O&M)
Workforce Planning n/a n/a $319,000
RAMP-related O&M total n/a n/a $14,615,000
Catastrophic Damage Involving
$256,000 $256,000 $256,000
Third-Party Dig-Ins (capital)
Employee, Contractor, Customer, and
$4,053,000 $4,053,000 $4,053,000
Public Safety (capital)
Catastrophic Damage Involving
Medium-Pressure Pipeline Failure $9,728,000 $47,157,000 $67,212,000
(capital)
RAMP-related capital total $14,037,000 $51,466,000 $71,521,000

Most of the RAMP activities were already being performed but new and
enhanced safety-related activities to mitigate risk have been included as a result
of the RAMP process. O&M costs for incremental activities are $1.096 million out
of the $14.615 million total O&M amount requested for RAMP-related activities.
Catastrophic Damage Involving Third-Party Dig-Ins
See section 7.1. in the SoCalGas section.
Employee, Contractor, Customer, and Public Safety
See section 7.1. in the SoCalGas section.
Catastrophic Damage Involving Medium-Pressure Pipeline Failure
See section 7.1. in the SoCalGas section.
Workforce Planning
Workforce planning is the risk of loss of employees with deep knowledge
and understanding in operations. This risk is being mitigated by training and
knowledge transfer programs as well as compliance and inspection programs.

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7.2.1. O&M
O&M costs for SDG&E are comprised only of non-shared costs and the
total forecast is $29.533 million, $3.755 million higher than 2016 costs. According
to SDG&E, the increase is driven by system expansion, infrastructure renewal,
field technical skills and training, improved documentation and control of
pipeline materials, and integration of new technology. The table below
summarizes the costs for each cost category.

Change
Non-shared O&M 2019
from 2016
Field Operations & Maintenance $22,854,000 $2,734,000
Asset Management $2,169,000 $450,000
Operations and Management $4,510,000 $571,000
Total $29,533,000 $3,755,000

Descriptions of Asset Management and Operations and Management

mirror the discussion in section [Link]. and [Link]. in the SoCalGas portion of
Gas Distribution. Costs were forecast using a base year plus adjustments
methodology. Field Operations & Maintenance is discussed with more detail
below.
[Link]. Field Operations & Maintenance
Majority of the O&M costs under this category relate to expenses
associated with the physical condition of SDG&E’s gas distribution system.
Activities performed can be classified as preventive, corrective, or supportive in
nature. The following table provides a more detailed breakdown of the different
cost centers comprising Field Operations & Maintenance.

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Change
Field Operations & Maintenance 2019
from 2016
Other Services $202,000 -($160,000)
Leak Survey $1,841,000 $270,000
Locate & Mark $3,589,000 $563,000
Main Maintenance $3,422,000 $457,000
Service Maintenance $1,867,000 $233,000
Tools, Fittings & Materials $1,010,000 $87,000
Electric Support $425,000 $8,000
Supervision & Training $3,993,000 $473,000
Measurement & Regulation $4,216,000 $343,000
Cathodic Protection $2,289,000 $460,000
Total $22,854,000 $2,734,000

Descriptions for the following: (a) Locate & Mark; (b) Leak Survey;
(c) Main Maintenance; (d) Service Maintenance; (e) Tools, Fitting & Materials;
(f) Measurement & Regulation; and (g) Cathodic Protection mirror those in the
SoCalGas portion found in section [Link]. except for the forecast methodologies
that were utilized. A linear trend was used for Locate & Mark, Main
Maintenance, Service Maintenance, and Measurement & Regulation while base
year plus adjustments was used for Leak Survey and Cathodic Protection. For
Tools, Fittings & Materials, a five-year average was used.
Other services, Electric Support, and Supervision & Training are unique to
SDG&E and are described below.
Other Services
Other Services consists of miscellaneous expenses associated with Gas
Distribution field operations not captured in other major workgroups. Examples
are leak investigations of customers’ house lines, leak surveys of transmission
mains, landscaping repair, etc. Costs were forecast using a five-year historical
average.

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Electric Support
This workgroup includes labor and non-labor expenses for traffic control
and construction support services during inspections under the Corrective
Maintenance Program and general construction activities. The Corrective
Maintenance Program is for specific inspection cycles pursuant to GO 165. Costs
were forecast using a three-year average because of changes in how traffic
control expenses were charged beginning in 2014.
Supervision & Training
This cost center includes expenses for employee field skills training, field
supervision, management, and miscellaneous expenses related to gas operations.
Costs were forecast using the base year plus adjustments because of increased
supervision and training operations not captured in historical costs.
[Link]. Positions of Intervenors
ORA and CUE provided comments to SDG&E’s O&M forecasts.
ORA objects to the linear trend forecast methodology utilized for Locate &
Mark, Main Maintenance, and Measurement & Regulation. ORA also opposes
the incremental addition for Field Supervision under Supervision & Training.
CUE recommends an increase of $0.627 million for Leak Survey in
connection with a proposal to require SDG&E to move to a three-year leak
survey cycle for all pipes not subject to more frequent inspections, additional
funding for Aldyl-A leak surveys, and a field comparison using Picarro leak
detection technology. CUE also proposes an addition of $0.260 million to
SDG&E’s request for Locate & Mark. Lastly, CUE recommends increases of
$1.715 million associated with increased Aldyl-A pipe replacements and
$0.177 million associated with increased steel pipe replacements.

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[Link]. Discussion
[Link].1. Field Operations & Maintenance
Issues
This section addresses the various issues relating to Field Operations &
Maintenance and the ten sub-categories that comprise it. Table 9-5 of Exhibit 404
shows recorded costs from 2012 to 2016.56
Unopposed Forecasts
The forecasts for: (a) Other Services, (b) Service Maintenance, (c) Tools,
Fittings & Materials, (d) Electric Support, and (e) Cathodic Protection were not
opposed by parties.
We agree with the five-year average utilized for Other Services and Tools,
Fittings & Materials as it captures highs and lows from 2012 to 2016. We also
agree with the linear trend utilized for Service Replacements as costs have
generally been increasing and are expected to continue increasing. For Electric
Support, we find that a three-year average is appropriate because of changes in
how traffic control expenses were charged beginning in 2014, which were not
captured in 2012 and 2013. For Cathodic Protection, we find a base year plus
adjustments are reflective of current costs because of additional maintenance
work and expansion of the GIS system that are not captured in prior years. We
also reviewed the underlying activities and costs drivers for these cost categories
and find them to be necessary and supported by the evidence. Thus, we find
that SDG&E’s forecasts for: (a) Other Services, (b) Service Maintenance,
(c) Tools, Fittings & Materials, (d) Electric Support, and (e) Cathodic Protection
are reasonable and should be approved.

56 Exhibit 404 at 6.

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Opposed Forecasts
ORA and CUE had alternative recommendations to SDG&E’s forecasts for:
(a) Leak Survey, (b) Locate & Mark, (c) Main Maintenance, (d) Supervision &
Training, and (e) Measurement & Regulation.
For Leak Survey, we find the underlying activities to be necessary and the
forecast methodology utilized reasonable and reflective of projected costs for the
TY. Regarding CUE’s request to move to a three-year inspection cycle and to
require a field comparison using Picarro leak detection technology, we find that
these requests are outside the scope of this GRC and are being addressed in
R.15-01-008, the Gas Leak Abatement OIR addressing the requirements imposed
by SB 1371. As for CUE’s recommendation to increase funding for the Aldyl-A
pipelines surveyed per year, we find SDG&E’s forecast to be more appropriate as
it is based on updated data on how many miles a patroller can survey in one
work day.57
For Locate & Mark, ORA recommends using 2016 costs plus adjustments
for RAMP-related incremental activities. We reviewed historical costs and find
that costs have generally been increasing despite the decrease from 2014 to 2015.
In addition, recorded data from 2017 which we find helpful in this case in
shedding light on the cost trend shows that costs increased further from 2016 to
2017. Moreover, additional costs are expected from SB 661 (the Dig Safe Act of
2016) which requires additional notification from excavators. With regards to
CUE’s proposal, we find SDG&E’s calculations, which incorporated incremental

57 Exhibit 14, Response to CUE Data Request CUE-SEU-DR-08, Appendix B at GOM-B-3.

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RAMP-related activities into its linear trend forecast to avoid double-counting, to

be more reasonable.
ORA’s recommends using 2016 recorded costs for Main Maintenance and
argues that costs have been fluctuating from 2012 to 2016. However, as shown in
Figure GOM-03,58 we find that costs have generally been increasing even though
costs decreased slightly from 2013 to 2014. In addition, recorded costs in 2017
support this trend. Thus, we find that SDG&E’s linear trend forecast
methodology to be appropriate in this case. CUE proposes an increase to
SDG&E’s proposed costs in connection with its capital requests associated with
Aldyl-A pipe replacements and steel pipe replacements. However, SDG&E does
not foresee significant O&M costs associated with these capital proposals as the
pipes that are being replaced are generally in the same O&M environment and
location.59 Based on the above, we find it reasonable to approve SDG&E’s
forecast for Main Replacements.
ORA objects to the incremental funding of $0.154 million for three field
supervisors under the Supervision & Training workgroup. ORA explains that
this incremental funding should already be captured in the increase from 2015 to
2016 costs where the increase was close to $1.2 million. SDG&E explains that
activities in the TY are expected to increase over the base year from which the
forecast was based hence the incremental adjustment. However, we find that
SDG&E does not explain why costs from 2015 increased by around 50 percent in
2016 and so we find it reasonable to agree with ORA that this increase already

58 Id. at GOM-20.
59 Exhibit 14 at GOM-22.

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captures the incremental funding being requested in this GRC. Therefore, we

find that SDG&E’s forecast for Supervision & Training should be reduced by
$0.154 million to $3.839 million.
With regards to Measurement & Regulation, Table 9-5 of Exhibit 404
shows that costs have been increasing even though there was a slight decrease of
$34,000 between costs in 2014 and 2015. In addition, SDG&E’s linear trend
forecast incorporates additional costs for RAMP-related mitigations, as well as
increased maintenance from aging station components and growth of the gas
distribution system. Therefore, we find SDG&E’s forecast to be reasonable and
should be approved.
Summary for O&M costs
To summarize, we find that all of SDG&E’s O&M forecasts should be
approved except for Supervision & Training, which should be reduced from
$3.993 million by $0.154 million to $3.839 million.
[Link].2. Asset Management and
Operations Management
Costs for both Asset Management and Operations Management were
based on TY2016 recorded costs because base costs are expected to remain
relatively flat. Incremental adjustments were added to Asset Management to
reflect growth in activity to support SDG&E’s gas GIS system. Incremental
adjustments were also added to Operations and Management to implement
computer terminal-based training and training for instructional design. We
reviewed the forecasts and find them to be reasonable and supported by the
evidence. Parties do not object to SDG&E’s forecast for these two cost categories.
Therefore, we find that SDG&E’s forecasts for Asset Management of
$2.169 million and $4.510 for Operations and Management should both be
approved.

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7.2.2. Capital
As stated previously, SDG&E’s capital forecasts are $50.666 million for
2017, $91.606 million for 2018, and $110.993 million for 2019. The table below
provides a breakdown of the requested capital costs. As is the case with
SDG&E’s O&M workgroups, many of SDG&E’s capital workgroups have the
same headings, primary functions, activities, and cost drivers as their
corresponding workgroups described and discussed in the SoCalGas portion and
so reference to the SoCalGas section describing the cost center functions and
activities is made whenever appropriate.

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Capital 201760 2018 2019

New Business $6,376,000 $8,217,000 $7,805,000
System Minor Additions,
$3,694,000 $3,694,000 $3,694,000
Relocations & Retirement
Meter & Regulator Materials $7,077,000 $7,468,000 $7,283,000
Pressure Betterments $1,695,000 $1,695,000 $1,695,000
Distribution Easements $38,000 $38,000 $38,000
Pipeline Relocations – Freeway&
$6,665,000 $6,665,000 $6,665,000
Franchise
Tools & Equipment $2,219,000 $2,219,000 $2,219,000
Code Compliance $2,549,000 $1,149,000 $1,174,000
Replacement of Mains & Services $5,968,000 $16,940,000 $26,226,000
Cathodic Protection $5,450,000 $5,656,000 $5,861,000
Regulator Station Improvements
$1,688,000 $20,509,000 $25,633,000
& Other
CNG Station Upgrades $0 $2,617,000 $2,617,000
Local Engineering $7,247,000 $14,739,000 $20,083,000
Total $50,666,000 $91,606,000 $110,993,000

[Link]. New Business

See section [Link]. in the SoCalGas section. For SDG&E, New Business
costs were forecast using a zero-based methodology.
[Link]. System Minor Additions, Relocations,
and Retirement
This workgroup covers expenditures not covered in other cost categories
that are required to maintain continued integrity of the gas distribution system.
Examples of activities are gas distribution main and service additions,

60The following 2017 capital forecasts were revised to the following amounts in the Update
Testimony (Exhibit 514) at Attachment I: New Business $8.078 million, System Minor Additions,
Relocations & Retirement $8.838 million, Meter Regulator Materials $2.664, Pressure Betterment
$0.800 million, Pipeline Relocations – Freeway & Franchise $15.341 million, Tools & Equipment
$2.565 million, Code Compliance $1.840 million, Replacement of Mains & Services
$16.151 million, Cathodic Protection $7.705 million, Regulator Station Improvements & Other
$2.337 million, CNG Station Upgrades $0.406 million, Local Engineering $8.994 million.

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relocations, and abandonments due to customer requests. Costs were forecast

using a five-year historical average.
[Link]. Meter and Regulator Materials
This workgroup is responsible for the capital material expenses for
purchasing new residential, commercial, and industrial gas meters and pressure
regulators. Meters and regulators are generally installed or replaced due to new
business installations, routine replacements, and planned meter and regulator
replacements. Costs were forecast using a zero-based methodology.
[Link]. Pressure Betterments
See section [Link]. in the SoCalGas section. Similar to SoCalGas, costs
were forecast using a five-year historical average.
[Link]. Distribution Easement
This workgroup provides funding for easements on private property or
public lands. This includes survey and mapping, document research and
preparation, and negotiations in addition to easement acquisitions. A three-year
average was utilized due to fluctuations from year to year.
[Link]. Pipeline Relocations – Freeway and
Franchise
See sections [Link]. and [Link]. in the SoCalGas section. Similar to
SoCalGas, costs were forecast using a five-year historical average.
[Link]. Tools and Equipment
See section [Link]. in the SoCalGas section under the “Capital Tools”
heading. For SDG&E, costs were forecast using a five-year average instead of a
linear trend.
[Link]. Code Compliance
This project provides funding for upgrades and additions to facilities to
maintain compliance with minimum federal and state safety standards for gas

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pipelines, in particular, those prescribed under 49 Code of Federal Regulations

§192 and GO 112-F. Costs were forecast using a three-year average plus
incremental additions.
[Link]. Replacement of Mains and Services
See sections [Link]. and [Link]. in the SoCalGas section. SDG&E utilized a
three-year average to develop its forecasts whereas SoCalGas utilized a five-year
average.
[Link]. Cathodic Protection
See section [Link]. in the SoCalGas section. Similar to SoCalGas, SDG&E
developed its forecasts for Cathodic Protection utilizing a five-year liner trend.
[Link]. Regulator Station Improvements and
Other
This project provides funding for capital projects not captured in other
workgroups that improve safety, compliance with regulations, and improvement
to performance and reliability. Examples are upgrades to gas distribution
fittings, valves, regulator stations, and other safety improvements to the gas
distribution facilities. A three-year average was utilized to develop the forecasts.
Certain RAMP-related upgrades and improvements are also included in this
project as incremental additions to the base forecast.
[Link]. CNG Station Upgrades
The Compressed Natural Gas (CNG) project will provide installations and
upgrades to public access CNG stations that serve the use of CNG vehicles in
Southern California. According to SDG&E, CNG stations are used by private
vehicle owners, military base vehicles, refuse trucks from the City of San Diego,
buses, taxi companies, and private companies. SDG&E plans to add an
additional station each in 2018 and 2019. A zero-based methodology was used to
develop SDG&E’s forecasts.

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[Link]. Local Engineering

This project will provide a broad range of services in support of field
capital asset construction. Local Engineering is composed technical planning,
project management, and engineering activities. Technical planning and project
management refer to activities in support of a capital project such as planning,
project drawings, third-party services, and estimating work order costs.
Engineering activities refer to activities such as analysis, development of designs
and specifications, assessment impacts, etc. According to SDG&E, costs tend to
fluctuate based on the volume of construction and so a zero-based methodology
was used to develop the forecasts using Local Engineering’s historic capital
expenditures with respect to the total direct expenditures across all Gas
Distribution capital budget codes except for Meter and Regulator Materials and
Tools & Equipment.
[Link]. Position of Intervenors
ORA, CUE, and TURN provided comments to SDG&E’s capital requests.
ORA recommends using 2017 recorded costs for all capital projects and
proposes reductions to the 2019 forecast for Replacement of Mains & Services
and Regulator Station Improvements & Other. ORA also recommends a
different method for calculating Local Engineering costs which results in a lower
forecast for 2018 and 2019.
CUE proposes an increase of $1.844 million to SDG&E’s forecast in 2019 for
Cathodic Protection and an increase of $3.718 million to the base forecast for
Regulator Stations. CUE also recommends an additional 25 percent or
$14.771 million to SDG&E’s forecast for Replacement Mains & Services in 2019.
TURN recommends removal of $4,008 in clothing and gear provided
during safety fairs and civic and community events from 2016 costs.

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[Link]. Discussion
ORA’s Recommendation to Use 2017 Recorded Costs
As it did for SoCalGas’ capital projects, ORA recommends using 2017
recorded costs instead of SDG&E’s 2017 forecasts for all of SDG&E’s proposed
capital projects for Gas Distribution. As we discussed in section [Link]. in the
SoCalGas portion, we find that selectively applying 2017 recorded costs in only
certain instances but not in others may lead to inconsistent results and that it is
not practical to update all data in the GRC because of the vast amounts of data
included in the application. While we recognize that there are instances where it
is prudent, necessary, and reasonable to apply select updated data in certain
instances. In this case, we find it reasonable and consistent to apply the 2017
forecasts for all the capital projects.
Approved Forecasts
We reviewed all of SDG&E’s proposed capital projects including SDG&E’s
proposed costs, underlying activities, cost drivers, and forecast methodologies
utilized to develop the forecasts for 2017, 2018, and 2019. We reviewed the
testimony presented, the accompanying workpapers that provide specific details
each project, pertinent sections of the RAMP report associated with the three
RAMP risks being mitigated, as well as the arguments, recommendations, and
counter-proposals raised by parties in testimony and briefs.
Based on our analysis and review of each proposed project, we find the
following capital projects: (a) New Business; (b) System Minor Additions,
Relocations & Retirement; (c) Meter & Regulator Materials; (d) Pressure
Betterments; (e) Distribution Easements; (f) Pipeline Relocations – Freeway &
Franchise; (g) Tools & Equipment; (h) Code Compliance; (i) Cathodic Protection;

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and (j) Regulator Stations & Other to be necessary and also find the requested
funding levels for the above projects to be reasonable.
The above projects were not opposed by parties except for a proposed
increase by CUE to Cathodic Protection in 2019. For most of the projects,
projected costs for 2017, 2018, and 2019 are close to 2016 recorded costs with
significant reductions in costs for System Minor Additions, Relocations &
Retirement and Pipeline Relocations. Costs were somewhat higher for Meter &
Regulator Materials because of increases in new business and for Tools &
Equipment because of activities aimed at mitigating risk to employee and public
safety.
We find that SDG&E provided sufficient evidence to support and justify
the above-mentioned projects and we find that these projects support system
reliability of SDG&E’s gas distribution system, promote safety, and necessary
services to its customers. We also find the various forecast methodologies
utilized to be reasonable and find that the requested forecasts should be
approved.
CUE proposes an increase of $1.844 million to SDG&E’s forecast for
Cathodic Protection in 2019 citing lagging performance in Cathodic Protection
efforts. SDG&E cited various activities that it has undertaken in recent years
including proposed enhancements pursuant to the RAMP process. We find that
SDG&E’s response adequately addresses and refutes CUE’s allegation, which
was not supported by more substantive and factual data and information.
ORA does not object to the 2018 forecast for Regulator Stations but
recommends the same funding level for 2019. The base expense for Regulator
Stations & Other is $0.762 million for 2017, 2018, and 2019, which is around the
same level as 2016 recorded costs of $0.624 million. A majority of the forecast

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however consists of funding for four proposed projects that are RAMP-related.
These are the Dresser Mechanical Coupling Removal, Oil Drip Piping Removal,
Replacement of Buried Piping and Vaults, and the Closed Valves Between
Medium-Pressure and High-Pressure Systems (Closed Valves Project) that will
verify, excavate, and replace closed and locked valves currently connecting
high-pressure piping to medium-pressure piping in order to improve the safety
and reliability of the system. ORA does not object to the necessity of funding
level for proposed projects but notes that the Close Valves Project will not be
completed until 2022 which SDG&E affirmed. However, funding for the project
will still be necessary for the portion of the project that is scheduled for this GRC
cycle. The Commission recognizes that large-scale projects begun in one GRC
cycle are sometimes completed in another GRC cycle. While the project will not
be in service at the end of this GRC cycle, the funds authorized will be captured
in Allowance for Funds Used During Construction. CUE proposes an increase of
$3.718 million to the base funding for Regulator Stations but we find this
unnecessary at this time in light of the four incremental RAMP-related projects
that are being authorized and prioritized. In addition, SDG&E’s internal parts
replacement program for regulators and related infrastructure schedules
replacement of parts at regular intervals which, according to SDG&E, has proven
useful in extending the useful lives of regulators and related infrastructure. 61
Based on the above, we find it reasonable to approve SDG&E’s forecasts for
Regulator Stations & Other.

61 Exhibit 14 at GOM-42.

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Modified Forecasts
We find that SDG&E’s forecasts for Replacement Mains & Services and
Local Engineering should be modified as discussed below.
ORA does not object to the 2018 forecast for Replacement Mains & Services
but recommends the same funding level for 2019. ORA states that SDG&E does
not justify a 55 percent increase in the 2019 forecast relative to 2018.
Table GOM-12 provides a breakdown of SDG&E’s requested costs for
Replacement Mains & Services in 2018, and 2019.62 The table shows that base
expenses are projected to be the same but costs for Vintage Steel Replacement of
$5.486 million in 2018 are projected to increase to $7.387 million in 2019 and costs
for Pre-1933 Threaded Steel Replacement of $7.386 million in 2018 are projected
to increase to $14.771 million in 2019. We find the projected increase in costs for
Vintage Steel Replacement to be reasonable but find the projected increase in
costs for Pre-1933 Threaded Steel Replacement in 2019 to around double the
amount projected for 2018 is not adequately supported by the evidence
presented by SDG&E despite the schedules and funding levels it submitted,
especially considering that $0 was projected for 2017. Instead, we find it more
reasonable to authorize the same funding level of $7.386 million for Pre-1933
Threaded Steel Replacements for both 2018 and 2019 to ensure that SDG&E will
be better able to accomplish the projected work in both years. In addition,
SDG&E did not present compelling arguments why the level of work projected
for 2019 needs to be completed by that time and why it did not begin the work in
2017 if it was such a high priority. CUE proposes an increase of $11.308 million

62 Id. at GOM-31.

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to SDG&E’s requested amount for 2019 which we reject for similar reasons
explained above in addressing ORA’s recommendation regarding the 2019
forecast. Based on the above, we find that SDG&E’s requested amounts for 2017
and 2018 for Replacement Mains & Services should be approved but find that the
2019 forecast should be reduced from $26.226 million to $18.835 million.
For Local Engineering, we agree that costs are influenced by the total
construction costs and agree with the methodology used of applying the average
percentage of Local Engineering costs to the total construction costs with
exclusions to costs for Meter and Regulator Materials and Tools & Equipment.
We also have no objections to the incremental costs for the cathodic protection
system evaluation.
However, SDG&E applied the average percentage of Local Engineering
costs relative to total construction from 2012 to 2016 whereas ORA recommends
using the average ratio from 2014 to 2017. ORA presents the percentages from
2012 to 2017 in Exhibit 404 which are 23.9 percent, 24.6 percent, 19.8 percent,
18.4 percent, 21.7 percent, and 14.62 percent respectively.63 We reviewed the
above percentages and find that there appears to be a significant enough
difference in the percentages from 2012 and 2013 as compared to other years.
SDG&E states that ORA does not present any evidence to support its
recommendation but neither does it present sufficient evidence to explain the
change in percentage level from 2014 onwards. Between SDG&E and ORA, we
find that SDG&E has the burden of supporting its forecasts and proposed costs.
However, consistent with the period for the forecast methodology, we find it

63 Exhibit 404 at 37.

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reasonable to only include the average percentages from 2015 to 2017, which is
18.24 percent. Therefore, we find it reasonable to modify SDG&E’s forecast
methodology for Local Engineering by applying an 18.24 percent multiplier
instead of 21.40 percent to direct capital expenditures net of Regulator Materials
and Tools & Equipment. SDG&E should re-calculate its forecasts using the
above multiplier.
Regarding the request for CNG Station Upgrades, we find that the request
includes the addition of new refueling stations in 2018 and 2019 as discussed in
section [Link]. We find that these additions are not upgrades to existing
stations. In addition, we find that the addition of new refueling stations is not
supported by the procurement of additional vehicles. The procurement of new
NGVs is discussed in the Fleet Services section. Therefore, we find it reasonable
to deny to requested amounts for CNG Station Upgrades of $2.617 million each
for 2018 and 2019.64
Other Issues
TURN raises the same argument as it did in the SoCalGas portion
concerning clothing and other gear containing the utility’s name and logo
(excluding uniforms and hard hats) and argues that these should not be funded
by ratepayers. For Gas Distribution, the amount in question for 2016 was
$4,008.65 We make the same findings and conclusions as we did in the SoCalGas
section concerning these items that are used at safety fairs and other civic and
community events so customers and other members of the public can easily

O&M funding for existing CNG stations was authorized under Gas Distribution – Field
64

Operations, Measurement and Regulation.

65 Exhibit 494 at 77 to 78.

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identify SoCalGas employees in case they have questions or concerns. In this

case, the amount in question is also a nominal amount which we find to be
reasonable. Based on the above, we find it reasonable to deny TURN’s proposal
to remove $4,008 for clothing and gear from 2016 costs.
8. Gas System Integrity
Gas System Integrity is the division/business unit responsible for creating
and issuing policies and standards that establish and validate compliance with
laws, regulations, internal policies, and best practices. It works closely with
other business units towards a shared goal of providing clean, safe, and reliable
natural gas service at reasonable rates.
8.1. SoCalGas
The total forecast for TY2019 is $32.904 million which is $19.936 million
greater than base year levels. This is inclusive of $0.204 million in savings from
FOF. Pursuant to D.16-06-054, costs associated with the Aliso Canyon gas leak
incident are not included in the forecast and are removed from historical
information used by impacted witnesses.
Certain costs included in this section are RAMP-related costs supporting
activities that mitigate key risks identified in the RAMP Report. The key risks
being mitigated are catastrophic damage involving third-party dig-ins, safety,
catastrophic damage involving high-pressure and medium-pressure pipeline
failure, workforce planning and records management. RAMP-related costs are
estimated at $22.753 million with $14.913 million representing incremental costs
associated with increased risk mitigation efforts associated with the RAMP
process.
SoCalGas is also requesting $34.970 million in 2017, $38.000 million in
2018, and $36.223 million in 2019 for IT-related capital projects.

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8.1.1. Non-Shared Costs

Total non-shared costs forecast for TY2019 is $15.640 million 66 which is
$10.865 million higher than 2016 adjusted, recorded costs.
[Link]. Gas Operations Staff & Training
The forecast for Gas Operations Staff & Training is $4.734 million using the
base year as a basis and then adding incremental costs. Activities in this category
consist of various trainings necessary to follow and comply with applicable laws,
regulations and standards, and to help maintain the safety of the workforce and
the public. Leadership training and training to develop various technical skills
are also included in this category.
[Link]. Pipeline Safety & Compliance
The forecast for Pipeline Safety & Compliance is $2.890 million and was
derived using base year costs plus incremental funding. This group is the lead
for responding to and complying with the Commission’s Safety and Enforcement
Division (SED) audits, communications, and inquiries. The group also serves as
a centralized gas information center for SoCalGas and includes the Quality and
Risk Management group that performs quality assurance and quality control
activities for pipeline safety and compliance activities on gas utility assets.
[Link]. Damage Prevention
The forecast for Technical Services is $1.681 million.67 This category
includes implementation of a federally mandated Public Awareness Program 68

66This includes an adjustment of $42,000 in the Update Testimony for the public awareness
forecast and $2,000 rounding for Gas Ops Staff & Training and Asset Management.
67The forecast for Technical was revised from $1.641 to $1.681 in the Update Testimony (Exhibit
514) at Attachment H.
68 Prescribed in 49 CFR § 192.616.

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that provides certain risk mitigation measures for enhanced public safety. The
program must be comprehensive to reach all areas which SoCalGas transports
gas and must include activities to advise municipalities, school districts,
businesses, and residents of pipeline facility locations. SoCalGas also intends to
boost awareness activities to lower the number of damages to its system and to
especially mitigate third-party damages.
[Link]. Asset Management
The forecast for Asset Management is $2.503 million using a five-year
average. Asset and data management require computer-based work
management and document management systems and technical computing
management and support systems. Part of the activities includes maintaining
and upgrading software applications.
[Link]. Gas Contractor Controls
The forecast for Gas Contractor Controls is $3.830 million using a
zero-based method because this department is relatively new. The Gas Control
Controls department formulates and promote policy related to construction
contractor safety and pipeline safety and quality oversight.
8.1.2. Shared Costs
Total shared costs forecast for TY2019 is $17.306 million which is
$9.113 million higher than 2016 adjusted, recorded costs. The cost categories for
shared services are identical to those in the non-shared services section but the
activities representing the shared services differ.
[Link]. Gas Operations Staff & Training
The forecast for Gas Operations Staff & Training is $1.364 million. This
includes cost centers for: (a) the VP of System Integrity and Asset Management
which provides leadership, guidance, and policies and includes both labor and
non-labor costs; (b) Field Technologies which evaluates new tools and

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technologies that enhance or replace existing processes or tools to provide

enhanced benefits such as improved efficiency and improved safety; and (c) Gas
System Integrity Staff & Programs which includes salaries of a director and staff
as well as supplies and materials. All costs were forecast using a five-year
average plus incremental costs.
[Link]. Pipeline Safety & Compliance
The forecast for Pipeline Safety & Compliance is $4.593 million. Cost
centers included in the forecast are: (a) Pipeline Safety Oversight which provides
centralized incident evaluation through monitoring and documenting the
progress of corrective actions and monitoring of compliance with federal and
state regulatory requirements; (b) Pipeline Safety & Compliance Manager which
serves as the point of contact with SED and audits and manages responses to
SED inquiries and includes labor and non-labor costs; (c) Operator Qualification
which schedules qualification activities, reviews and audits contractor
qualification programs, keeps qualification records, and monitors records for
possible compliance issues; and (d) Quality Risk which performs quality
assurance and quality control activities for various pipeline safety and
compliance activities on gas utility assets. All the forecasts were prepared
utilizing a base year plus incremental costs method.
[Link]. Damage Prevention
The forecast for Damage Prevention is $2.383 million. Cost centers
included here are: (a) Shared Public Awareness Activities which conducts
central management of SoCalGas’ and SDG&E’s Public Awareness Plans; and
(b) Pipeline Systems Construction Policy which develops system-wide policies
and practices concerning high-pressure construction and a damage prevention
program focusing on preventing excavation damages to SoCalGas’ underground

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pipelines. The forecasts were developed using base year plus increments and a
five-year average respectively.
[Link]. Asset Management
The forecast for Asset Management is $6.416 million. Included costs
centers are: (a) Business Process Enterprise System Support (ESS)
Implementation and Mobile Support which is responsible for material
traceability, management and development of departmental websites;
(b) Applications which provides support for computer programs and systems
not covered by the Information Technology group; (c) ESS Production Support
which develops and maintains business applications that are used to support
Gas Transmission and Gas Storage operations; (d) Work Management and
Databases which provide operational system support to field and other
functions; (e) Contract Maintenance which is responsible for software licenses
and maintenance contracts that support the systems and applications of various
organizations; and (f) Enterprise Geographic Information System (GIS) which
gathers data sets addressed by the GIS system and includes synchronization of
GIS and high-pressure pipeline database. All the forecasts were developed using
a five-year average with incremental costs being added for expanded work and
additional staffing and resources.
[Link]. Gas Contractor Controls
The forecast for Gas Contractor Controls is $2.550 million. This
organization provides a centralized records management and program
organization of daily tasks and activities that are performed. The forecast was
developed using a zero-based methodology because the program was newly
created in late 2016.

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8.1.3. IT Business Unit Capital Projects

SoCalGas is requesting $34.970 million in 2017, $38.000 million in 2018, and
$36.223 million in 2019 for IT-related capital projects. Appendix B of Exhibit 84
contains a list of the 29 IT-related projects being requested. Detailed descriptions
of each project are included in the capital workpapers of Exhibit 302. 69 The
projects include RAMP-related incremental upgrades and various IT upgrades
that provide increased functionality, customization, and migration from obsolete
systems or systems that are no longer supported.
8.1.4. Position of Intervenors
Comments regarding this section were provided by ORA, CUE, and OSA.
For both shared and non-shared costs, ORA recommends using the 2016
adjusted, recorded amount as the basis for costs rather than the various methods
utilized by SoCalGas. ORA does recognize that increased costs may result due to
new programs and requirements and adds the incremental costs to the 2016 costs
resulting in $4.775 million recorded costs plus $2.683 million incremental costs
for non-shared and $8.193 million recorded costs plus $3.198 million incremental
costs for shared services resulting in a total recommended amount of
$18.853 million70 compared to the $32.904 million requested by SoCalGas.
CUE does not contest any of the proposed costs in this section but initially
recommended that the Commission direct SoCalGas to implement proposed
training or alternatively, make the proposed training subject to a one-way

69 Exhibit 302 at 551 to 818.

70 Exhibit 407 at 10.

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balancing account treatment. This request was not raised again in CUE’s
opening brief.
OSA makes a number of related recommendations which centers on
SoCalGas being required to implement American Pipeline Institute (API)
Recommended Practice (RP) 1173 and recommendations for making the Pipeline
Safety Management System (PSMS) more effective and including the PSMS as
part of the next RAMP filing as well as requiring a third-party audit of
implementation before the filing of its next GRC application.
8.1.5. Discussion
We first reviewed ORA’s recommended methodology of using base year
costs as the basis for the forecast and then adding the incremental costs requested
by SoCalGas. ORA does not indicate that it disputes any of these incremental
costs and even recommends that both non-shared and shared incremental
activities be approved.71 ORA then adds $2.683 million of incremental costs for
non-shared and $3.198 million incremental costs for shared services or a total of
$5.881 million.
However, ORA does not indicate or explain how it derived these
incremental cost totals or whether it ignored incremental costs associated with
RAMP. We reviewed the forecast costs and ORA’s incremental cost totals appear
to be incorrect. For example, the RAMP incremental costs alone total
$14.913 million. SoCalGas also clarifies this point and submitted tables showing
that the incremental adjustment it requests for non-shared services total

71 Exhibit 407 at 9.

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$10.970 million and for shared services the total is $7.198 million.72 Using ORA’s
methodology of base year plus applying the corrected incremental costs results
in a total TY2019 forecast of $31.136 million for Gas System Integrity which is not
too far removed from the $32.904 being requested by SoCalGas. Therefore, we
find it reasonable to deny ORA’s recommended amounts as it appears to be
based on incorrect incremental costs.
SoCalGas utilized various forecast methodologies in this section but most
of the forecasts utilized either the base year or five-year average as the basis from
which incremental costs were then added. As shown in Table 12-4 of Exhibit
407,73 total costs from 2012 to 2016 do not have much variance. Following this,
we find that using either base year or the five-year average as the basis for
TY2019 forecasts is reasonable as either method produces relatively similar
results. The key element to consider therefore is whether the incremental costs
are justified.
Reviewing the incremental costs described in Exhibit 84, we note that most
of the costs are RAMP-related with $14.913 million out of the $18.168 total
representing RAMP-related incremental costs. We reviewed the activities
relating to RAMP and find that aside from new programs, many of the risk
mitigation and safety-related activities that were already being performed
historically are being enhanced, especially activities relating to the prevention of
damage from third-parties. In addition, this section seeks to address relatively
more RAMP risks than are being addressed in other sections in this decision

72 Exhibit 86 Appendix A.
73 Exhibit 407 at 7.

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leading to more enhanced risk mitigation activities and in turn, more costs. In
addition to the RAMP-related costs, other incremental costs are due to new
programs being implemented and programs and activities to address new
regulatory requirements.
Based on the above, we find the incremental costs requested to be
reasonable and supported by the testimony submitted. We also have no
objection to the zero-based methods used for Gas Contractor Controls as this
program is relatively new. We therefore have no recommended adjustments to
SoCalGas’ forecasts and find that the requested Gas System Integrity costs for
TY2019 should be authorized.
Regarding CUE’s recommendation concerning training costs, we agree
with SoCalGas that a one-way balancing account to record training costs is not
necessary at this time to allow for a certain degree of flexibility as we continue to
evaluate and make refinements to the RAMP process which is being integrated
into the GRC for the first time. Also, pursuant to Pub. Util. Code § 591, 74 the
proposed training must be included in SoCalGas’ Risk Spending and
Accountability Reports as ordered by D.16-06-054.75 The training costs that will
be authorized in this decision will be submitted as part of the above reports
along with a comparison of what was spent and an explanation regarding any
discrepancy.

74Pub. Util. Code § 591 (a): The commission shall require an electrical or gas corporation to
annually notify the commission, as part of an ongoing proceeding or in a report otherwise
required to be submitted to the commissions, of each time since that notification was last
provided that capital or expense revenue authorized by the commission for maintenance,
safety, or reliability was redirected by the electrical or gas corporation to other purposes.
75 D.16-06-054 OP 11(d) at 331 to 332.

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With regards to OSA’s recommendations, SoCalGas states that it is

proactively working, on a voluntary basis, towards the implementation of a
PSMS following the recommendations in API RP 1173.76 SoCalGas further states
that the plan is still in development and that elements thereof are more
prudently reviewed first at a high level. SoCalGas adds that implementation
should not be rushed to avoid implementation pitfalls. We support and share
OSA's goals to advocate for the improvement of Applicants’ safety management
although as SoCalGas points out, API RP 1173 is not a required practice and
some key elements thereof are already being applied by SoCalGas. We agree
with SoCalGas that implementing a system-wide PSMS should first be reviewed
thoroughly and that a detailed plan must be developed before implementation.
Thus, rather than directing and requiring immediate implementation, we find
that SoCalGas should instead be directed to submit testimony in its next GRC
concerning its findings and the development of its plans concerning the
establishment of a system-wide PSMS. We also note that many of OSA’s
recommendations focus on safety culture enhancements and practices and not
revenue requirements. We find that these are better addressed in SoCalGas’ next
RAMP filing and look forward to OSA’s continued participation in SoCalGas’
next RAMP and GRC applications.
To summarize, we find that SoCalGas TY2019 forecasts of $15.640 million
for non-shared costs and $17.306 million for shared costs are reasonable and
should be approved.

76 Exhibit 86 at OR-17 to 20.

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We reviewed each of the 29 IT-related capital projects being requested by

SoCalGas and find the projects to be necessary and supported by the evidence
presented with the exception of two projects namely the Click Enhancement
Project ($5.137 million in 2017, $3.898 million in 2018, and $2.000 million in 2019)
and the Field Data Collection with eForm project ($1.903 million each for 2018
and 2019). For these two disapproved projects, SoCalGas seeks to improve on
the existing IT but fails to explain why those systems are no longer adequate to
complete the same tasks. SoCalGas states that the projects will make tasks easier
or improve certain aspects but provides insufficient detail in its workpapers to
show that the current systems are unable to perform the same tasks or how the
improvements will change the performance capabilities of the existing systems.
Therefore, we find it reasonable to deny the above-named projects which results
in $29.833 million in 2017, $32.199 million in 2018, and $32.320 million in 2019
that should be approved.
8.2. SDG&E
SDG&E’s total forecast for TY2019 is $1.558 million which is $1.407 million
greater than recorded costs of $0.151 million in 2016. A portion of the requested
costs are for RAMP-related projects and activities to mitigate key risks identified
in the RAMP Report. The key risks being mitigated are: (a) catastrophic damage
involving third-party dig-ins; (b) employee, contractor, and public safety, and
(c) records management. RAMP-related costs, which are estimated at $1.352
million, with $1.227 million representing incremental costs.
SDG&E is also requesting $0.110 million in 2017 for the Gas Operations
Performance Analytics Phase 3 project.

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8.2.1. Non-Shared Costs

Total non-shared costs for TY2019 is $0.958 million and is $0.807 million
higher than 2016 recorded costs. Non-shared costs are composed of Asset
Management, Pipeline Safety & Compliance, and Damage Prevention and the
forecasts for TY2019 are $0.127 million, $0.106 million, and $0.726 million
respectively.
Asset Management
Costs were forecast using a zero-based method because this activity does
not have historical costs. SoCalGas plans to implement a company-wide pipeline
safety management system that complies with API RP 1173 on a voluntary basis.
Pipeline Safety & Compliance
Costs were forecast using a base year method plus incremental additions
for increased program and field audits, data requests, field visits, and
discussions with SED about best practices.
Damage Prevention
Costs were developed using an adjusted forecast as SDG&E plans to
increase the volume of current efforts relating to public awareness programs that
aim to reduce damage to SDG&E’s systems caused by third-parties. Other
activities conducted are the same as those described in section [Link] in the
SoCalGas section.
8.2.2. Shared Costs
Shared costs of $0.600 million are for Codes and Standards which supports
the development and integration of gas standards for SDG&E and SoCalGas.
Gas standards policies help the two utilities meet and comply with regulatory
obligations, allow for information exchange, and provide consistency with
respect to gas standards. Costs were forecast using a zero-based methodology.

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8.2.3. IT Business Unit Capital Projects

SDG&E is requesting $0.110 million in 2017 for the Gas Operations
Performance Analytics Phase 3 project. The project will expand the existing
reporting platform that will provide more robust and easy to use reports as well
as other operational efficiencies.
8.2.4. Discussion
Comments were provided by OSA, ORA, and CUE.
OSA makes the same recommendations concerning the implementation of
API RP 1173 and making PSMS as part of the next RAMP filing as well as
requiring a third-party audit of implementation before the next GRC filing. And
we make the same findings and conclusions as we discussed in the SoCalGas
section under section 8.1.4. API RP 1173 is not a required practice but SDG&E is
implementing these standards on a voluntary basis. Also, many of OSA’s
recommendations are better addressed in SDG&E’s next RAMP filing and we
encourage OSA’s participation in that proceeding as well as in SDG&E’s next
GRC.
ORA recommends reducing costs for Damage Prevention ($0.726 million)
to $0.375 million while CUE recommends increasing it to $1 million.
ORA recommends using the highest recorded cost during the last five
years but most of the TY2019 forecast are for incremental activities for increased
risk mitigation efforts to reduce damage caused by third-parties. Thus, we find
that ORA’s analysis does not take into consideration new activities resulting
from the RAMP process which is being incorporated into the GRC for the first
time. As a result, we find SDG&E’s forecast to be more reasonable.
On the other hand, CUE recommends $1 million for increased 811
advertising under Damage Prevention. However, SDG&E’s approach is to

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balance spending between the advertising activities and Locate and Mark
activities under the Gas Distribution section that include locating and marking
underground pipelines, conducting job observations, and performing pothole
operations and depth check. Both activities contribute to reducing damage from
third-party dig-ins and we find SDG&E’s approach of requesting funding for
both activities to be reasonable. Thus, we find that CUE’s request to increase
SDG&E’s requested amount is not necessary at this time.
To summarize, we find SDG&E’s total TY2019 forecast of $1.558 million for
O&M costs reasonable and should be approved. We reviewed SDG&E’s request
for an IT-related capital project and find the request reasonable and should be
approved. No party objected to the proposed project.
9. Gas Transmission Operations (O&M)
This section addresses the day-to-day expenses associated with operating
and maintaining Applicants’ natural gas transmission system. This section only
covers O&M expenses. Capital costs are addressed in section 10 of the decision.
9.1. SoCalGas
SoCalGas’ Gas Transmission organization is responsible for the safe
operation of approximately 2,918 miles of high-pressure gas pipeline and nine
compressor stations.77 Aside, from operating safely, the Gas Transmission
organization also aims to comply with legal and regulatory requirements and
provide customers with reliable natural gas service at a reasonable cost.

77According to SoCalGas, the Department of Transportation (DOT) uses engineering criteria to

define transmission lines as opposed to the functional approach utilized by SoCalGas and so the
length of SoCalGas’ gas pipeline is different using DOT standards.

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The total forecast for Gas Transmission Operations for TY2019 is

$51.934 million which includes $5.095 million in savings from FOF initiatives and
excludes costs relating to the Aliso Canyon gas leak incident pursuant to
D.16-06-054. All costs were forecast using a five-year average and are adjusted
for future period incremental changes as applicable. Certain costs are associated
with risks identified in the RAMP Report. Key risks identified relate to
catastrophic damage involving high-pressure pipeline failure and activities to
mitigate these risks are include activities relating to pipeline operation and
technical services. Mitigation activities that are RAMP-related are estimated at
$23.923 million.
9.1.1. Non-Shared Costs
[Link]. Gas Transmission Pipelines
The forecast for Gas Transmission Pipelines is $14.463 million which is
$3.229 million less than 2016 adjusted, recorded costs. Incremental costs for
support staffing, leakage investigation and mitigation, cathodic protection
maintenance and repair, and incremental maintenance were added to the
five-year historical average.
The Gas Transmission Pipelines group is responsible for safe day-to-day
operation and maintenance of gas transmission pipeline facilities and related
infrastructure. This includes maintaining equipment at pipeline receipt points,
valve control stations, delivery transfer points, monitoring and control facilities,
etc. This group also performs leak surveys of all transmission pipeline facilities,
develops and implements gas handling procedures, investigates gas quality
issues, provides emergency services, and other related functions.

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[Link]. Compressor Stations

The forecast for Compressor Stations is $9.988 million which is
$0.256 million more than 2016 adjusted, recorded costs. Incremental costs for
various support staffing were added to the five-year historical average.
The Compressor Stations group is responsible for safe and reliable
day-to-day operation and maintenance of nine compressor station facilities and
related infrastructure. This includes maintenance of compressor engines,
ancillary equipment, monitoring, metering, and control facilities, and other
related equipment. The group is also responsible for developing gas
compression O&M procedures, air emission monitoring and testing, conducting
inspections, maintaining round-the-clock staffing to respond to compression
operation issues, and other related functions.
[Link]. Technical Services
The forecast for Technical Services is $26.467 million which is
$24.581 million more than 2016 adjusted, recorded expenses. Incremental costs
for staffing, satellite monitoring, rights-of-way maintenance, high consequence
area (HCA) mitigation, and system reliability project abandonment recovery.
Technical Services activities include design engineering, instrumentation,
project support, and environmental services in support of day-to-day operations
and maintenance of SoCalGas’ gas transmission system. Technical Services is
also responsible for right-of-way maintenance, on-site technical expertise and
troubleshooting of technical issues.
[Link]. Positions of Intervenors
ORA and TURN object to the forecast for Technical Services but do not
oppose the forecasts for Gas Transmission Pipelines and Compressor Stations.

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ORA recommends using a five-year average for Technical Services which

is $2.229 million. ORA objects to the incremental cost drivers and argues that
these activities are routine in nature and part of day-to-day expenses incurred by
a gas transmission and storage company for its operations.78 ORA also
specifically objects to the HCA mitigation and the system reliability project
abandonment recovery associated with the North-South project.
TURN objects to the forecast for Technical Services and recommends
disallowance of incremental spending for HCA mitigation, rights-of-way
maintenance, and the Southern Gas System Reliability Project abandonment
recovery which relate to the denied application for the North-South pipeline.
Instead, TURN recommends using a five-year average from 2013 to 2017 which
results in $2.376 million or a reduction of $24.090 million from SoCalGas’ request.
[Link]. Discussion
We reviewed SoCalGas’ forecasts for Gas Transmission Pipelines and
Compressor Stations and find these to be reasonable and supported by the
evidence presented. The amounts requested approximate or are less than base
year adjusted, recorded expenses. SoCalGas also provided sufficient testimony
concerning the incremental cost drivers and parties did not object to the
forecasts. Therefore, we find that the requested amounts for Gas Transmission
Pipelines and Compressor Stations should be authorized.
For Technical Services, we find that the appropriate five-year average to
consider is from 2012 to 2016 as opposed to TURN’s recommendation to utilize
2013 to 2017. The proceeding generally relies on historical data up to the base

78 Exhibit 407 at 10 to 12.

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year since the application is filed in 2017 and it is not feasible to update all data
as it becomes available throughout the course of the GRC. We also find that
select updating of data without sufficient reason or justification may cause
unfairness as other parties can also request the Commission to consider other
updated data selected by parties that favor their position. And while we
recognize that the Commission may at times rely on and utilize select base year
plus 1 data which in this case is 2017 data, we find that these should be limited to
cases when use of such information is reasonable and sufficiently justified.
Therefore, we find that the five-year average that should be considered for
Technical Services is from 2012 to 2016.
We next consider the incremental costs requested by SoCalGas which are:
Technical Support Staffing: $0.056 million
Satellite Monitoring: $0.050 million
HCA Mitigation: $12.000 million
Contracts and Procurement Support Staffing: $0.181 million
Rights-of-Way Maintenance: $5.000 million
North-South Project Abandonment Recovery: $7.162 million
SoCalGas argues that the above are incremental costs and provide
testimony explaining why. Our approach is to examine each one rather than
rejecting all of them outright as ORA recommends. We agree that some of the
activities proposed are in addition to or incremental to historical costs and that
there may be RAMP-related activities that justify the incremental funding.
We reviewed the testimony concerning technical support staffing, satellite
monitoring, and contracts and procurement support staffing and find that the
incremental funding being requested for these are supported by the evidence.
The incremental cost driver concerning the need for additional staffing is similar
to requests for the same in other cost categories that are discussed in this section.
We also find that the amount corresponding to satellite monitoring was

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adequately explained and justified by SoCalGas’ testimony. Thus, the requested

increments for these activities should be approved.
With regards to HCA mitigation and rights-of-way maintenance, SoCalGas
states that the incremental funding requested is associated with mitigating a risk
that was identified in the RAMP report which is catastrophic damage involving
high-pressure pipeline failure. SoCalGas’ testimony explains the necessity of
rights-of-way maintenance and HCA mitigation and that it is required to
remediate or replace pipeline within two years of a class location change due to
encroachment on transmission pipelines.
Recorded costs for HCA mitigation from 2012 to 2016 range from $0 to
$2.224 million with an annual average of $0.785 million.79 For rights-of-way
maintenance, SoCalGas explains that the annual budget has been approximately
$1.5 million but a single project for removal of an abandoned pipeline can
potentially consume this amount depending on the amount of abandoned
pipeline to be removed.80
However, as is the case with many activities that are now designated as
being RAMP-related, HCA mitigation and rights-of-way maintenance are
activities that were already being performed by SoCalGas prior to the RAMP
process. And from our review of SoCalGas’ testimony and its arguments raised
in briefs, we find that SoCalGas did not sufficiently explain and justify why
incremental funding over historical costs is necessary for these two areas such as
increased mitigation efforts and activities due to RAMP or other reasons.

79 Exhibit 407 at 15.

80 Exhibit 26 at EAM-5.

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SoCalGas did argue that some of the cost drivers for rights-of-way
mitigation are not routine, such as removal of previously abandoned pipelines,
span repainting after wildfires, and repair of pipe exposures and road washouts
after significant rainfall.81 In recognition of these non-routine activities as well as
consideration of a general increase in mitigation activities resulting from the
RAMP process, we find that an increment of $1.5 million for rights-of-way
maintenance representing costs that are 100 percent above the annual average is
reasonable. For HCA mitigation, we find that authorizing the highest level of
spending during the last five years which is $2.224 million instead of the annual
average of $0.785 million is reasonable. This results in an increment of $1.439 for
HCA mitigation.
With respect to the $7.162 million requested for the North-South project
abandonment recovery, Exhibit 24 refers us to the joint testimony of witnesses
Bermel and Musich in Exhibit 3082 which covers SoCalGas’ request for cost
recovery for the North-South project addressed in section 10 of this decision.
Therefore, we reject the request made in this section and address this issue in
section 10. SoCalGas argues that the request made in this section is for O&M
costs and is distinct from the request made in Exhibit 30,83 but its testimony in
Exhibit 24 says otherwise. In any case, SoCalGas’ testimony in Exhibit 29 fails to
provide sufficient grounds to support its request and we therefore find that the
request in this section should be denied.

81 SoCalGas and SDG&E Opening Brief at 73.

82 Exhibit 24 at EAM-18.
83 Exhibit 26 at EAM-8.

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To summarize, we find that SoCalGas’ requested amount of

$26.467 million for Technical Services should be reduced by $21.223 million
representing reductions of $10.561 million for HCA mitigation, $3.5 million for
rights-of-way maintenance, and $7.162 million for the North-South project
abatement recovery. This results in an amount of $5.244 million that should be
approved for Technical Services.
9.1.2. Shared Costs
SoCalGas’ management personnel provide support to SDG&E’s gas
transmission operations. A total of $1.016 million is forecast for shared services
which is $66,000 more than 2016 adjusted, recorded expenses. These costs
represent salaries and expenses relating to the provision of shared service
functions and are comprised of three cost center organizations. All shared
services related to gas transmission are performed by SoCalGas and costs are
allocated to SDG&E by each cost center organization. All forecasts were based
on a five-year historical average.
[Link]. Director of Gas Transmission
The Director of Gas Transmission provides overall operational leadership
and is responsible for O&M performance, regulatory compliance, financial
performance, and work measurement reporting. The forecast for TY2019 is
$0.240 million with 9.31 percent being allocated to SDG&E.
[Link]. Field Operations Managers
Field Operations Managers provide departmental operational leadership,
staffing management, financial and work measurement, performance and
reporting for pipeline and compressor stations, and other related duties. The
forecast for TY2019 is 0.419 million of which 21.01 percent is allocated to SDG&E.

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[Link]. Technical Services Manager

The Technical Services Manager provides departmental operational
leadership, staffing management, and technical support services for both
SoCalGas and SDG&E. The forecast for TY2019 is $0.357 million of which
7.14 percent is being allocated to SDG&E.
[Link]. Discussion
The total forecast for Shared Services is near base year levels being only
$66,000 more. Most of the additional costs are from the Field Operations
Managers. Based on our review, we have no objections to SoCalGas’ forecast
which we find to be supported by the testimony submitted. We also agree with
the forecast methodology utilized as well as the allocation of costs between
SoCalGas and SDG&E which was based on the number of Gas Transmission
organization employees for each of the different shared services cost categories.
ORA is the only other party that provided comments to this section and ORA did
not have any issue with SoCalGas’ forecast. Therefore, based on the above, we
find that SoCalGas’ request for Shared Costs totaling $1.016 million should be
approved.
9.2. SDG&E
SDG&E’s forecast for TY2019 is $5.110 million which is $0.740 million more
than base year adjusted, recorded costs. The forecast represents projected
expenditures for O&M costs in TY2019. Capital-related costs are discussed in
section 10 of the decision. The forecast is inclusive of $52,000 in savings
associated with FOF.
9.2.1. Non-Shared Costs
SDG&E’s Gas Transmission organization does not perform any shared
services activities and so all costs are non-shared. There are three operational
functions being supported which are Gas Transmission Pipelines, Compressor

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Station, and Technical Services. The functions performed correspond to the three
non-shared services operational functions for SoCalGas which have the same
names and are discussed in the SoCalGas portion in section 9.1.1. above. All
forecasts were also derived using five-year historical averages plus incremental
cost estimates. Thus, in this subsection, we only describe the forecast and
incremental cost drivers. The description of the functions performed by each
cost category corresponds to the SoCalGas portion in section 9.1.1.
Gas Transmission Pipelines
The forecast for TY2019 is $1.839 million. Incremental cost drivers include
staffing, pipeline leakage investigation and mitigation, and right-of-way
maintenance.
Compressor Station
The Forecast for TY2019 is $3.124 million. Incremental cost drivers are
mainly for support staffing.
Technical Services
The forecast for TY2019 is $0.147 million. Incremental cost drivers are for
technical support staffing.
9.2.2. Discussion
We reviewed SDG&E’s request as well as the testimony submitted and
find that the testimony provided is sufficient to support SDG&E’s requested
amounts. The basic activities to be performed are the same as the activities in
SDG&E’s prior GRCs. The forecast for TY2019 is not very different from base
year levels and the increased amounts are reasonable and adequately explained
by the incremental cost drivers described in testimony. The increased costs are
mainly due to increased staffing due to increased activities and increased risk
mitigation and safety-related activities to be performed. For Gas Transmission

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Pipelines, additional leak detection equipment will be added. We also have no

issues with the forecast methodology utilized by SDG&E.
ORA is the only other party that provided comments to SDG&E’s forecast
for Gas Transmission Operations and ORA did not find any issue with SDG&E’s
forecast. Based on the above, we find that SDG&E’s requested amount for Gas
Transmission Operations of $5.110 million should be adopted.
10. Gas Transmission Capital
This section addresses capital expenditures relating to Gas Transmission
which include pipelines and appurtenances as well as gas compressor stations
which help move gas through transmission pipelines. Applicants state that these
capital projects are required for the safe, reliable, and effective operation of their
Gas Transmission system. In addition, SoCalGas seeks recovery for costs
reasonably incurred in conceiving and pursuing the North-South project which,
according to SoCalGas, was proposed to address a recognized reliability risk.
10.1. SoCalGas
SoCalGas requests $135.413 million in 2017, $181.837 million in 2018, and
$178.776 million in 2019 for Gas Transmission capital projects. In addition,
SoCalGas also requests $7.162 million each for 2019, 2020, and 2021 to recover
costs for the North-South project which it proposes to spread over the three years
covering this GRC cycle.
The capital projects being proposed include RAMP-related costs totaling
$8.735 million in 2017, $15.951 million in 2018, and $11.509 million in 2019. The
RAMP-related projects are linked to mitigating three major safety risks identified
in the RAMP Report. These are catastrophic damage involving high-pressure

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pipeline failure, physical security of critical gas infrastructure, and climate

change adaptation.84
Risk mitigation efforts associated with RAMP relate to specific projects or
programs. For catastrophic damage involving high-pressure pipeline failure,
SoCalGas plans to de-rate, conduct pressure tests, or replace sections of pipeline
and conduct preventive maintenance or remediate cathodic protection areas. To
mitigate the risk of physical security of critical gas infrastructure, SoCalGas
proposes projects to upgrade access control and detection capabilities. Finally, to
address risks relating to climate change adaptation, SoCalGas proposes projects
that will help mitigate safety-related threats to gas infrastructure from extreme
weather events, land movement, and erosion such as the installation of strain
gauges near vulnerable gas transmission pipelines that will monitor excessive
stresses.
10.1.1. New Pipeline
This project is for the construction of new pipeline to provide the backbone
and local natural gas transmission system with additional resiliency, capacity,
and reliability in order to serve load and to provide natural gas reinforcement to
an existing area.85 The forecast for this project is $8.543 million for 2017,
$7.383 million each for 2018 and 2019 using a five-year average.
10.1.2. Pipeline Replacements
This project is for the replacement of existing pipelines due to various
reasons such as condition of the pipeline, class location changes, hazardous

These RAMP risks are in Chapters SCG-4, SCG-6, and SCG-9 respectively in the RAMP
84

Report.
85 Exhibit 30 at MAB-9.

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conditions, etc. The forecast for this project is $30.194 million for 2017,
$26.358 million for 2018, and $10.499 million for 2019 using a zero-based
methodology. A summary of projects currently planned or in the process of
being executed are listed in Exhibit 30.86
10.1.3. Pipeline Relocations
Pipeline Relocations occasionally occur because of utility agreements with
state and local agencies. Locations of pipelines and related facilities may conflict
with California Department of Transportation (Caltrans) construction projects,
property development, municipal public works, street improvements,
rights-of-way, and other contract or franchise agreements. The forecast for this
project is $11.596 million for 2017, $10.476 million for 2018, and $5.922 million for
2019 using a zero-based methodology for freeway relocations and a five-year
average plus incremental for franchise relocations. A summary of projects
currently planned or in the process of being executed are provided in
Exhibit 30.87
10.1.4. Compressor Stations
SoCalGas states that many of its compressor stations and sub-systems are
more than 50 years old require significant upgrades and replacements to
maintain operational reliability and system resiliency and also to comply with
environmental regulations. The projects that are being planned were categorized
as small, medium, and large projects based on the projected costs of a project and
include blanket projects comprised of many smaller but related projects. A

86 Id. at MAB-11 to 12.

87 Exhibit 30 at MAB-13 to 15.

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majority of the projects are classified as small projects, but two large projects are
planned for replacements of the Blythe compressor station and the Ventura
compressor station. SoCalGas also includes costs for decommissioning of the
Cactus City and Desert Center compressor stations which were constructed in
the 1950s and have reached the end of their working lives. The forecast for these
projects is $50.432 million for 2017, $103.351 million for 2018, and
$116.626 million for 2019. A summary and description of the small, medium, and
large projects are listed in Exhibit 30.88
10.1.5. Cathodic Protection
Cathodic Protection equipment is used to preserve the integrity of natural
gas pipelines, mains, service lines, and underground appurtenances by
providing protection against external corrosion. The forecast for Cathodic
Protection projects is $5.000 million for 2017, $6.235 million for 2018, and
$6.658 million for 2019 using a base year forecast methodology because costs are
relatively flat.
10.1.6. Meter & Regulator
The meter and regulator equipment control the flow of natural gas in the
transmission pipelines using valves and regulator stations. This equipment is
then controlled locally or remotely from a central control system. The forecast
for these projects is $18.938 million each for 2017, 2018, and 2019 using base year
adjusted, recorded costs as the activities in 2016 represent activities that will be
carried out in 2017 to 2019.

88 Id. at MAB-17 to 24.

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10.1.7. Auxiliary Equipment

Auxiliary Equipment projects include equipment used to support the gas
transmission system that is not assigned to a specific project. The projects under
this category include physical security upgrades related to RAMP and
equipment to monitor land movement. The forecast for these projects is
$10.710 million for 2017, $9.096 million for 2018, and $12.750 million for 2019
using a zero-based methodology.
10.1.8. Position of Intervenors
IS initially stated that SoCalGas did not provide enough supporting
testimony for the Blythe Compressor Modernization project.89 SoCalGas
subsequently included more detail in its rebuttal testimony90 and IS did not raise
this specific issue again in briefs.
ORA proposed different recommendations for 2017 costs for New Pipeline,
Pipeline Replacement, Pipeline Relocation, Cathodic Protection, and Meter &
Regulator. The ORA proposed figures are shown in Table 12-9 of Exhibit 407.91
For Compressor Stations, ORA recommends $24.979 million for 2017,
$92.888 million for 2018, and $107.168 million in 2019. ORA states that SoCalGas
has significantly underspent funds authorized from the prior GRC and has spent
only 50 percent of its forecast for 2017. ORA also recommends that funding
should only be for specific projects.

89 Exhibit 436 at 23 to 24.

90 Exhibit 32 Appendix A.
91 Exhibit 407 at 19.

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ORA also recommends that the costs for Auxiliary Equipment be reduced
to $5.744 million in 2017 representing recorded costs for 2017 and $5.661 million
each for 2018 and 2019 representing the five-year average.
10.1.9. Discussion
With respect to the various recommendations made by ORA for 2017 other
than for Compressor Stations and Auxiliary Equipment which we shall discuss
separately, we find that ORA’s recommendations were not supported by the
evidence it presented. In addition, SoCalGas cited delays to several projects
which resulted in lower 2017 spending for Pipeline Relocation.
Similarly, for Compressor Stations, SoCalGas cited delays involving the
Blythe Modernization project which is a large-scale project. From its testimony,
SoCalGas indicates that work was conducted for 2016 and 2017, but because of
delays, the project will not be placed in service until 2018.92 As a result, the funds
expended for construction are not yet recorded since the plant is not yet in
service. There is no evidence or indication that actual work and construction
were not taking place in 2016 and 2017 and we find that it could have been
ascertained if engineering or construction work were not being conducted and
authorized funds were not being spent on a major project such as this.
With respect to the requested amounts for this GRC, we note that other
large-scale projects are being planned specifically for the Ventura Compressor
Station and the Honor Rancho Compressor Station (and the Moreno Compressor
station for SDG&E). Because we recognize the importance of the proposed
projects and the role of compressor stations in maintaining operational reliability

92 Exhibit 32 at MAB/EAM-11.

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and safety of the gas transmission system, we find that it is prudent and
reasonable to authorize the proposed projects and for SoCalGas to have the
necessary funding to conduct these projects (and Moreno Compressor station for
SDG&E). At this point, we do not find it necessary to deviate from current GRC
practice and authorize funding only for specific projects because of the large
scope covered in the GRC and because of the many challenges associated with
planning and executing multiple and large projects within a specified timeframe.
We do however encourage SoCalGas to place a high priority on critical projects
under this category as most of its compressors are over 50 years old and because
of key risks that need to be mitigated in this area. Therefore, we find that the
requested amounts for Compressor Stations should be authorized.
Regarding Auxiliary Equipment, ORA argues that SoCalGas’ spending in
prior years is much less, up to more than 50 percent less, than the requested
amounts. For its part, SoCalGas states that ORA ignores RAMP-related
incremental spending that is planned to address increased risk mitigation efforts
of a key risk identified in the RAMP Report.
SoCalGas provided a list of projects under Auxiliary Equipment as well
projected costs for each of these and a description of the different projects. The
projects include RAMP-related costs such as installation of physical security
systems, access controls, and detection capabilities.
However, recorded costs for 2017 of $5.744 million approximate the
five-year average spending for Auxiliary Equipment which is $5.661 million.
Therefore, based on the level of spending for 2017, it would seem that SoCalGas
did not perform much of the incremental RAMP-related activities it may have
planned which is why recorded costs are around the same level as what it
normally spends without the incremental RAMP activities. Therefore, we find

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that this is an instance where it is reasonable to rely on 2017 recorded costs. For
2018 and 2019, we assume that SoCalGas will perform the risk mitigation
activities it had planned and find that its requested amounts be approved.
To summarize, SoCalGas’ requested amounts for Gas Transmission capital
expenditures for 2017, 2018, and 2019 should be adopted except for Auxiliary
Equipment in 2017 which should be reduced to $5.744 million representing
recorded costs for 2017.
10.2. Cost Recovery for the North-South Project
SoCalGas seeks recovery of costs incurred in conceiving and pursuing the
North-South project and according to SoCalGas, undertaking activities in
furtherance of the Commission-ordered California Environmental Quality Act
(CEQA) review. SoCalGas argues that when it filed Application (A.) 13-12-013
for authority to recover in rates costs associated with the North-South project, the
Scoping Memorandum and Ruling issued in that proceeding ordered that a
CEQA review be conducted. SoCalGas states that over $20 million was spent on
activities pursuant to the CEQA review during the pendency of the application
instead of after the Commission approval of the application, as SoCalGas had
originally planned. A.13-12-013 was eventually denied in D.16-07-015 after the
Commission found that there were better alternatives to the North-South project.
SoCalGas proposes to spread cost recovery evenly for three years resulting in a
request to recover $7.162 million annually from 2019 to 2021. The costs to be
recovered are categorized as O&M costs even though this section discusses
capital requests.
10.2.1. Positions of Intervenors
ORA, Lancaster, TURN, SCGC, and Sierra Club and UCS oppose any
recovery for the North-South project consistent with D.16-07-015. TURN and

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SCGC submitted a joint brief arguing that the reasonableness of costs to be

recovered were not established, that the costs were incurred during a prior GRC
period, that allowing recovery would constitute retroactive ratemaking, that
costs were already written off, and that the project was rejected and not
abandoned.
10.2.2. Discussion
In D.16-07-015, we rejected the North-South project as well as the proposal
to recover project costs in rates.93 The decision did not exclude any costs that
may be recovered, such as the application and CEQA costs incurred and we find
that pre-construction and pre-engineering costs are included in project costs.
Had the application and the proposal to recover project costs been approved,
SoCalGas would not have needed to seek separate recovery of CEQA costs.
These costs would have been deemed included in what could have been
recovered. Thus, when recovery of project costs was denied without any
exceptions, the CEQA costs should be deemed part of such costs and denied as
well.
According to SoCalGas, the costs to be recovered were incurred prior to
May 2014 and after May 2014 up to as late as April 2016, although it does not
specify exactly when costs were incurred after May 2014. As noted by TURN
and SCGC, this period falls within SoCalGas’ previous 2012 GRC. As such, these
costs fall outside the period of costs that are being considered and are to be
authorized in this GRC proceeding. There is also no memorandum account or

93 D.16-07-015 at 22.

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other similar mechanism that set aside consideration of the costs to be recovered
such that this issue can be reviewed in this proceeding.
SoCalGas’ rebuttal testimony also states that it had planned to conduct
CEQA activities after A.13-12-013 had been approved and that in the alternative
that the application was denied, that it would not have pursued the CEQA
activities.94 This shows that SoCalGas already recognized that the application
may have been denied and could have addressed recovery for the CEQA costs or
a procedure for doing so in A.13-12-013.
Finally, we find that recovery of costs for an abandoned project is different
from recovery of costs for a denied project. An abandoned project generally
presupposes that the project had been previously authorized or approved which
is not the case for a denied project. The Commission definitively concluded in
D.16-07-015 that SoCalGas had not demonstrated a need for the proposed
North-South pipeline project and that ratepayers not be burdened with any of
the costs associated with the project.
In view of all the foregoing, we find that the requested cost recovery for
the North-South project of $7.162 million annually for 2019 to 2021, should be
denied.
10.3. SDG&E
SDG&E receives gas from SoCalGas at the San Diego/Riverside County
border and through various points of a pipeline that runs along the Orange
County and San Diego County coastline.

94 Exhibit 32 at MAB/EAM-8

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

SDG&E’s capital expenditures forecast for Gas Transmission is

$10.492 million in 2017, $10.192 million in 2018, and $10.042 million in 2019. 95
SDG&E states that the capital requests are necessary for the safe and reliable
operation of SDG&E’s gas transmission system. The total forecast is inclusive of
FOF benefits of $0.450 million in 2017 and $0.150 million in 2018 and
RAMP-related costs estimated at $1.689 million each for 2017, 2018, and 2019.
The RAMP-related projects are in connection with mitigation of catastrophic
damage involving high-pressure gas pipeline failure identified in the RAMP
Report.
10.3.1. Capital Projects
The cost categories and descriptions of the types of projects included in
each cost category of SDG&E’s capital projects correspond to those described in
the SoCalGas portion in sections 10.1.1 to 10.1.6. For SDG&E, we shall only list
the categories and provide the capital forecasts for 2017, 2018, and 2019 as
follows:
New Pipeline: $3.901 million each for 2017, 2018, and 2019
Pipeline Replacements: $1.505 million each for 2017, 2018, and 2019
Pipeline Relocations: $2,000 each for 2017, 2018, and 2019
Compressor Station: $4.415 million for 2017, $4.115 for 2018, and
$3.965 million for 2019
Cathodic Protection: $0.184 million each for 2017, 2018, and 2019
Meter and Regulator: $0.485 million each for 2017, 2018, and 2019
SDG&E utilized a base year method for New Pipeline and a five-year
average for all of its other capital forecasts. SDG&E does not have an Auxiliary

95 The totals in Exhibit 33 were modified by errata corrections in Exhibit 35a.

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Equipment category which is discussed in section 10.1.7. of the SoCalGas

portion.
10.3.2. Positions of Intervenors
ORA is the only other party that provided comments to SDG&E’s capital
forecasts. ORA’s recommendations which differ from SDG&E’s proposals are
summarized below:
New Pipeline
$1.667 million for 2017, $3.901 million for 2018, and $0.094 million for 2019.
ORA’s recommendation is based on using 2017 recorded costs, base year costs
for 2018, and a three-year average from 2012 to 2014 for 2019.
Pipeline Replacements
$0.391 million for 2017, and $0.588 million each for 2018 and 2019 based on
recorded costs in 2017 and deducting costs for the Bear Valley project for 2015
and 2016.
Compressor Station
$3.432 million for 2017, $3.605 million for 2018, and $3.455 million for 2019
based on 2017 recorded costs and removing costs after removing one-time costs
associated with security enhancements and the security guard shelter building
from the five-year average.
Cathodic Protection
$0.209 million for 2017 using recorded 2017 costs.
Meter and Regulator
Use 2017 recorded costs for 2017.
10.3.3. Discussion
In reviewing SDG&E’s capital forecasts in this section, we first compared
SDG&E’s forecast methodology versus the various methods applied by ORA.

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First, with respect to the use of 2017 recorded costs versus 2017 forecasts, while
we do note that recorded results are more accurate and more recent than
forecasts covering the same year, selectively applying 2017 recorded costs in
some instances but not in others may lead to inconsistent results. The GRC
application was filed in 2017 and SDG&E utilized the most recent data available
at the time of preparing and filing the application which is base year or 2016
data. As the application progresses, newer data become available, but we find
that it is not feasible to constantly update data for the entire application.
Next, we find that for this GRC, updating only select data may lead to
inconsistent results as not all data is being updated. For example, a select update
in one area resulting in a lower value than the forecast would be inconsistent if
another update in a different area would result in a higher value than the
forecast but was not applied. For this GRC, it is not practical to update all data
as there are vast amounts of data included in the application.
We recognize that there are instances where it is prudent, necessary, and
reasonable to apply updated data and we exercise our discretion in doing so in
appropriate cases. We will generally not apply select updating of data without
any explanation why the updated data should be applied.
From our review of ORA’s recommendations, we find that many of the
forecast methodologies applied are not consistent or uniform. For example, in
New Pipeline, ORA recommends using 2017 recorded costs, base year
methodology for 2018, and a three-year average for 2019. ORA also
recommended using a three-year average from 2012 to 2014 and not the latest
three years.
For recorded costs from previous years, we note that these tend to vary
because of large-scale projects that raise costs for a particular year. As such,

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ORA recommends eliminating these projects from the five-year average which
appears reasonable. However, SDG&E states that it is also planning several large
projects under the various cost categories and from our review of prior years, we
note that large projects do occur on occasion which results in fluctuating
recorded costs. For example, recorded costs for Pipeline Replacements were
$0.081 million in 2012 and $3.436 million in 2015.96 Similarly, for Compressor
Station, recorded costs were $1.878 million in 2012 and $9.897 million in 2016.
SDG&E states that while many of the projects are routine, some projects are
difficult to determine in advance. Also, we find that large-scale projects tend to
occur on occasion and SDG&E identified some large-scale projects that are being
planned for this GRC cycle.
Based on the above, we find that a five-year average is reasonable and
appropriate for capturing the fluctuations in recorded costs as well as large-scale
projects that occur from time-to-time.
With respect to New Pipeline, SDG&E is recommending use of base year
costs as the basis for their forecast. ORA opposes this recommendation and
states that recorded costs in 2015 and 2016 were considerably higher because of
costs associated with the Pio Pico Energy Center and argues that this is a
one-time project and should not be included as a basis for costs in future years.
SDG&E argues that it is planning another large-scale project, the Carlsbad
Energy Center for 2017 and 2018. However, we find that this project does not
extend to 2019 and there was insufficient comparison in costs and scale of the

96 Exhibit 35 at MAB/EAM-6

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

Carlsbad project versus the Pio Pico project. We also find that using base year
costs as a basis does not take into account recorded costs in prior years.
Therefore, we find that a five-year average is also more appropriate for
New Pipeline similar to the other cost categories where large-scale projects are
also being planned for one or more of the years included in this GRC cycle. To
summarize, we adopt all of SDG&E’s forecast costs for capital expenses for Gas
Transmission (including for the authorized amounts for Compressor Stations,
discussion in more detail in the SoCalGas Section 10.1.9) except for New Pipeline
which should be modified to reflect the five-year average of recorded costs from
2012 to 2016 which is $2.036.2 million.
11. Gas Major Projects
The SoCalGas Major Projects and Construction organization manages
projects associated with pipeline installation, replacement, and modernization. It
also includes valves, regulating and metering stations and appurtenances, and
other similar projects associated with compressor stations, storage fields, and
natural gas fueling stations.
This section addresses RAMP-related risks, particularly, mitigating against
catastrophic damage involving medium-pressure pipeline failure identified in
the RAMP report.
11.1. O&M
The TY2019 forecast for O&M costs is $3.971 million which is
$2.713 million more than 2016 adjusted, recorded expenses. O&M costs are
divided into three cost categories and all three were forecasted using base year
2016 as a reference. All O&M costs are non-shared and are performed solely for
the benefit of SoCalGas. Pursuant to D.16-06-054, costs relating to the Aliso
Canyon incident are excluded from the forecast.

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11.1.1. Management & Outreach

Management & Outreach is comprised of several cost center groups that
relate to general management of staff and associated organizational costs. The
cost center grouping includes regulatory and program management personnel
that prepare regulatory filings. The forecast for this cost center grouping is
$3.646 million which is $2.713 million more than base year 2016 adjusted,
recorded expenses and is the only O&M category under Gas Major Projects that
shows a forecasted change from adjusted 2016 recorded costs.
We reviewed the forecast and find that the reason for the increase is due to
expenses associated with four capital projects that have significant assets that
will be placed into service in TY2019. Details for the expense elements were
provided in Table MAB-12 in Exhibit 50.97 In addition, forecasted costs include
work of certain employees who were temporarily redirected to perform tasks
relating to the Aliso Canyon incident and are now returning to regular duties
and responsibilities.98
We find the costs to be adequately supported by the evidence presented
and have no objections to the forecast for this cost center grouping. ORA and
TURN are the only parties that provided comments to the Gas Major Projects
section and neither party had any objections to this forecast. The four major
projects that were mentioned above are discussed in the capital projects section.

97 Exhibit 50 at MAB-10.
98 Id. at MAB-4.

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11.1.2. Project & Construction Management

The forecast for this cost category is $201,000. This is another cost center
grouping and activities to be funded represent functional expertise in performing
or assisting in technical development, consultation, planning, permitting, design,
material specifications, commissioning, and project management of major
infrastructure projects such as large pipelines, compressor stations, valve
stations, and interconnect facilities.
There are no adjustments from base year adjusted, recorded expenses for
the TY2019 forecast and we find the forecast to be reasonable and adopt it.
11.1.3. Project Controls & Estimating and
Gas Contractor Controls
The forecast for this cost category is $124,000. This is yet another cost
center grouping and the activities to be funded relate to activities in support of
major capital and some O&M funded projects such as analyzing and developing
cost forecasts, cost estimating, schedule development, updating and analysis,
managing quality, safety, and compliance of contractors for large projects and
project controls utilized by PSEP.
There are also no adjustments from base year adjusted, recorded expenses
for the TY2019 forecast and we likewise find the forecast to be reasonable and
adopt it.
11.2. Capital
There are three project groupings under this section consisting of four
distinct projects. The total forecast for the projects is $1.2 million in 2017,
$8.969 million in 2018, and $37.714 million in 2019.
11.2.1. Distribution Operations Control Center
The forecast for the Distributions Operations Control Center (DOCC) is
$400,000 in 2017, $3.156 million in 2018, and $25.901 million in 2019 using a

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zero-based forecast. The DOCC and related system of field sensors and control
assets is a system for monitoring and remotely controlling medium and
high-pressure gas distribution pipelines. The system will allow integrated
operation of the distribution and existing high-pressure transmission systems
and will strengthen SoCalGas’ and SDG&E’s ability to manage their distribution
pipeline operations system in real time. The system also includes remote and
automated controls and a constantly staffed facility. The system is proposed to
be built in phases from 2017 to 2021 with an estimated total capital cost of
$108 million. This GRC covers costs up to 2019 totaling $29.457 million.
11.2.2. Pipeline Information Monitoring System
The Pipeline Information Monitoring System (PIMS) is a centralized data
system of field sensors and computerized data management assets to monitor
conditions external to pipes in real-time along the routes of rights-of-way of large
high-pressure gas pipelines. The system will provide early warning, timely
response, and mitigation of potential external threats to the physical integrity of
pipelines. The forecast for PIMS is $500,000 for 2017, $1 million for 2018, and
$7 million for 2019 using a zero-based forecast methodology.
11.2.3. Methane Monitoring & Fiber-Optic
Monitoring
These are two separate projects with a combined forecast of $300,000 for
2017, $4.813 million each for 2018 and 2019 using a zero-based forecast
methodology. The Methane Monitoring project consists of installing 2,100
methane monitoring sensors along pipeline routes where high pressure pipelines
that are 12 inches or greater in diameter are located in close vicinity to facilities
that are high occupancy, pose logistical evacuation challenges, or have special
implications to commerce such as bridges and transportation centers. The
Fiber-Optic Monitoring project is for the installation of fiber-optic monitoring

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stations. Both systems will report any abnormal activity to the PIMS where it can
be viewed and resolved as necessary.
11.2.4. Positions of Intervenors
ORA and TURN are the only other parties to provide comments and
recommendations to SoCalGas’ capital requests in this section.
ORA recommends using 2017 recorded capital expenditure for all capital
projects totaling $143,000 compared to SoCalGas’ forecast of $1.2 million. TURN,
on the other hand, objects to the capital forecast for DOCC for 2019 and
recommends $0. TURN argues that it is not clear that the DOCC will provide
meaningful safety benefits to justify the capital costs. TURN adds that real-time
monitoring will not significantly improve response times and that most safety
incidents are caused by external factors. TURN recommends SoCalGas be
instructed to propose the DOCC in its next rate case and be required to quantify
benefits, conduct a risk-spend efficiency versus other mitigation measures, and
commission a third-party study of PG&E’s DOCC facility.99
11.2.5. Discussion
In its rebuttal testimony and in briefs, SoCalGas states that it does not
oppose ORA’s recommendation to use 2017 actual capital expenditures instead
of its forecasted amount. While the decision has generally refrained from relying
solely on updating only select data to 2017 actual expenses, we recognize that
this approach is appropriate in specific instances. The utility has the burden of
submitting adequate proof to justify its requests and in this instance, by
supporting ORA’s position, SoCalGas agrees that it does not have adequate

99 Exhibit 490 at 48 to 49.

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A.17-10-007, A.17-10-008 ALJ/RL8/jt2

evidence to substantiate its original request. As a result, we find ORA’s

recommendation to be the most reliable with respect to this issue and more so
because the utility agrees. Therefore, we find it reasonable to adopt ORA’s
recommendation of approving $143,000 in 2017 for all four capital projects being
proposed under Gas Major Projects.
With respect to TURN’s objection to the DOCC, we find that the real-time
information and monitoring of gas distribution pipelines that will be provided
by the system as described in Exhibit 50 showing the features and other
capabilities of the DOCC,100 provide meaningful safety benefits.
Real-time monitoring and remote-control access to key points in the
distribution system allows faster detection of abnormal changes in pressure and
speeds up response times to address these issues. SoCalGas also demonstrated
that the current system for monitoring pressure in the distribution system is
unable to provide continuous monitoring and is unable to monitor multiple units
at once making it difficult to triangulate and determine where the actual problem
is in the distribution system. SoCalGas also demonstrated significant response
time benefits that will be provided by real-time monitoring of abnormally low or
high-pressure areas versus the current system even for incidents caused by
external factors. Exhibit 55 contains a diagram illustrating an example of how
the DOCC can reduce response times.101 As shown in the diagram, detection of a
pressure incident as well as analysis of the situation will be significantly
improved thereby shortening the potential response time to an incident.

100 Exhibit 50 at MAB-23.

101 Exhibit 55 at 3.

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TURN also argues that real-time monitoring and remote access will not be
as effective as SoCalGas suggests since the entire distribution system will not be
monitored, and remote-control access will only be available to 200 regulator
stations. However, the pressure-monitoring and remote access units to be
installed are only for the initial phase of the project and will be installed in key,
strategic, and high occupancy areas. All in all, real-time monitoring will be
provided for nearly 1,800 high-pressure points and over 4,000 miles of
high-pressure pipeline and remote-control access to 200 of the most critical
distribution regulator stations.
The system also supports mitigation of a key risk identified during the
RAMP process and we find that the real-time monitoring to be provided by the
system supports our policy of reducing gas leaks more quickly. We note that we
authorized a similar system for PG&E.102 Finally, we find that postponing the
project until the next GRC only serves to delay the project and would likely
increase costs. Based on all the above, we find that the requested amounts for
the DOCC for 2018 and 2019 should be authorized.
We find that SoCalGas provided sufficient evidence and justification for
the necessity of the PIMS and Methane Monitoring and Fiber-Optic Monitoring
projects and that these projects will improve safety. We also find the requested
amounts in 2018 and 2019 for these projects are reasonable and supported by the
evidence.

PG&E’s Gas Distribution Control Center was authorized in D.14-08-032 covering its TY2014
102

GRC application.

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Therefore, in view of the foregoing, we find that for capital projects under
Gas Major Projects, $143,000 in 2017, $8.969 million in 2018, and $37.714 million
in 2019 should be authorized.
12. Gas Engineering
The purpose of Gas Engineering is to establish and oversee the engineering
aspects of SoCalGas’ and SDG&E’s gas infrastructure. Gas Engineering is
responsible for complying with federal and state safety and environmental
requirements and implementing industry best practices. Gas Engineering also
provides technical and engineering support and optimizes infrastructure and
end-use equipment performance. Activities relating to land services and
rights-of-way (ROW) and research and development also fall under Gas
Engineering.
12.1. SoCalGas
The TY2019 forecast for O&M costs is $26.629 million103 which is
$9.406 million more than 2016 adjusted, recorded expenses. SoCalGas’ O&M
costs include both shared and non-shared services. For capital costs, SoCalGas is
requesting $12.622 million for 2017, $13.361 million for 2018, and $14.101 million
for 2019.104 Certain costs are driven by risk mitigation activities pursuant to the
RAMP process. The key risks being mitigated in this section are records
management, climate change adaptation, and catastrophic damage involving
high-pressure pipeline failure. The table below summarizes the estimated costs

Revised from $26.629 million to $26.554 million in the Update Testimony (Exhibit 514) at
103

Attachment H.
SoCalGas revised the forecast from $12.622 million to $11.316 million for 2017,
104

$13.361 million to $12.484 million for 2018, and $14.101 million to $13.224 million for 2019 in the
Update Testimony (Exhibit 514) at H.

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for the mitigation activities that will be undertaken. These costs are embedded in
the O&M and capital costs requested by SoCalGas and the reasonableness of
these costs are reviewed in the O&M and capital sections that they appear in.

RAMP Risk 2017 2018 2019

Records Management (O&M) n/a n/a $5,964,000
Climate Change Adaptation
n/a n/a $1,520,000
(O&M)
Catastrophic Damage Involving
High-Pressure Pipeline Failure $2,245,000 $2,245,000 $2,245,000
(capital)

Records Management
Gas Engineering provides drafting and design of the gas infrastructure
and gas facilities and the material traceability project can help to improve
compliance with regulations mandating the maintenance of traceable, verifiable,
complete, and readily available documentation.
Climate Change Adaptation
The Geological Hazard Mitigation Program performs analysis and
recommendations related to geological, civil, and structural engineering design
impacted by weather and climate-driven events.105
Catastrophic Damage Involving High-Pressure Pipeline Failure
The Engineering Analysis Center provides operations requirements to
odorize gas in the gas infrastructure and gas facilities as mandated by the Code

105 Exhibit 60 at DRH-10.

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of Federal Regulations 192 Subpart I. The requested costs relate to

“odorization”106 equipment and techniques for pipeline systems.
This section also includes $55,000 in O&M savings from FOF which has
been incorporated into the forecast. Costs relating to the Aliso Canyon gas leak
incident are excluded from the forecast and from historical costs.
12.1.1. Non-Shared O&M
The total forecast for non-shared costs is $12.226 million which is
$4.440 million higher than 2016 costs. Non-shared O&M cost categories are
composed of Gas Engineering and Land Services & Right-of-Way. The table
below shows the forecast for each cost category.

Non-shared O&M 2019 Change

from 2016
Gas Engineering $8,600,000 $2,920,000
Lands Services & Right-of-Way $3,626,000 $1,520,000
Total $12,226,000 $4,440,000

[Link]. Gas Engineering

Costs include activities associated with the following departments:
(a) Engineering Analysis Center (EAC); (b) Measurement, Regulation, and
Control (MRC); and (c) Civil, Structural, and Hazard Mitigation Engineering.
The EAC and MRC departments perform core engineering activities to
maintain safe and reliable operations and support to various organizations
within SoCalGas. These include oversight and administration, air quality and
compressor services, applied technologies, and field support. The forecast for

106Natural gas odorization equipment are classified as either chemical vaporization or chemical
injection equipment.

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the EAC and MRC departments utilized a five-year average because it better
accounts for the work that ebbs and flows over time.
Meanwhile, Civil, Structural, and Hazard Mitigation Engineering activities
include ongoing structural engineering design and new hazard mitigation
programs which include geological hazards and climate change risk mitigations.
Costs for these were forecast using the base year method with incremental costs
added reflecting costs for new or enhanced programs such as satellite
monitoring.
[Link]. Land Services & Right-of-Way
Costs under this category relate to general expenditures to manage the
necessary property rights to allow access, operation, and maintenance of pipeline
infrastructure which traverses over both public and private land and properties.
The five-year linear method was utilized to forecast these costs because activities
and staffing levels have been steadily increasing and SoCalGas expects this trend
to continue.
In addition to these costs, SoCalGas is requesting the creation of the
Morongo Rights-of-Way Memorandum Account (MROWMA) and the Morongo
Rights-of-Way Balancing Account (MROWBA) in connection with four expired
and expiring rights-of-way impacting existing gas transmission pipelines and a
gas distribution center located in the Morongo Indian Reservation (Reservation).
The MROWMA will record pre-construction costs associated with the
possible relocation of gas transmission pipelines to bypass the Reservation as
described in A.16-12-011 where it made the same request. On the other hand, the
MROWBA will record costs associated with the renewal of the expiring ROWs
described above as well as pre-construction costs associated with potential
relocations that will be incurred beginning January 1, 2019.

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[Link]. Positions of Intervenors

ORA and TURN provided comments to the non-shared O&M requests.
ORA does not object to the Gas Engineering forecast but recommends a
year-on-year increase of 9.6 percent based on the increase of costs from 2016 to
2017. This results in a reduction of $0.854 million from SoCalGas’ forecast. ORA
also recommends the establishment of a MROWMA that will track all costs
relating to the expiring ROWs with recovery of costs being subject to a
reasonableness review.
TURN recommends that the Commission deny both the request to
establish a MROWMA and MROWBA. TURN argues that costs to be tracked by
the MROWMA are already included in SoCalGas’ TY2016 GRC and that the
pre-construction costs to be tracked by the MROWBA may be included in Gas
Transmission and Major Projects or can be recorded though working cash and
construction work in progress (CWIP). TURN also recommends disallowance of
$877 in costs relating to expenses for clothing and gear that does not contain
SoCalGas’ logo.
[Link]. Discussion
SoCalGas objects to ORA’s proposal of applying a year-on-year growth of
9.6 percent to 2017 recorded costs and states that this does not take into account
historical costs and other cost drivers such as governmental fees and a project to
deploy a ROW database. SoCalGas also argues that there is an upward trend
with regards to costs.
We reviewed both methodologies and find that ORA’s method relies
heavily on 2017 recorded costs which is less than SoCalGas’ 2017 forecast by
$0.398 million. ORA then applies the increase rate between 2016 and 2017 to
2018 and then to 2019. We find that this method does not take into account prior

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years where increases were 209.0 percent (from 2013 to 2014) and 22.4 percent
(from 2014 to 2015).107 We agree with SoCalGas that projected costs are hard to
predict since the ROW costs are based on contractual agreements and the
perceived value of the ROW access points which are often subject to change.
Thus, we find that reliance on a longer period of historical costs is more
appropriate and find that SoCalGas’ forecast of $3.626 million for Land Services
and Right-of-Way is more reasonable and should be approved.
With regards to TURN’s objection to $877 spent on clothing and gear, we
find that a nominal amount spent on such promotional materials108 is reasonable.
Based on the above, we find it reasonable to authorize SoCalGas’ total
non-shared services forecast of $12.226 million.
MROWMA and MROWBA
SoCalGas operates three gas transmission pipelines (Lines 2000, 2001, and
5000) that cross the Reservation and a gas distribution system located in the
Reservation that serves the residential and commercial needs of the Morongo
Band of Indians (Morongo). SoCalGas’ operation of the above are pursuant to
four existing ROWs granted by the federal government through the Bureau of
Indian Affairs (BIA). The first ROW was granted by the BIA in 1948 with the rest
being granted at different times subsequently. The four ROWs have been
renewed at various points in time but are currently set to expire as follows:
Line 2000 – expires on March 29, 2018
Line 5000 – expires on August 21, 2018

107 Exhibit 63 at DRH-8, Table 13-12.

108The type of clothing and gear discussed are often used as promotional items during
informational, educational, or other events conducted by SoCalGas.

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Gas Distribution System – expires on August 21, 2018

Line 2001 – expires on March 22, 2020
The three gas transmission pipelines are part of SoCalGas’ Southern
System and transport gas received from interstate pipelines. The Southern
Transmission System has a receipt point capacity of about 1.2 billion cubic feet
per day which represents approximately 26 percent of the total system receipt
point capacity. The three gas transmission pipelines are necessary in providing
service to SoCalGas’ customers (including Morongo) as well as the SDG&E gas
delivery system and for maintaining system reliability.
Appraisals to determine the appropriate valuation of the ROWs were
completed in February 2015 and SoCalGas has been negotiating with Morongo
for the renewal of the four ROWs since July 2015, when it submitted a formal
offer to Morongo for a 50-year renewal. However, negotiations for renewal of
the ROWs have not progressed up to the time the GRC application was filed and
SoCalGas states that it has to consider potential relocation of the three
transmission lines outside of the Reservation.
With respect to the costs to be tracked in the MROWMA, SoCalGas states
that the costs to be tracked are the same pre-construction costs described in
A.16-12-011 and it makes the same request here because parties in A.16-12-011
argued that these costs should be recovered in the GRC. At the time this GRC
was filed, A.16-12-011 was still pending. The proceeding was resolved in
D.18-04-012109 wherein the Commission denied SoCalGas’ request, the
dispositive portion of which states:

109 The decision was dated April 26, 2018.

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“We have reviewed the positions and arguments that parties have
raised and examined the testimonies and other exhibits submitted
and based on our review, we find that the pre-construction costs to
be tracked by the memorandum account are GRC-costs that should
have been raised and are therefore deemed included in SoCalGas’
2016 GRC. SoCalGas argues that these costs were not ripe for
inclusion in the 2016 GRC but does not argue or provide evidence
that it was prohibited, precluded, or otherwise incapable of
including these costs in its 2016 GRC, specifically, in the capital
expenditures for gas transmission and engineering. It is also clear
that SoCalGas was well aware that the first three ROWS were set to
expire during the period covered by the 2016 GRC. SoCalGas made
a formal offer to Morongo on July 2015 while the 2016 GRC was still
pending but did not make an argument as to what would have been
a reasonable time within which to expect a reply from Morongo.
Absent any such showing, we find that Morongo’s non-response
after several months is sufficient time as to alert SoCalGas to the
possibility that its offer would not be accepted and that it would
have to consider other options and that these events were not
unforeseeable.
Moreover, the Settlement Agreement adopted in D.16-06-054
states that it sets forth a complete and final resolution of all
revenue-requirement related issues in the 2016 GRC proceeding. As
pointed out by TURN and SCGC, Exhibit B of the Settlement
Agreement sets out the specific revenue requirement amounts
proposed for various areas of SoCalGas’ operations with page B-3
covering shared and non-shared gas transmission expenses, and
pages B-6 to B-7 addressing the capital expenditures for the gas
transmission system. SoCalGas argues that costs relating to the
Morongo ROW renewals were not subject to the settlement, nor
were they explicitly identified in the 2016 GRC. However, as
SoCalGas admits, its 2016 GRC testimony did not include categories
for a number of specific projects, including the new “Major Projects”
organization, but rather presented a general forecast covering
whatever projects would arise for the entire transmission
organization. SoCalGas also does not provide any evidence
demonstrating that parties were aware that the Morongo ROW
renewals would be treated separately from the Settlement

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Agreement. Absent such showing, we find it reasonable to assume

that parties to the settlement had no knowledge of any such
exclusions or additional costs and projects, covering
pre-construction costs that are consistent with the categories of costs
that SoCalGas identified in its 2016 GRC. Thus, parties had every
reason to assume that the revenue requirement determined in the
Settlement Agreement addressed all revenue requirement costs
within the 2016 GRC period.”110
The findings and conclusions made in D.18-04-012 are applicable here with
respect to pre-construction costs prior to periods covered in this GRC as these
costs are deemed included in SoCalGas’ T2016 GRC. However, the same
principle does not apply with respect to pre-construction costs for periods that
are covered in the TY2019 GRC.
As of the date of this decision, negotiations to renew the ROWs are still
ongoing and an agreement can still be reached regarding renewal of the expired
ROWs. However, in light of the important role these pipelines provide to system
reliability and because renewal of the ROWs remains uncertain, we find that
costs associated with considering alternatives to renewing the ROWs are
necessary and appropriate. In addition, SoCalGas specifically excluded such
costs from its TY2019 forecast and we agree that the costs are difficult to predict.
Therefore, we find that SoCalGas’ requests to establish the MROWMA should be
authorized.
With respect to the MROWBA, the costs are specifically excluded from any
of SoCalGas’ forecasts in this GRC and we also agree that the costs are difficult to
predict. Thus, we disagree with TURN’s proposal to include these costs in Gas

110 D.18-04-012 at 10 to 12.

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Transmission and Major Projects. We also have no objections for the costs to be
tracked. However, we agree with ORA that the costs should be tracked in a
memorandum account as opposed to a balancing account to allow the
Commission the opportunity to conduct a reasonableness review of the costs to
be recovered. The testimony submitted in the proceeding does not include
sufficient details as to the activities to be performed or the costs that will be
incurred and whether these are necessary and reasonable. In addition,
negotiations regarding renewal of the ROWs are still ongoing and an agreement
may still be reached and so the activities to be performed are uncertain. Thus,
we find it more appropriate for these costs to be tracked in a memorandum
account where the Commission will be afforded an opportunity to review the
costs incurred.
We therefore find it reasonable to deny the requested authority to establish
the MROWBA. Instead, the costs that are being requested to be recorded in the
proposed MROWBA should be tracked in the MROWMA being authorized in
this decision. Recovery of the tracked costs may then be requested by SoCalGas
in its next GRC proceeding which the Commission can then review for
reasonableness thereof. In its next GRC filing, SoCalGas should include
testimony confirming any costs associated with Morongo ROW negotiations
and/or resolution if an agreement is reached.

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12.1.2. Shared O&M

The total forecast for shared services costs is $14.403 million 111 which is
$4.966 million higher than 2016 costs. The table below shows the forecast for
each shared services cost category.

Change
Shared O&M 2019
from 2016
Director of Gas Engineering $808,000 $421,000
Measurement, Regulation, and
$6,648,000 $1,718,000
Control
Engineering Design $4,376,000 $2,248,000
Engineering Analysis Center $2,133,000112 $632,000
Gas Operations Research and
$438,000 -($53,000)
Materials
Total $14,403,000 $4,966,000

[Link]. Director of Gas Engineering

This cost category includes expenditures incurred for the director of Gas
Engineering as well as administrative and support functions. SoCalGas utilized
a five-year average methodology in developing its forecast.
[Link]. MRC
The MRC shared cost centers are for engineering policy, design, material
selection, testing and field support related to measurement, gas regulation,
automated control systems for pipelines, compressor stations, and other
instrumentations.113 The forecasts for MRC were developed utilizing a five-year
average methodology.

111Revised from $14.403 million to $14.329 million in the Update Testimony (Exhibit 514)
at Attachment H.
Revised from $2.133 million to $2.059 million in the Update Testimony (Exhibit 514) at
112

Attachment H.
113 Exhibit 60 at DRH-24.

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[Link]. Engineering Design

The Engineering Design cost centers are for engineering policy and design
for both SoCalGas and SDG&E. This includes design drafting, process
engineering, pipeline engineering, mechanical design, electrical design, and high
pressure and distribution engineering network design. Costs were forecast
utilizing a five-year average methodology, except for electrical engineering
design wherein a base year method was utilized because new activities were
included and high pressure and distribution engineering network design
(HPDEND) which utilized a five-year linear method because activities and
staffing levels have been consistently rising and this trend is expected to
continue.
[Link]. Engineering Analysis Center
The Engineering Analysis Center provides related environmental, gas
operation, and other testing that help verify that safe pipeline quality gas is
delivered. The forecast was developed using a five-year average.
[Link]. Gas Operations Research and Materials
The cost centers included in this cost category manage the related business
processes for approval, documentation, and quality management of gas pipelines
and appurtenance materials and ensures compliance with regulatory
requirements that mandate minimum requirements for the selection and
qualification of pipes and components used in pipes. The group also provides
support regarding information related to materials as well as management and
coordination of research and development programs related to the environment.
Costs were forecast utilizing a base year method because this cost center was
shifted from another cost center rendering historical data unusable.

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[Link]. Position of Intervenors

Only ORA provided comments to the shared services O&M forecast. ORA
recommends using 2017 costs of $0.502 million for HPDEND instead of a
five-year linear method. ORA also recommends a $75,000 reduction to
Engineering Analysis Center after it was discovered through a data request that
an incremental FTE for a management position is not being requested.
[Link]. Discussion
SoCalGas agrees with ORA’s proposed reduction of $75,000 to Engineering
Analysis Center because the corresponding FTE to be funded by said amount is
not being requested. SoCalGas removed the amount in Update Testimony
(Exhibit 514) at H-1. With respect to the forecast method for HPDEND,
SoCalGas argues that a five-year linear method is appropriate because costs have
been increasing. However, ORA provided a graph showing HPDEND expenses
from 2012 to 2017.114 The graph shows that costs decreased from $0.513 million
to $0.488 million and then to $0.486 million in 2013, 2014, and 2015 respectively.
Costs decreased again in 2016 from $0.544 million to $0.502 million in 2017.
From the above, it is clear that costs have not been increasing with consistency.
Therefore, we find ORA’s forecast to be more appropriate which reduces the
forecast for Engineering Design by $0.148 million.
We reviewed the rest of the shared services forecast and do not disagree
with the use of five-year averages to develop these forecasts and a base year
method because of the shift in cost center which renders historical data unusable
for Gas Operations Research and Materials. Therefore, we find that SoCalGas

114 Exhibit 408 at 23.

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shared services forecasts should be adopted except for a reduction of $148,000 to

Engineering Design.
12.1.3. Capital
As stated previously, SoCalGas’ capital forecast is $12.622 million for 2017,
$13.361 million for 2018, and $14.101 million for 2019. The table below provides
a breakdown of the requested capital costs.

Capital 2017 2018 2019

Land and Right-of-Way115 $5,468,000 $5,468,000 $5,468,000
Capital Tools &Lab Equipment116 $2,245,000 $2,245,000 $2,245,000
Supervision & Engineering Overheads $4,909,000 $5,648,000 $6,388,000
Total $12,622,000 $13,361,000 $14,101,000

[Link]. Land and Right-of-Way

The forecast will fund purchase of land or land rights for new
high-pressure pipelines and for existing ROWs that have expired relating to
pipelines that are installed on private lands. SoCalGas utilized a five-year
average methodology to develop its forecast.
[Link]. Capital Tools & Lab Equipment
This forecast is for acquiring and replacing high-value tools that are used
daily by operating personnel such as volt/amp meters, Global Positioning
System receivers, etc. This also includes laboratory equipment used for the EAC.
A five-year average was used to develop the forecast.

115SoCalGas revised the forecast for Land and Right-of-Way from $5.468 million to
$3.892 million for 2017, $5.468 million to $4.591 million each for 2018 and 2019 in the Update
Testimony (Exhibit 514) at Attachment H.
116SoCalGas revised the forecast for Capital Tools & Lab Equipment from $2.245 million to
$2.515 million for 2017 in the Update Testimony (Exhibit 514) at Attachment H.

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[Link]. Supervision & Engineering Overheads

This cost category is for transportation and storage supervision and
engineering overhead charges which are later on assigned to other areas. A
five-year linear average was utilized because costs have been steadily increasing
due to the increasing complexity of planning and engineering gas capital
projects.
[Link]. Positions of Intervenors
ORA is the only other party that provided comments to SoCalGas’ capital
requests. ORA does not object to the forecast for Capital Tools & Lab Equipment
but recommends using 2017 recorded costs resulting in an increase of
$0.270 million to the 2017 forecast.
For Land and Right-of-Way, ORA recommends using an average of 2016
and 2017 recorded costs for the 2017 forecast and then using the result as the
basis for the 2018 and 2019 forecasts. This results in reductions of $1.576 million
in 2017 and $0.788 million each for 2018 and 2019.117
For Supervision and Engineering Overheads, ORA recommends applying
a year-on-year growth of 8.43 percent which represents the increase from 2016 to
2017.
[Link]. Discussion
SoCalGas states that Morongo-related expenses were excluded from 2017
recorded costs which formed a large part of the basis for ORA’s calculations.
And as stated above, an agreement regarding renewal of the ROWs may still be
achieved and so it is uncertain whether costs incurred will relate to ROW

117 This reduction is reflected in SoCalGas’ Update Testimony (Exhibit 514) at Attachment H.

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renewal or construction around the Reservation. Given the uncertainty of the

negotiations and the speculative nature of potential construction costs, we find
that Morongo-related costs should first be tracked instead of approved, so the
Commission has the opportunity to review associated costs. As a result, we find
ORA’s forecasts for Land Services to be more accurate as it excludes
Morongo-related costs.
Based on the above, for Land Services, we find that $3.892 million for 2017,
$4.591 million for 2018, and $4.591 million for 2019 should be authorized. While
we are denying SoCalGas’ request to establish the MROWBA, we find SoCalGas'
request to create a Memorandum Account is reasonable and allows all
Morongo-related costs incurred beginning January 1, 2019 to be recorded subject
to a reasonableness review in SoCalGas’ next GRC filing.
We find the forecast for Capital Tools & Lab Equipment to be reasonable
and agree with the five-year average methodology that was utilized in
developing the forecast. We disagree with using 2017 recorded costs consistent
with not favoring select updating of 2016 data as applied throughout the
decision unless there is good reason to do so in appropriate instances.
For Supervision and Engineering Overheads, we find SoCalGas’
methodology more appropriate as it takes into account historical trends as
opposed to ORA’s method which relies heavily on 2017 costs. In this instance,
we find that taking into consideration costs and trends from a wider period of
time provides a better gauge of the fluctuating costs for this group.
Based on the above, we find that capital projects under Gas Engineering
should be authorized as follows: $11.046 million for 2017, $12.484 million for
2018, and $13.224 million for 2019 which excludes Morongo-related costs.

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12.2. SDG&E
SDG&E’s Gas Distribution and Transmission system is comprised of
approximately 225 miles of transmission pipeline and 15,000 miles of mains and
service lines.118 SDG&E receives gas from SoCalGas through several
interconnections between the two systems.
SDG&E’s capital request for Gas Engineering is $0.268 million 119 each for
2017, 2018, and 2019. SDG&E’s O&M costs are captured in the shared services
forecasts of SoCalGas. The table below provides a breakdown of the requested
capital costs.

Capital 2017120 2018 2019

Land and Right-of-Way $113,000 $113,000 $113,000
Auxiliary Equipment $28,000 $28,000 $28,000
Capital Tools $54,000 $54,000 $54,000
Supervision & Engineering Overheads $73,000 $73,000 $73,000
Total $268,000 $268,000 $268,000

Land and Right-of-Way

Costs for the purchase or renewal of easements and acquisition of ROWs
for installing and maintaining high pressure pipelines. Costs were forecast using
a zero-based method for labor and a five-year average for non-labor

118 Exhibit 64 at DRH-2.

Revised 2017 forecast from $0.268 million to $0.889 million in the Update Testimony
119

(Exhibit 514) at Attachment I.

120The following 2017 capital forecasts were revised to the following amounts in the Update
Testimony (Exhibit 514) at Attachment I: Land and Right-of-Way $0.488 million, Auxiliary
Equipment $0.295 million, Capital Tools $0.106 million, Supervision & Engineering Overheads
$0 million.

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Auxiliary Equipment
Costs for purchase of auxiliary equipment to support compressor stations.
Costs were forecast using a combination of base year for items that have no
historical costs prior to 2015 and a five-year average for other items.
Capital Tools
Costs for acquiring and replacing high-value tools routinely used by
operating personnel. Costs were forecast using a five-year average.
Supervision & Engineering Overheads
Costs for supervision and engineering overhead charges which are later on
assigned to other areas. Costs were forecast using a five-year average.
12.2.1. Positions of Intervenors
ORA is the only party that provided comments and recommends using
2017 recorded costs except for Supervision and Engineering Overheads where it
recommends zero dollars. ORA’s recommendation results in a 2017 total of
$0.889 million. SDG&E agrees with ORA’s recommendation.
12.2.2. Discussion
As applied consistently throughout this decision, we have not favored
select updating of 2016 data utilized throughout the GRC to 2017 recorded costs
unless it is justified and there is good reason to do so as it is not feasible to
update all the data and updating only select data may lead to inconsistencies. In
addition, SDG&E’s testimony only provides support for its forecast and not
regarding the reasonableness of the higher amount.
In this case, we reviewed SDG&E’s capital forecasts and find them to be
reasonable and supported by the evidence presented. We also find the costs to
be necessary and agree with the forecast methodologies that were utilized. Thus,

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we find that SDG&E’s capital requests for Gas Engineering of $0.268 million each
for 2017, 2018, and 2019 should be approved.
13. Underground Storage
The forecasts for Underground Gas Storage (UGS) discussed in this section
also address O&M and capital costs for three other functional areas which are
Aboveground Gas Storage (AGS), the Storage Integrity Management Program
(SIMP), and Storage Risk Management (SRM).
AGS concerns the storage field assets that are aboveground which include
compressors, pipelines, purification, and auxiliary equipment. UGS concerns the
storage reservoir and storage field wells and includes operation, maintenance,
integrity, and engineering functions associated with use of these facilities. SIMP
is an integrity management program for inspection and risk management of
SoCalGas’ storage fields. Lastly, SRM includes aboveground monitoring, data
management, compliance, and audit support.
According to SoCalGas, gas storage fields require continuous installation,
maintenance, refurbishment, and replacement of heavy industrial equipment
such as engines, compressors, electrical systems, wells, piping, gas processing
components, and instrumentation.121 SoCalGas operates four underground
storage fields: Aliso Canyon, La Goleta, Honor Rancho, and Playa del Rey.
Natural gas is compressed onsite and injected into the field reservoirs through
piping networks and storage wells. Storage gas is then withdrawn and delivered
through the transmission and distribution system when customer demand
exceeds flowing gas supplies.

121 Exhibit 273 at NPN-2.

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Certain costs are associated with mitigating key risks identified in the
RAMP Report. The risks that are being mitigated by various activities are
catastrophic damage involving high-pressure pipeline failure, physical security
of critical gas infrastructure, climate change adaptation, and catastrophic event
related to storage well integrity. Exhibit 273 contains a description of how
SoCalGas evaluated these risks in the RAMP Report.122 The RAMP risks were
discussed in the RAMP report. Total expenditure relating to RAMP will be
identified in both the O&M and capital sections of the discussion.
Also, in compliance with D.16-06-054, costs relating to the Aliso Canyon
leak incident have been removed from historical costs and information used by
SoCalGas’ witnesses.
Compliance with regulations from the Division of Oil, Gas, and
Geothermal Resources (DOGGR), U.S. Department of Transportation (DOT)
Pipeline and Hazardous Material Safety Administration (PHMSA), SB 887, and
the California Air Resources Board (CARB) impact the forecasts in this section.
13.1. O&M
The total forecast for O&M costs for TY2019 is $60.074 million which is
$13.766 million more than 2016 adjusted, recorded expenses. This is inclusive of
FOF savings of $0.327 million. RAMP-related costs totaling $6.859 million are
included in the forecasts.

122 Exhibit 273 at NPN-10 to 17.

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13.1.1. Non-Shared Costs

[Link]. UGS and AGS
The forecast for UGS and AGS is $38.699 million which is $5.376 higher
than base year adjusted, recorded expenses using a five-year average for labor
and base-year plus incremental costs for non-labor.
The functions of UGS and AGS were described briefly at the beginning of
this section. SoCalGas’ integrated transmission pipeline and distribution system
enables delivery of natural gas either to customers or into the storage field
reservoirs depending on demands to the system. The individual storage facilities
either receive gas or provide gas through injections or withdrawals. Demand for
natural gas is subject to heavy fluctuations so injections and/or withdrawals of
natural gas may be required at any hour and the storage fields are continuously
staffed with operating crew and personnel.
Increased costs forecast for TY2019 are driven by pipeline integrity
inspection requirements, increase in regulatory fees, special leak surveys,
ambient air monitoring costs and other new operating requirements required by
new legislation and new regulations.
[Link]. Storage Risk Management
The TY2019 forecast for SRM costs is $2.031 million compared to base year
adjusted, recorded expenses of $0.479 million. SoCalGas utilized a base year plus
incremental costs in developing its forecast. Incremental costs are to address
additional regulations from CARB, DOGGR, and PHMSA.
[Link]. SIMP
The forecast for SIMP is $18.910 million which is $6.859 million higher than
2016 adjusted, recorded costs using a zero-based forecast methodology. As
stated in the opening portion of this section, SIMP is an integrity management
program for inspection and risk management of SoCalGas’ storage fields. O&M

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activities consist of physical well inspection, risk management, and data

management of the UGS program. SoCalGas uses state-of-the-art inspection
technologies to conduct inspections.
For the TY2016 GRC, SIMP costs were recorded and balanced in the SIMP
Balancing Account (SIMPBA) and SoCalGas is requesting continued approval of
the regulatory treatment of costs recorded in the SIMPBA. According to
SoCalGas, increased O&M costs are driven by new regulatory requirements
leading to increases in costs for personnel, well inspections, UGS regulatory
implementation, data management, noise and temperature logs, and emerging
regulations.
13.1.2. Shared Costs
Shared Costs consists of activities performed by the Senior Vice President
group for Transmission and Storage. The forecast for TY2019 is $0.434 million
using base year costs as a basis. Activities here provide leadership and guidance
for various organizations including Underground Storage.
Most, and possibly all, of the costs here may be subject to the revisions to
Pub. Util. Code § 706 brought about by SB 901 disallowing ratepayer recovery of
officer compensation which became effective January 1, 2019. Treatment of the
portion of costs comprising officer compensation is discussed in section 4.2. of
the decision.
13.1.3. Positions of Intervenors
ORA and OSA provided comments regarding this section.
ORA does not oppose any of the O&M forecasts by SoCalGas but
recommends the creation of a one-way balancing account to record routine costs
for UGS and AGS in order to protect ratepayers from costs from new regulatory

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requirements. ORA also recommends that the SIMPBA be approved as a

one-way balancing account.
OSA recommends that SoCalGas develop a safety management system
(SMS) framework to address gas storage assets and operations and present its
proposal in the next GRC.
13.1.4. Discussion
We reviewed the evidence submitted as well as arguments raised in briefs
and find the TY2019 forecasts for O&M costs to be reasonable. Although there is
a considerable increase from 2016 adjusted, recorded costs, SoCalGas sufficiently
set forth that majority of the cost drivers for the increase are a result of new laws,
regulations, and requirements from CARB, DOGGR, and PHMSA among others,
requiring additional inspections, testing, leak surveys, reporting, data
management, and other requirements. We also find the various forecasts utilized
to be appropriate and note that parties did not object to any of the O&M
forecasts.
Regarding ORA’s two recommendations concerning balancing accounts,
first, we find that the creation of a one-way balancing account to record routine
costs for UGS and AGS is not necessary at this time. ORA’s concern is to protect
ratepayers from costs resulting from new regulatory requirements. However, as
SoCalGas explained, the TY2019 forecast for routine UGS and AGS costs were
developed to address routine costs that are regularly performed and regulatory
requirements that are already in effect, are measurable, and not widely variable.
In addition, two new regulations being proposed by DOGGR to replace existing
regulation are not expected to materially alter forecast costs. The proposed
regulations will affect routine activities such as training, pressure and subsurface
leak surveys, patrolling field lines, maintaining records, monitoring and

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inspection, safety precautions, and other activities that are deemed routine.
SoCalGas has also examined the drafts for the proposed legislation and did not
find a proposed provision that would materially affect the compliance activities
that they are already required to conduct.
With regards to whether the SIMPBA should be approved as a one-way or
two-way balancing account, ORA states that a one-way balancing account
encourages SoCalGas to spend within the amount authorized and that it has
adequate experience to determine inspection, repair, and other costs associated
with SIMP. On the other hand, SoCalGas states that SIMP-related work is
variable and regulations affecting SIMP are dynamic and subject to changes
which makes the costs variable. For example, SoCalGas states that more frequent
well inspections, use of new techniques and tools, and additional data collection
are being or may be proposed.
We weighed the arguments raised by both parties and find the issues
raised by SoCalGas are of more concern with respect to regulatory treatment of
the SIMPBA. As demonstrated by SoCalGas in Exhibit 276, work relating to the
SIMP may vary greatly and SoCalGas provided several examples, such as
proposed regulations that may have a significant impact on costs.123 A two-way
balancing account gives SoCalGas sufficient flexibility to address these possible
variances and at the same time allows unspent funds to be returned to
ratepayers. With respect to ORA’s concern about protecting ratepayers and
encouraging SoCalGas to spend prudently, the current version of the SIMPBA
authorized in D.16-06-054 requires the filing of a Tier 3 advice letter to recover

123 Exhibit 276 at NPN-11 to 13.

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any undercollection up to 35 percent and the filing of an application to recover

undercollections greater than 35 percent.124 This affords the Commission an
opportunity to review any requests to recover undercollections.
Based on the above, we find it reasonable to authorize the SIMPBA and to
continue the balancing account treatment established in D.16-06-054 as described
above. The SIMPBA shall continue to be maintained as a two-way balancing
account subject to the same recovery procedure established in D.16-06-054 for
any undercollections from the authorized amount. Any unused funds are to be
returned to ratepayers.
Regarding OSA’s recommendation for a SMS framework, SoCalGas agrees
with OSA regarding the development of a SMS framework to address gas
storage assets and operations. SoCalGas states that it is committed to voluntary
implementation of the API RP 1173125 concerning pipeline safety management
system requirements. The RP provides guidance to pipeline operators for
developing and maintaining a pipeline SMS to manage the safety of complex
processes. We agree with OSA that implementing a SMS framework may be
beneficial and also agree that SoCalGas should include a SMS proposal for gas
storage in its next GRC application.
13.2. Capital
The forecast for capital costs is $208.535 million in 2017, $180.646 million in
2018, and $172.606 in 2019. RAMP-related activities totaling $134.870 million in
2017, $120.495 million in 2018, and $111.601 million in 2019 are included in the

124 D.16-06-054 at 249 to 250.

125 Exhibit 276 at NPN-15.

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forecasts. The proposed capital expenditures are to enable the safe and reliable
delivery of natural gas to customers, enhance integrity, efficiency, and
responsiveness of operations, and comply with regulations including
environmental regulations.
ORA is the only other party that provided comments and
recommendations to the UGS capital expenditures. Because ORA’s comments
are similar in nature, they are included in the description for each project group.
Discussion of all project groups including ORA’s recommendations are
combined to avoid repetitive analysis and discussion of similar issues.
13.2.1. Storage Compressors
Storage compressors increase the pressure of natural gas so it can be
injected into the underground reservoirs. The capital projects in this section are
associated with SoCalGas’ natural gas compressors. The table below shows the
estimated costs for 2017, 2018, and 2019.

Compressors 2017 2018 2019

Goleta – main unit #4 overhaul and
$2,000,000 $326,000 $0
heater addition
Honor Ranch – compressor
$1,000,000 $3,000,000 $10,000,000
replacement study
Playa Del Rey – wet gas compressor $1,000,000 $1,000,000 $0
Compressor Blanket Projects $5,000,000 $12,170,000 $15,700,000
Total $9,000,000 $16,496,000 $25,700,000

The Unit #4 compressor at Goleta has reached the maximum run time
between overhauls and SoCalGas plans to overhaul and restore Unit #4.
SoCalGas also plans to add an engine oil heater to reduce the operational wear
and tear on internal components. The forecast utilized was developed using the
knowledge of experienced personnel who handled similar overhauls and oil
heater installations.

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The Honor Ranch project is for a feasibility study to replace five

compressors and enterprise high-speed reciprocating engines. SoCalGas states
that the compressors have reached the end of their useful life after approximately
forty years of service. The forecast method utilized is zero-based.
The Playa Del Rey project is to build and place in service a wet gas126
compressor. The forecast was developed using similar projects completed in
recent years.
Blanket Projects consist of various smaller projects with individual cost
estimates to replace and upgrade compressor equipment. The forecast was
developed using knowledge of managers at storage fields.
ORA does not object to the 2018 and 2019 forecasts but recommends
adopting 2017 adjusted, recorded expenses of $5.683 million instead of the 2017
forecast.
13.2.2. Storage Wells
The next set of projects is associated with storage wells. Projects are for the
replacement of components, and design and drilling of replacement wells for the
injection and withdrawal of natural gas and reservoir observation.

Wet gas is natural gas that contains more than 0.1 gallons of condensable elements per 1,000
126

cubic feet of gas.

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Storage Wells 2017 2018 2019

Replacements $4,000,000 $18,000,000 $49,000,000
Plug & Abandon $38,900,000 $23,150,000 $7,250,000
Tubing Upsizing $2,680,000 $1,050,000 $0
Workovers $11,969,000 $5,369,000 $969,000
Wellhead Repairs & Replacements $1,036,000 $556,000 $0
Recompletions $0 $0 $0
Blanket Projects $1,000,000 $1,000,000 $1,000,000
Cushion Gas Purchase $0 $0 $2,340,000
Total $59,585,000 $49,125,000 $60,559,000

There are approximately 57 to 65 wells that are planned for abandonment.

Replacement storage wells will be drilled to replace abandoned wells. The
forecast for replacements and plugging and abandoning wells vary in cost, but
the average replacement cost is $7 million per well and $0.850 million for each
abandonment.
SoCalGas also plans to redesign wells to improve tubing flow to increase
injection and withdrawal capacity and to create a dual barrier for safety. Well
workovers are maintenance activities to prevent fluid encroachment and
maintain withdrawal and injection capacity. SoCalGas also plans to replace or
repair wellhead valves and seals on various wells to maintain equipment
integrity. All of these projects were forecast utilizing a zero-based method.
Blanket projects consisting of multiple smaller projects were forecast using
experienced professionals. Finally, SoCalGas plans to purchase cushion gas127 to
support the final phase of the Honor Rancho expansion project. Costs are
estimated at $2.74 to $2.91 per decatherm.

The minimum volume of gas required in an underground storage reservoir to provide the
127

necessary pressure to deliver working gas volumes to customers.

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ORA does not object to the 2018 and 2019 forecasts but recommends
adopting 2017 adjusted, recorded expenses of $51.446 million instead of the 2017
forecast. ORA also recommends the creation of a balancing account to record
costs of capital expenditures for wells.
13.2.3. Pipelines
This set of projects is associated with upgrading or replacing field piping
and related components.

Pipelines 2017 2018 2019

Aliso Valve Replacements $880,000 $880,000 $880,000
Aliso Pipe Bridge Replacement $8,000,000 $8,000,000 $0
Blanket Projects $11,467,000 $4,000,000 $6,800,000
Total $20,347,000 $12,880,000 $7,680,000

SoCalGas plans to replace various aboveground valves of different sizes

and pressures at the Aliso Canyon location. This work is unrelated to the Aliso
Canyon leak incident. Each valve replacement is approximately $20,000.
SoCalGas also plans to relocate an existing pipe rack at Aliso that is located in a
ravine area. The project cost was derived from a work estimate through a
bidding process. Finally, this group of projects includes blanket projects that
were estimated using the knowledge and expertise of managers at the storage
fields.
Once again, ORA does not object to the 2018 and 2019 forecasts but
recommends adopting 2017 adjusted, recorded expenses of $21.017 million.
13.2.4. Storage Purification Systems
This set of projects is associated with equipment used to remove
impurities from natural gas from storage. This includes equipment used for the
conditioning of such gas removed from storage.

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Purification Systems 2017 2018 2019

Aliso Dehydration Upgrades $750,000 $1,250,000 $1,250,000
Goleta Dehydration Upgrades $0 $3,050,000 $0
Blanket Projects $4,760,000 $5,485,000 $4,360,000
Total $5,510,000 $9,785,000 $5,610,000

Projects are planned to upgrade the dehydration plans at Aliso Canyon128

and Goleta. The projects also include installation new gas and glycol filters for
improved gas conditioning and instrumentation upgrades. Costs were forecast
using quotes provided by vessel fabricators, equipment manufacturers,
contractor estimates, and similar work performed previously. The forecast also
includes blanket projects that were estimated using the knowledge and expertise
of managers at the storage fields.
ORA does not object to the 2018 and 2019 forecasts but recommends
adopting 2017 adjusted, recorded costs of $2.915 million for 2017.
13.2.5. Storage Auxiliary Equipment
These projects consist of work on various types of field equipment not
included in other project groups. Examples of such equipment are
instrumentation, measurement, controls, electrical, drainage, infrastructure,
safety, security, and communications systems.129

128 This work is unrelated to the Aliso Canyon leak incident.

129 Exhibit 273 at NPN-46.

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Auxiliary Equipment 2017 2018 2019

Aliso Overhead Power System
$0 $1,000,000 $1,250,000
Upgrades
Aliso Electrical System Upgrades $3,450,000 $2,520,000 $2,500,000
Aliso Slope Stability $1,000,000 $1,000,000 $1,000,000
Aliso Sesnon Gathering Plant Relief $750,000 $750,000 $500,000
Honor Ranch Operations Center
$200,000 $1,000,000 $1,800,000
Modernization
Playa Del Rey Erosion & Slope
$400,000 $2,500,000 $1,000,000
Stability
Blanket Projects $13,406,000 $10,970,000 $11,625,000
Total $19,206,000 $19,740,000 $19,675,000

Aliso Canyon project upgrades are planned to replace the overhead power
system with new poles and system infrastructure with new poles and wires to
respond to weather conditions and meet electrical standards. These projects
were forecast based on historical costs and is unrelated to the Aliso Canyon leak
incident. SoCalGas also plans to enhance safety around the Fernando Fee well
site to protect against soil erosion and enhance stability. Costs were forecast
using a zero-based method. Another Aliso project is a redesign of the Sesnon
Gathering Plant by adding a new vessel with drip pot to eliminate pressure
points. The forecast for this project also utilized a zero-based methodology.
The Honor Ranch Operations Center Modernization is for the update,
modernization and reconfiguration of the control room to allow enhanced
operations. Costs were forecast using projects similar in scope.
SoCalGas also plans to improve slope stability and address soil erosion of
the Playa Del Rey compressor station which is located along a bluff. Costs were
based on recent phases of the project.
SoCalGas also included blanket projects composed of various smaller
projects that were estimated using the knowledge and expertise of managers at
the storage fields.

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ORA does not object to the 2018 and 2019 forecasts but recommends
adopting 2017 adjusted, recorded costs of $17.618 million for 2017.
13.2.6. SIMP
The SIMP capital projects relate to well work mitigation resulting from
inspection of SoCalGas’ gas storage wells initially inspected in 2016. The second
cycle of well inspections is set to begin in 2018 following the two-year inspection
cycle proposed by DOGGR. SoCalGas expects additional regulations and orders
affecting capital costs will continue to be proposed. The table below shows the
forecast for SIMP-related capital projects for 2017, 2018, and 2019. Majority of the
costs are associated with inspection and return to operation or workovers, for all
fields by the end of TY2019. There are also projects relating to two pilot efforts to
monitor integrity and for evaluation of cathodic protection. All projects were
forecast using a zero-based method. As with SIMP O&M costs, SoCalGas also
requests that SIMP capital costs continue to receive two-way balancing account
treatment due to the changing nature of regulations.

SIMP 2017 2018 2019

Plug and Abandonment of Wells $3,800,000 $1,900,000 $0
Inspection/Return to Operation $68,905,0000 $68,120,000 $46,232,000
Data Management $2,580,000 $1,350,000 $650,000
Emerging Monitoring Integrity &
$0 $0 $5,000,000
Safety Technology Pilot
Cathodic Protection $0 $0 $1,500,000
Total $75,285,000 $71,370,000 $53,382,000

Once again, ORA recommends the adoption of 2017 adjusted, recorded

costs of $61.968 million for 2017 but does not object to the forecasts for 2018 and
2019. ORA also recommends that the SIMP balancing account treatment for
capital costs be modified into a one-way balancing account for similar reasons
stated in its O&M recommendation.

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13.2.7. Aliso Canyon Turbine Replacement

The Aliso Canyon Turbine Replacement Project was authorized in
D.13-11-023 and was placed into service on May 17, 2018. A more detailed
background and description of this project is discussed in section 14 of this
decision. The costs being addressed here are capital costs for the project for 2017
and 2018 which are forecast at $19.602 million and $1.250 million respectively.
ORA does not have any objections or alternative recommendations regarding
these costs.
13.2.8. Discussion
ORA makes the same recommendation with respect to all the disputed
projects and that is to adopt 2017 adjusted, recorded costs instead of the 2017
forecasts. For its part, SoCalGas states that projects experience delays and
several projects planned for 2017 were not yet completed and so those costs were
not included in 2017 adjusted, recorded costs. SoCalGas argues that despite the
delays, the work still needs to be completed and so the requested funds are
necessary. SoCalGas also gave examples of projects that were planned as
multi-year projects and that some work may be shifted as priorities change.
From our review of the testimony and arguments by ORA and SoCalGas,
we note that ORA provided no explanation why it recommends using 2017
recorded costs and so we assume that the recommendation is based on using
more recent data and because actual expenses for 2017 appear to be more reliable
than the 2017 forecasts. However, this does not account for the possibility of
projects being delayed or re-scheduled as SoCalGas argues. SoCalGas also gave
an example of a multi-year project that requires work being performed in 2017,
2018, and 2019 and how some work originally planned for one year can be
re-scheduled or re-prioritized to other another year. ORA did not contest the

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scope and projected costs of the projects themselves or the forecast methods that
were utilized and so we find that ORA’s recommendation does not address or
respond to the arguments that SoCalGas presented. Thus, between the two
parties’ arguments, we find that SoCalGas provided more support for its position
in the form of testimony and analysis.
We also find that the necessity of the various projects was adequately
supported by testimony and ORA did not object to the various forecast
methodologies that were utilized. Although we express some concern that
delays in 2017 may lead to delays in 2018 and 2019 and cause projects planned
for 2019 to not be completed, we expect SoCalGas to properly prioritize projects
under this section especially projects that are necessary for safety and compliance
with safety-related regulations, as well projects that mitigate key risks. Based on
our review, we find that all of SoCalGas’ capital project forecasts for UGS
totaling $208.535 million in 2017, $180.646 million in 2018, and $172.606 million
in 2019, should be authorized.
Following our discussion of the two-way balancing treatment for O&M
costs, we likewise find it reasonable to authorize the SIMPBA to continue to
record capital costs relating to SIMP and to continue the balancing account
treatment established in D.16-06-054 for recovery of booked costs. For capital
projects, the SIMPBA shall also continue to be maintained as a two-way
balancing account subject to the same recovery procedure established in
D.16-06-054 for any undercollections from the authorized amount. Any unused
funds are to be returned to ratepayers.
Finally, we find that ORA’s request for a balancing account to record
capital expenses for wells is not necessary. ORA’s recommendation is based on
its concern that SoCalGas will not be able to complete seven well replacements

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planned for 2019 because it only plans to replace a total of four wells in 2017 and
2018. However, as SoCalGas explains, fewer projects are planned for 2019 for the
other project groups under Storage Wells in recognition of the greater number of
well replacements planned for 2019. As shown in section 13.2.2., the requested
amounts for most of the other project groups under Storage Wells are less for
2019. SoCalGas also cited a specific example regarding well plug and
abandonments wherein only five are planned for 2019 compared to 40 for 2017
and 17 for 2018.
14. Aliso Canyon Turbine Replacement
In D.13-11-023,130 this Commission granted SoCalGas’ authority to
“construct and operate the Aliso Canyon Turbine Replacement Project to replace
three obsolete gas turbine driven centrifugal compressors and associated
equipment with a new electric compressor station and construction of other
improvements at the Aliso Canyon storage field.”131
The decision authorized a total cost $200.9 million for the project but also
directed that if actual costs exceeded $200.9 million, “a reasonableness review of
all project costs must be conducted in SoCalGas’ general rate case following
completion of the project.”132 The decision added that efforts to maximize the
O&M cost savings and capital benefits be reviewed as well. Costs exceeding the
authorized amount of $200.9 million were to be tracked in a memorandum
account.

130 Decision in A.09-09-020 which became effective November 11, 2014.

131 D.13-11-023 OP 1 at 69.
132 D.13-11-023 OP 12 at 73.

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The project was completed and placed into service on May 17, 2018; and in
this application, SoCalGas seeks to establish the reasonableness of the
$275.5 million of actual project costs to complete the project and to recover
$74.6 million in costs representing the amount that actual costs exceed the
authorized cost in D.13-11-023 of $200.9 million. SoCalGas states that total
project costs actually exceed $275.5 million by approximately $11.9 million. 133
However, SoCalGas did not update its testimony to include this amount and is
not seeking recovery of this amount of $11.9 million in this GRC.
14.1. Project Cost Elements
The project cost of $200.9 million in A.09-09-020 was developed using
major project cost elements. In this application, SoCalGas uses these same cost
elements but with adjustments to each one. The table below shows a list of these
major project cost elements as well as a breakdown of estimated costs and the
corresponding estimated costs at completion and the variance between the two
totaling $74.6 million.

A.09-09-020 Completion
Scope Variance
(2009) (2018)
Central Compressor Station $166,000,000 $146,600,000 (19,400,000)
Environmental $1,000,000 $13,000,000 $12,000,000
Substation & Electrical
$10,200,000 $23,900,000 $13,700,000
Infrastructure
Buildings $900,000 $13,500,000 $12,600,000
Other $200,000 $8,400,000 $8,200,000
Company Labor $0 $7,200,000 $7,200,000
Indirects $22,600,000 $62,900,000 $40,300,000
Total $200,900,000 $275,500,000 $74,600,000

133 Exhibit 279 Appendix A at DLB-A-1.

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Central Compressor Station

The Central Compressor Station accounts for approximately 70 percent of
direct costs for the entire project and is the largest component of the project. The
station houses three new electric-driven, variable-speed compressors, along with
scrubbers, piping, coolers, and electrical equipment.134 Construction activities
include clearing and grading, construction of building and equipment
foundations, construction of compressor housing stations, construction and
installation of associated control equipment, air cooled heat exchangers, other
equipment, and piping. Construction includes a 500-foot aboveground pipeline
for moving compressed gas into the storage field. Costs also include
pre-engineering, engineering services, and procurement.
Environmental
Environmental costs are primarily costs to retain consultants to comply
with California Environmental Quality Act requirements including costs for the
preparation of the Environmental Impact Report (EIR).
Substation and Electrical Infrastructure
According to SoCalGas, the replacement of gas turbines with electrical
compressors required construction and operation of a new substation to provide
electric service at the Aliso Canyon Storage Field and SCE was contracted to
provide the substation.
Buildings
The buildings component represents costs for relocation of a guard house
and the replacement of office buildings.

134 Exhibit 277 at DLB-13.

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Others
This cost category is for construction activities associated with fill sites,
temporary office trailers, project controls support and increased site security.
Company Labor
These are for labor costs including assessment of environmental impacts in
aid of the development of the EIR, planning and development, and actual project
activities.
Indirects
Indirect costs include overhead costs associated with direct costs such as
payroll taxes and pension and benefits. Also included are Allowance for Funds
Used During Construction (AFUDC) and property taxes.
14.2. Positions of Intervenors
ORA is the only party that provided comments for this section and while
ORA does not take issue with SoCalGas’ presentation of its testimony at this
time, ORA recommends that a full audit of SoCalGas’ expenditures be performed
by the Commission or an assigned entity to determine the reasonableness of all
charges or to conduct a reasonableness review in the next GRC.
14.3. Discussion
D.13-11-023 provided a mechanism for reviewing costs in excess of the
$200.9 million that was already authorized in that decision. In Ordering
Paragraph (OP) 12, the decision provides that after completion of the project, a
reasonableness review of project costs as well as efforts to maximize O&M cost
savings and capital benefits should be conducted in the following GRC. The
project was fully completed and placed into service on May 17, 2018 and this
GRC is the GRC following completion of the project. Thus, we find that the

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reasonableness review of the project should be conducted in this GRC and not in
the next GRC.
With respect to ORA’s recommendation that the Commission conduct an
audit of all project costs, we note that ORA did not express any concerns with
SoCalGas’ presentation of testimony in this GRC and did not present any specific
reasons or concerns to be addressed in its recommendation that an audit be
conducted such as insufficiency or incorrectness of the evidence presented.
Thus, we find that a reasonableness review in this GRC is sufficient to resolve the
requests being made.
We reviewed the testimony presented in this GRC as well as the findings
made in D.13-11-023 and focus our review on the portion of the costs that exceed
project cost of $200.9 million authorized in D.13-11-023. The review and analysis
conducted in D.13-11-023 sufficiently established the necessity of the project as
well as the reasonableness of the project cost authorized in that decision. We
find that it is not necessary to go over these issues again and that it is appropriate
to adopt the findings made in D.13-11-023. We also note that D.13-11-023
recognized that actual costs authorized for the project may exceed the authorized
amount and provided a mechanism for which to seek recovery thereof and
which SoCalGas complied with.
With respect to the $74.6 million variance, we reviewed the seven major
project cost elements and separately examined the reasonableness of the
variances presented in each cost element. These project elements are the same
ones that were presented and reviewed in D.13-11-023. We also examined
SoCalGas’ efforts to maximize O&M cost savings capital benefits as directed by
D.13-11-023.

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Generally, in explaining the reason for the overall variance of

$74.6 million, SoCalGas cites to the significantly expanded scope of the project
following the increased environmental impacts identified in the EIR and the
increased mitigations that were required as a result thereof. SoCalGas also cites
to the lengthy delay in completing the project, and that the costs that were
previously developed and identified in A.09-09-020 reflect base year 2009
nominal dollars. SoCalGas claims that price escalation alone would compare to
approximately $232 million today.135
We reviewed the timeline of the project and do not disagree that the
project was not approved until November 22, 2013, or more than four years from
the time the application was filed. SoCalGas’ original timeframe projected that
the project would be completed in approximately one year, but we find that the
expanded scope of the project, which required additional planning and redesign
justifies the additional delay. Thus, we find that SoCalGas is not responsible for
delays to the completion of the project.
For the Central Compressor Station, cost-saving efforts included
contracting of services with a firm to assist in competitive solicitation of bids
from 19 qualified contractors, hiring of an engineering firm to provide expert
design and construction oversight, savings from design optimization, application
of drilling methods in certain areas as opposed to excavation, and use of a soil
nail wall instead of a concrete wall. Collectively, projected costs were reduced by
$19.4 million from the original estimate in 2009.

135 Exhibit 277 at DLB-32.

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Environmental costs increased significantly from the 2009 estimate because

the EIR issued by the Commission identified additional and more significant
potential environmental impacts that needed to be addressed, which required
more time and resources than contemplated in the 2009 estimate. There were
also added costs for activities which we find to be necessary such as surveying
and monitoring used to prepare the EIR, SoCalGas’ compliance costs which
included construction and vegetation clearing, and mitigation costs which also
included construction and habitat, vegetation, and tree mitigation activities.
The design for the SCE substation were modified to meet design
requirements for the Central Compressor Station and site preparation costs were
higher than anticipated because of additional needs such as better access,
requirements because of the new design, a new ordinance requiring a
biofiltration system, and additional environmental monitoring required by the
EIR. In an effort to lower costs, SoCalGas conducted a competitive solicitation
for construction of a plant power line.
For Buildings, most of the increased costs was a result of SoCalGas’
decision to replace existing office trailers with a permanent steel building in
order to increase size and to afford extra protection against wind, fire, and other
elements, and thereby enhance safety. Other enhancements from the original
plan include enhanced access to comply with anticipated safety-related
regulations.
Increased costs in the Others cost category was mostly due to the
construction of four new fill sites in part because of requirements from the EIR.
An already available fill site that was contemplated in the 2009 plan was not
available for the project when construction began because it was utilized for
another project.

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For Company Labor, the original plan was to use only a small team to
provide management and oversight over third-party contractors that would
execute project activities. As the project progressed, SoCalGas deemed it more
prudent to use company employees to perform activities that would have been
performed by third-party contractors. The overall increase in the scope of the
project contributed to higher labor costs.
Regarding the increase in indirect costs, the majority of the increased costs
are due to the change in scope of the project. Direct capital costs increased by
$34.3 million, resulting in increased overhead costs as well. AFUDC and
property taxes increased significantly because of the extended length of time it
took to complete the project. Since the costs here are derivative in nature, very
little cost-saving methods were available.
Cost savings and capital benefits concerning the replacement of obsolete
gas compressors are detailed in Table DLB-10 and DLB-11 of Exhibit 277.
Savings include reductions in third-party and labor costs, reduced storage,
reduced air emission fees, etc. while capital benefits include reduced demand for
Regional Clean Air Incentives Market Trading Credits and reduced GHG
emissions.
Based on our review and analysis of the above, we find that the testimony
presented supports the reasonableness of the $275.5 million in capital
expenditures to complete the Aliso Canyon Turbine Replacement Project and
that SoCalGas should be authorized to recover in rates the $74.6 million in costs
which exceed the previously authorized amount in D.13-11-023. We also find
that the request to continue the Aliso Canyon Memorandum Account (ACMA) to
record additional capital-related costs in excess of $275.5 million is reasonable.

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Any recovery sought for such amounts should be subject to a reasonableness

review in SoCalGas’ next GRC.
15. Gas Control and System Operations and Planning
This section addresses SoCalGas’ TY2019 forecast for Gas Control and
System Operations and Planning. SoCalGas’ forecast for TY2019 is $8.958 million
in O&M costs. There are no associated capital expenditures. The forecast
represents an increase of $2.931 million over 2016 adjusted, recorded expenses.
A large part of the increase is associated with incremental costs for Emergency
Services. All costs were forecast using five-year average methodology.
Costs associated with Emergency Services and Supervisory Control and
Data Acquisition (SCADA) activities are presented by SoCalGas as
RAMP-related costs although these costs were not included in the RAMP Report.
Rather, these costs are presented in the GRC as post-RAMP additions following
the comment process in the RAMP proceeding and final review of RAMP risks,
costs, and requests to be included in the GRC. The RAMP risks being mitigated
are employee, contractor, customer, and public safety and catastrophic damage
involving high pressure pipeline failure. The total RAMP costs requested for this
section is $5.708 million and these will be reviewed in the cost categories where
they are included.
Consistent with other applicable sections of the decision, costs pertaining
to the Aliso Canyon gas leak incident are excluded from the forecast and from
historical averages.
This section shall also address the IT Business Unit capital projects
requested under this section.

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15.1. Non-Shared Costs

Non-shared costs for Gas Control & System Planning are forecast at
$2.972 million which is $2.186 million higher than 2016 adjusted, recorded
expenses for 2016.
15.1.1. Storage Products Manager
The Storage Products Manager group operates the California Energy Hub
(CEH) to provide unbundled natural gas storage and parking services such as
natural gas storage, traditional hub services such as natural gas parking and
loaning,136 and natural gas sales from projects authorized by the Commission.
The TY2019 forecast for this group is $0.156 million which is around $10,000
higher than base year levels.
15.1.2. Emergency Services
The forecast for Emergency Services is $2.816 million which is
$2.176 million higher than 2016 adjusted, recorded costs. This department
supports SoCalGas’ goal of maintaining comprehensive and coordinated
emergency response and recovery programs to comply with federal and state
requirements. SoCalGas intends to add 13 positions in addition to the six
employees that currently support the functions.
15.1.3. Positions of Intervenors
ORA provided comments to SoCalGas’ non-shared forecast. ORA
recommends $1.145 million which is SoCalGas’ recorded costs for 2017. ORA
states that SoCalGas’ request is excessive and that spending from 2012 to 2016
ranged from $0.640 to $0.905 million.

Natural gas parking is the temporary storage of natural gas on the SoCalGas system, and
136

natural gas loaning is the temporary lending of natural gas from the SoCalGas system.

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15.1.4. Discussion
ORA’s analysis is that spending has not exceeded $1 million from 2012 to
2016 and that the establishment of emergency response procedures pursuant to
GO 112-F was required to be complied with no later than January 1, 2017. Thus,
ORA argues that recorded costs of $1.145 million in 2017 were already sufficient
to comply with GO 112-F.
Based on our review however, the 2017 costs do not include compliance
with other requirements such as the Gas Emergency Management Program
required by GO 112 and the training and certification requirements required by
the California Division of Occupational Safety and Health department regarding
the Incident Command System. The additional FTEs being requested will enable
SoCalGas to monitor and administer the required trainings and to implement a
recommendation by SED to enhance the frequency of emergency preparedness
and response exercises and coordination with first responders and public
officials regarding said trainings.
In addition, pursuant to the RAMP process, SoCalGas proposes to conduct
certain activities beyond the minimum requirements set forth by GO 112-F in
order to enhance its response and recovery programs for employees and its
natural gas system operations as well as the public awareness program with first
responders. SoCalGas adds that additional resources are necessary to maintain
and enhance programs under GO 112-F such as improving an Incident
Command System that complies with the general order and implementing
emergency procedures and training.
Given that Emergency Services is on call 24 hours a day and in light of the
recent wildfires and atypical weather conditions, we find that there is an

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increased need for emergency response preparedness and coordination with

other first responders.
Based on the above, we find SoCalGas’ request for additional FTEs for
Emergency Services to be reasonable and necessary in order to enhance
SoCalGas Emergency Services capabilities. We also find the forecast for the
Storage Products Manager group to be reasonable and therefore find that the
total forecast for non-shared costs of $2.972 for TY2019 should be approved. The
above forecast will provide the necessary funding for a resulting total of 18.5
FTEs for Emergency Services. We also agree with SoCalGas that the
appropriateness of the funding level being authorized can be reviewed when it
files its RAMP spending and accountability reports.
15.2. Shared Costs
SoCalGas’ TY2019 forecast for shared costs is $5.986 million which is
$0.745 million higher than base year adjusted, recorded costs. Shared costs
include costs for four departments: Energy Markets & Capacity Products, Gas
Scheduling, Gas Transmission Planning, and Gas Control and SCADA
Operations.
15.2.1. Energy Markets & Capacity Products
The forecast for Energy Markets & Capacity Products is $1.550 million
which is around base year levels. This group is comprised of the director,
Capacity Products Manager, and Capacity Products Support. The group
provides services for gas marketers that serve SoCalGas and SDG&E customers,
large nonresidential customers who choose to act as their own gas supplier, and
core aggregators. The group also manages business relationships, provides

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analytical and regulatory compliance support, and represents SoCalGas in the

development and modification of gas industry standards for gas scheduling. 137
The group also monitors market pricing information and recommends changes
to capacity and storage. The group also develops and maintains SoCalGas’ and
SDG&E’s electronic bulletin board called Envoy.138
15.2.2. Gas Scheduling
Gas Scheduling manages the day-to-day system and operation for
nominations, allocations, and scheduled gas transportation as well as the
Operational Flow Order rules. Gas Scheduling also tracks storage accounts,
tracks and clears shipper imbalances, and administers the imbalance trading
process. Gas Scheduling also makes regular postings on Envoy. The TY2019
forecast for this group is $0.724 million which is $0.124 million higher than 2016
costs.
15.2.3. Gas Transmission Planning
Gas Transmission Planning is responsible for long-term planning and
design of Applicants’ gas transmission systems and continually assesses the
system’s ability to meet Commission design standards, service obligations, and
to satisfy new demand to the system. The forecast for Gas Transmission
Planning is $0.691 million which is $84,000 higher than base year levels.
15.2.4. Positions of Intervenors
Comments to the shared services forecasts were provided by ORA, SCGC,
and EDF.
ORA does not take issue with any of the shared services forecasts.

137 Exhibit 17 at DKZ-3.

138 This is the name of the Applicants’ electronic bulletin board and is not an acronym.

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SCGC recommends that SoCalGas be authorized to spend an additional

$1 million in 2019 to incorporate the trading of Daily Scheduled Quantities into
Envoy’s electronic bulletin board system.
EDF recommends that SoCalGas automate its imbalance trading within the
Envoy system to enable “day after” flow imbalance trading. EDF also initially
recommended that SoCalGas allocate funding to create a plan to address
operational and market risks associated with gas and electric coordination. We
find that these issues are addressed in the RAMP Report and proposed
mitigations such as real-time monitoring of the transmission system and remote
monitoring of gas and electric systems are already proposed in the GRC. EDF
did not raise this issue again in its opening brief.
15.2.5. Discussion
We reviewed the TY2019 shared services forecast for Gas Control &
Systems Operations and find the proposed costs to be reasonable and necessary
to carry out the various functions performed by the Gas Control Systems
Operations division. SoCalGas provided sufficient testimony to support its
requested costs including an explanation of the cost drivers for the $0.745 million
increase from base year recorded costs. We also find the forecast methodology of
using a five-year historical average to be appropriate. Parties did not object to
the proposed costs. Thus, we find that the proposed forecast of $5.986 million for
TY2019 for shared services costs is reasonable and should be approved.
With regards to proposals by SCGC and EDF concerning automation of
SoCalGas’ daily imbalance trading, the assigned ALJ issued an oral ruling during
the evidentiary hearing on July 10, 2018 that all core balancing issues are outside

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the scope of these GRC proceedings as determined by the assigned

Commissioner.139 The ruling adds that such issues are better raised in the core
balancing proceeding.140 In a subsequent ruling issued on September 17, 2018,
the assigned ALJ further clarified that funding requests for proposals by EDF
and SCGC relating to core balancing to actual demand, as well as the proposal
for automation, should likewise be raised and addressed in the core balancing
proceeding.
EDF states that the core balancing proceeding only applies to core
customers and not to non-core customers. We agree with EDF but find that there
is only a single process for core balancing to actual demand for both core and
non-core customers. A decision modifying the process (such as automation) of
the daily imbalance trading for core customers would also apply to non-core
customers. It would be duplicative for the Commission to decide a single
process in two separate proceedings and may lead to inconsistencies. Thus, we
find it reasonable and prudent to defer judgment on these issues as it applies to
non-core customers to the Commission’s resolution of these issues in
A.17-10-002.
15.3. Operational Flow Cost Memorandum Account
SoCalGas requests that the Commission allow recovery of expenditures
recorded in the Operational Flow Cost Memorandum Account (OFCMA) in the
amount of $1.696 million.

139 Transcript Volume 11 at 579-580.

140 A.17-10-002 filed by SDG&E and SoCalGas on October 2, 2017.

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The OFCMA was authorized in D.15-06-004141 to record expenditures for

SoCalGas’ Operational Flow Order (OFO) and Emergency Flow Order (EFO)
activities. The low OFO and EFO establish procedures that trigger when it is
forecast that the storage withdrawal allocated to the balancing function will be
exhausted or when there is an actual supply or capacity shortage that threatens
deliveries to end-use customers. Costs tracked in the OFCMA are to be
recovered in the GRC. And as stated above, SoCalGas seeks recovery of
$1.696 million in capital expenditures that have been tracked in the
memorandum account.
SoCalGas states that the costs incurred were for major system
enhancements required in Envoy and the Specialized Core Billing System in
order to execute the OFO and EFO implementation. The enhancements included
the creation of new screens to view and process low OFO calculations,
modifications to the Gas Scheduling process to replace the “winter balancing
rules” with the new procedures, creation of new alerts, and updates to
accommodate changes to the billing system.142
We reviewed SoCalGas’ request and find that SoCalGas provided
sufficient testimony to support its request. The testimony provides sufficient
detail regarding the costs incurred as well as the necessity thereof. SoCalGas
also complied with the requirements set forth in D.15-06-004 and submitted the
necessary periodic reports that are detailed in Table DKZ-11 of Exhibit 17.143

141 D.15-06-004 OP 13 at 43 to 44.

142 Exhibit 17 at DKZ-35.
143 Exhibit 17 Table DKZ-11 at DKZ-34 to 35.

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Parties did not object to the reasonableness of the proposed costs. Therefore, we
find that the $1.696 million balance in the OFCMA are reasonable and authorize
recovery thereof in rates. However, we find ORA’s proposal to normalize cost
recovery over the 2018 and 2019 period is not necessary because of the relatively
minimal impact on rates.
15.4. IT Business Unit Capital Projects
SoCalGas is also requesting $3.401 million in 2017, $3.806 million in 2018,
and $4.771 million in 2019 for six IT-related projects. The projects are described
in Exhibit 17.144 Additional details are provided in the capital workpapers of
witness Olmsted.
We reviewed all six projects and find the requested amounts reasonable
and should be approved. Four of the projects provide upgrades to SoCalGas’
Envoy system replacing outdated software and providing system enhancements
that allow necessary functionalities and increased security. The other two
projects are for communication trailers that support first responders and
replacement of an outdated system that supports important gas operations
functions. Parties do not oppose these proposed capital projects.
16. Pipeline Integrity for Transmission and Distribution
This section addresses costs associated with the Pipeline Integrity for
Transmission and Distribution organization which is responsible for
implementing and managing requirements set forth in 49 Code of Federal
Regulations (CFR) section 192, Subpart O and Subpart P.

144 Exhibit 17 at 22 to 25.

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Compliance with Subpart O is accomplished through the Transmission

Integrity Management Program (TIMP) which requires Applicants to “identify
threats to transmission pipelines in HCA, determine the risks posed by these
threats, schedule prescribed assessments to evaluate these threats, collect
information about the condition of the pipelines, take actions to minimize
applicable threat and integrity concerns to reduce the risk of a pipeline failure,
and report findings to regulators.”145
Meanwhile, compliance with Subpart P is accomplished though the
Distribution Integrity Management Program (DIMP) which requires Applicants
to “collect information about their distribution pipelines, identify additional
information needed and provide a plan for gaining that information over time,
identify and assess applicable threats to the distribution system, evaluate and
rank risks to the distribution system, determine and implement measures
designed to reduce risks from failure of the gas distribution pipeline and
evaluate the effectiveness of those measures, develop and implement a process
for periodic review and refinement of the program, and report findings to
regulators.”146
TIMP and DIMP are relatively new federal code requirements that go
beyond routine maintenance activities by monitoring and remediating risk on
the gas pipeline system and maintaining the integrity of the gas system. TIMP
manages risk reduction through assessments and remediation of transmission
pipelines in populated areas on a recurring schedule while DIMP implements

145 Exhibit 111 at MTM-3.

146 Id. at MTM-3 to 4.

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target activities, programs, and projects that provide an extra layer of

monitoring, assessment, and proactive remediation.147
16.1. SoCalGas
SoCalGas’ total forecast for TIMP and DIMP is $86.00 million for TY2019
O&M costs and capital costs of $125.184 million each for 2017 and 2018, and
$215.00 million in 2019.
Certain costs are associated with mitigation of key RAMP risks identified
in the RAMP Report. These are Catastrophic Damage Involving High-Pressure
and Medium-Pressure Pipeline Failure and Records Management. Total
RAMP-related costs associated with TIMP and DIMP is $86.00 million for TY2019
O&M costs and capital costs of $125.184 million each for 2017 and 2018, and
$215.00 million for 2019.148 Incremental RAMP costs for TIMP and DIMP are
approximately $8.317 million for TY2019 O&M costs and capital costs of
$9.600 million for 2017, $6.500 million for 2018, and $102.846 million for 2019.149
Most of the incremental RAMP costs are associated with the DIMP Distribution
Risk Evaluation and Monitoring System (DREAMS) and the Gas Infrastructure
Protection Project that is also part of DIMP.
Pursuant to D.16-06-054, costs associated with the Aliso Canyon gas leak
incident are excluded from the forecast and from historical data.
16.1.1. O&M
The TY2019 forecast of $86.00 million is $10.342 million higher than 2016
adjusted, recorded costs. Both non-shared and shared costs are simply

147 Exhibit 111 at MTM-3 to 4.

148 Exhibit 111 at MTM-5, Table MTM-2.
149 Exhibit 111 at MTM-8 to MTM-10, Tables MTM-5 & 6.

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comprised of costs associated with TIMP and DIMP. The table below shows the
breakdown of both non-shared and shared O&M costs for TIMP and DIMP. All
forecasts utilized a zero-based methodology because historic averages do not
reflect anticipated changes in scope from year to year and because both
programs are still relatively new.

Total TIMP
O&M Non-shared Shared
or DIMP
TIMP $44,351,000 $1,649,000 $46,000,000
DIMP $38,359,000 $1,641,000 $40,000,000
Total
Non-shared $82,710,000 $3,290,000 $86,000,000
and Shared

[Link]. TIMP
The activities prescribed by Subpart O are categorized into seven topic
areas and are briefly described below:
Threat Identification and Risk Assessment
All pipelines operated in HCAs are evaluated for nine threat categories
which are “external corrosion, internal corrosion, stress corrosion cracking,
manufacturing, construction, equipment, third party, incorrect operations, and
weather related and outside force.”150 Risk assessment is conducted by relative
assessment of relevant threats and industry data.
Assessment Plan
Once HCA pipelines are prioritized, an assessment plan is created to
manage the scheduling and due dates for all assessments.

150 Exhibit 111 at MTM-14.

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Assessment
The primary assessment methods utilized are in-line inspection,151
pressure testing, external corrosion direct assessment, and internal corrosion
direct assessment.
Remediation
Remediation is conducted through repair or reconditioning of a pipeline
coating and can include replacement.
Additional Preventative and Mitigative Measures
Performed once data is analyzed and there is need is identified for such
additional measures.
Geographic Information System (GIS)
A computer system that presents all types of geographic data and is used
to manage medium and high-pressure pipelines.
Auditing and Reporting
Relevant integrity data is reported to the PHMSA annually. Copies of the
report are provided to the Commission. The report includes the total system
miles, the number of miles inspected, number of HCA miles, and number of
HCA miles inspected.
Costs to implement TIMP are balanced and recorded in the TIMP
Balancing Account (TIMPBA) and excess costs due to unanticipated activities
may be requested though an advice letter.
[Link]. DIMP
DIMP activities prescribed by Subpart P are as follows:

151 In-line inspection utilizes specialized inspection tools that travel inside the pipeline.

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System Knowledge
Data collection includes “understanding of system attributes which
include design, materials, construction methods, pipeline condition, past and
present operations, maintenance, local environment factors, and failure data.” 152
Threat Identification and Risk Analysis
The major incident categories are excavation damage, other outside force
damage, corrosion, material or welds, equipment failure, natural force damage,
and incorrect operations.
Programs/Projects and Activities to Assess Risk (PAAR)
PAAR programs are intended to address risk and implemented through
different avenues depending on the threat being addressed.
GIS
Same as described in TIMP in [Link]. above.
Reporting
Same as described in TIMP in [Link]. except for the content of the report
which is excavation damages, leaks repaired, hazardous leaks repaired, and
mechanical fitting failures.
As with TIMP, costs to implement DIMP are balanced and recorded in the
DIMP Balancing Account (DIMPBA) and excess costs due to unanticipated
activities may be requested though an advice letter.
16.1.2. Capital
TIMP and DIMP capital costs are set forth in the table below. According to
SoCalGas, recent incidents in the gas industry have upward pressures on TIMP

152 Exhibit 111 at MTM-20.

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to expand inspections and on DIMP to analyze risks and implement programs

and activities to address risk at an accelerated pace. All forecast methods were
developed using a zero-based methodology.

Capital 2017 2018 2019

TIMP $50,801,000 $50,801,000 $55,000,000
DIMP $74,383,000 $74,383,000 $160,000,000
Total $125,184,000 $125,184,000 $215,000,000

16.1.3. Positions of Intervenors

Comments were provided by ORA, TURN, CUE, CFC, and OSA.
ORA recommends using 2017 adjusted, recorded costs of $193.425 million
for 2017 TIMP and DIMP capital costs but has no objections to the rest of
SoCalGas’ O&M and capital forecasts.
TURN recommends removal of costs for clothing and gear other than
uniforms in the amount of $4,359.
CUE recommends that the capital budget for 2019 be increased to
$532.72 million or $385.965 million more than SoCalGas’ request based on
accelerated replacements for the Vintage Integrity Plastic Plan (VIPP) program to
replace pre-1986 Aldyl-A gas pipes and the Bare Steel Replacement Plan (BSRP)
program to replace bare steel pipes without cathodic protection. Aldyl-A is a
type of plastic which was used in gas pipes installed by SoCalGas starting in the
late 1960s. These pipes, particularly those installed before 1973, are particularly
prone to cracking and leaking. CUE also recommends an increase to the
Distribution Riser Inspection Program (DRIP).
CFC recommends a reduction of $1.759 million to the 2019 DIMP capital
forecast because of improved leak performance and because safety must be
balanced with affordability. CFC also states that future increases be subject to

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the advice, assessment, and recommendation of the three project advisors that
SoCalGas intends to add.
CUE also raised concerns in connection with the DRIP that contractors are
not familiar with SoCalGas’ facilities which impair their ability to detect
abnormal conditions but we agree with SoCalGas that only qualified contractors
perform the DRIP inspections and that many contractors have worked on
SoCalGas’ facilities for a number of years. The DRIP inspections are also
conducted on top of more routine maintenance inspections performed.
OSA states that TIMP should be expanded to address non-HCA areas and
that data obtained from tests should be validated.
In its rebuttal testimony, SoCalGas states that all parties recommend
adopting its 2017 adjusted, recorded capital costs.
16.1.4. Discussion
The activities associated with TIMP and DIMP are performed pursuant to
compliance with regulatory requirements mandated by 49 CFR section 192,
Subpart O and Subpart P. TIMP manages risk reduction through assessments
and remediation of transmission pipelines while DIMP implements target
activities, programs, and projects that provide an extra layer of monitoring,
assessment, and proactive remediation. We find the activities associated with
TIMP and DIMP as well as the RAMP-related activities to be necessary in
promoting the safe provision of natural gas services, mitigating key risks, and
compliance with the regulatory requirements mandated by Subpart O and
Subpart P.
O&M Costs
Parties generally do not object to SoCalGas’ O&M forecast except for a
recommended disallowance by TURN of $4,359 for clothing and gear and CUE’s

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recommended increase of $3.743 million. The increase recommended by CUE

are resulting O&M increases associated with CUE’s recommended acceleration
and increases to SoCalGas’ capital programs. We shall address this issue in our
discussion of the capital portion of this section. Regarding TURN’s
recommendation, we find that a de minimis amount of less than five thousand
dollars spent on clothing and gear used in conjunction with customer events to
create awareness of customer programs and services is reasonable and not for
promotional purposes. Additionally, TURN did not raise its initial objection in
briefs. Therefore, we find that SoCalGas’ TY2019 forecast for O&M costs of
$86.00 million is reasonable and should be approved.
2017 Capital Costs
With respect to the use of 2017 recorded data for 2017 capital costs, this
decision has generally stayed away from applying select updating of 2016 data
used in the application to 2017 data. As mentioned in other sections of this
decision, updating only select data may lead to inconsistent results as not all data
is being updated. For example, updating data in this section where recorded
costs in 2017 are tens of millions greater than the 2017 forecast would be
inconsistent if, for example, the Cybersecurity section is not updated as well
where capital spending in 2017 is tens of millions less than the 2017 forecast.
And we find that it is not practical to update all data. We do, however, recognize
that there are instances where it is prudent, necessary, and reasonable to apply
updated data in select areas and we shall exercise our discretion in doing so in
appropriate cases.
For TIMP and DIMP capital costs however, we find that the testimony and
other evidence submitted by SoCalGas adequately supports the 2017 forecast but

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there is little evidence submitted in this application to support the 2017 recorded
spending,153 which is more than $68 million higher than the 2017 forecast.
In any case, TIMP and DIMP costs are subject to a two-way balancing
account treatment through the TIMPBA and DIMPBA respectively. As adopted
in the past two SoCalGas GRC decisions154, recovery of any TIMP or DIMP
undercollections will be limited to undercollection amounts up to 35 percent of
the total revenue requirement for that program and will require a Tier 3 advice
letter. Amounts above 35 percent will be subject to a separate application
procedure. Under this recovery process, SoCalGas will be provided with the
appropriate safety spending and should be able to appropriately explain and
provide information regarding the spending. Therefore, we find it reasonable to
authorize the forecast amount of $125.184 million for 2017 capital costs.
2018 Capital Costs
Parties do not object to the capital forecast for 2018 and we find this to be
reasonable and supported by the evidence.
2019 Capital Costs
A large portion of CUE’s recommended increases are associated with
CUE’s recommended acceleration to the replacement rates for the VIPP and
BSRP programs. CUE recommends that the Aldyl-A pipe replacement in the
VIPP program be increased from 78 miles to 223 miles in 2019 and for the rate of
replacement of bare steel pipes in the BSRP program to be increased from
29 miles to 103.5 miles in 2019. These two recommendations alone amount to an

SoCalGas did provide in Exhibit 114 at MTM-11 that the replacement rate of vintage steel
153

and plastic was 8 miles more than the forecast of 55 miles.

154 D.13-05-010 and D.16-06-054.

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increase of $191.4 million and $60.04 million respectively over SoCalGas’

proposed capital budget for 2019 of $215.0 million. CUE states that SoCalGas’
planned replacement rate is well below the pace required to replace all Aldyl-A
and bare steel pipes within the 25 to 30 years it had originally projected.
While we agree with CUE that the VIPP, BSRP, and DRIP are important
programs that address safety risks from pipes that are composed of materials
that present a greater amount of risk, the RAMP Report shows that there are
other key pressing safety risks that must be addressed. In addition, the various
safety mitigation activities, plans and programs must also be prioritized and
balanced with keeping rates affordable. We must also consider SoCalGas’ labor
and non-labor resources and ability to comply with the replacement rate that
CUE is recommending even if we were to increase the authorized amount being
requested. In reviewing the evidence presented and the arguments raised by
parties, we find that SoCalGas’ proposed costs and replacement rate in this GRC
for the VIPP, BSRP, and DRIP programs are reasonable and within SoCalGas’
means to complete. In its next GRC however, SoCalGas should also include an
outlook of its long-term assessment and replacement plan for Aldyl-A pipes and
bare steel pipes without cathodic protection, in addition to what it plans for the
next GRC cycle as it appears that its current replacement rate is not on pace with
its original assessment.
On the issue of SoCalGas’ improved leak performance, the VIPP and BSRP
programs focus on replacement of plastic and vintage steel pipes as opposed to
basing the replacement rate on leaks. Thus, we find that improved leak
performance has little effect on the above programs which target wholesale
replacement of pipes. Regarding the three project advisors that SoCalGas plans
to add, SoCalGas states that the three advisors are being added to Gas

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Distribution’s focus on leak reduction efforts and have little to do with

determining the rate of replacement of plastic and vintage steel. Therefore, we
find that CFC’s proposals should be denied.
Based on the above, we find that SoCalGas’ forecast of $215.00 million for
capital projects in 2019, should be approved.
OSA Issues
With respect to OSA’s comments, SoCalGas responds that TIMP
inspections have been proactively expanded over the years to include non-HCA
areas which are beyond the current requirements set forth by Subpart O. 155 We
agree with this approach although SoCalGas should continue to properly
prioritize what pipelines are to be inspected as the amount of pipelines that can
be tested and inspected is limited as compared to the total length of pipelines in
its distribution and transmission system. With regards to validation of test
results, it is not clear and OSA did not elaborate what sort of validation it had in
mind. Thus, we reiterate our suggestion in the Gas Integrity section of the
decision that OSA consider becoming a party in SoCalGas’ next RAMP
proceeding and propose and explain this and other appropriate
recommendations in the next RAMP proceeding.
16.2. SDG&E
SDG&E’s gas transmission and distribution system are subject to the same
requirements prescribed by 49 CFR section 192, Subpart O and Subpart P and the
underlying O&M and capital costs are the same as those for SoCalGas except for
the size of its system which is composed of 14,088 miles of interconnected gas

155 Exhibit 114 at MTM-9.

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mains and services compared to 99,872 miles for SoCalGas. The tables below
show the O&M and capital forecasts. All forecasts were developed using a
zero-based methodology. Total RAMP-related costs associated with TIMP is
$9.0 million and $51.0 million for DIMP.

Total TIMP
O&M Non-shared Shared
or DIMP
TIMP $5,000,000 $0 $5,000,000
DIMP $6,000,000 $0 $6,000,000
Total
Non-shared $11,000,000 $0 $11,000,000
and Shared

O&M costs for TY2019 are $3.256 million higher than base year adjusted,
recorded costs. The description of TIMP and DIMP activities to be conducted are
the same as those described in sections [Link]. and [Link]. in the SoCalGas
section.

Capital 2017 2018 2019

TIMP $3,997,000 $3,997,000 $4,000,000
DIMP $20,219,000 $20,219,000 $45,000,000
Total $24,216,000 $24,216,000 $49,000,000

16.2.1. Positions of Intervenors

ORA and CUE provided comments to the SDG&E portion. Both parties
make similar recommendations as they did in the SoCalGas portion.
ORA recommends using the 2017 adjusted, recorded costs of
$36.808 million for 2017 capital and does not object to the O&M and 2018 and
2019 capital forecasts.
CUE recommends increasing the 2019 capital forecast to $251.558 million
or $154.156 million higher than SDG&E’s based on its recommendation to
accelerate the VIPP program to replace pre-1986 Aldyl-A gas pipes and to
accelerate the DREAMS program pipe replacement from 27 to 126 miles per year.

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CUE also recommends an increase of $762,000 to SDG&E’s O&M forecast

because of associated costs with its proposal to accelerate the VIPP program.
In its rebuttal testimony, SDG&E states that all parties recommend
adopting its 2017 adjusted, recorded capital costs.
16.2.2. Discussion
ORA and CUE raise the same recommendations and supporting
arguments concerning use of 2017 adjusted, recorded capital costs and increased
capital spending for 2019 respectively, as both parties did in the SoCalGas
section. We make the same findings and conclusions as discussed in
section 16.1.4. above.
Regarding TIMP and DIMP capital costs for 2017, we find that the
testimony and other evidence submitted by SDG&E adequately supports the
2017 forecast but there is little evidence submitted in this application to support
the 2017 recorded spending which is more than $12.592 million higher than the
2017 forecast. In any case, as with SoCalGas, SDG&E’s TIMP and DIMP costs are
subject to a two-way balancing account treatment through the TIMPBA and
DIMPBA respectively. Amounts above 35 percent will be subject to a separate
application procedure. Under this recovery process, SoCalGas should be able to
appropriately explain and provide information regarding spending incurred.
Similarly, the recovery process for SDG&E’s TIMP and DIMP are the same as
SoCalGas, where undercollections will be limited to amounts up to 35 percent of
the total revenue requirement for that program and will require a Tier 3 advice
letter. Under this recovery process, SDG&E will be provided with the
appropriate safety spending and should be able to appropriately explain and
provide information regarding the spending.

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Similarly, with regards to CUE’s recommendations concerning accelerated

replacement rates for the VIPP and DREAMS programs, we find as we did in the
SoCalGas section that there are other key pressing safety risks that must be
addressed and that costs for these programs must also be prioritized and
balanced with keeping rates affordable. However, we also find that SDG&E
should include an outlook of its long-term assessment and replacement plan of
its Aldyl-A pipes and the DREAMS program pipe replacement in its next GRC,
in addition to what it plans for the next GRC cycle as it appears that its current
replacement rate is not on pace with its original assessment.
Based on our review and analysis, we find it reasonable to authorize
SDG&E’s requested amounts of $11.00 million for O&M costs and capital costs of
$24.216 million each for 2017 and 2018, and $49.00 million for 2019.
17. Pipeline Safety Enhancement Plan (PSEP)
On September 9, 2010, a 30-inch diameter natural gas pipeline ruptured
and caught fire in San Bruno, California, causing death and property damage. 156
As one of its responses to this incident, the Commission initiated R.11-02-019 to
consider what aspects of the Commission’s regulation of natural gas
transmission and distribution pipelines should change. In D.11-06-017, the
Commission required operators of natural gas pipelines to file a comprehensive
Implementation Plan to replace or pressure test all-natural gas transmission
pipeline in California that have not been tested or for which reliable records are
not available.157 D.11-06-017 also provided specific requirements that must be

156 R.11-02-019 at 1.
157 D.11-06-017 at 23 to 24.

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complied with. These were later codified under Pub. Util. Code Sections 957 and
958.
The Commission authorized SoCalGas’ and SDG&E’s safety enhancement
plan in D.14-06-007 and directed the utilities to begin implementation of the plan.
However, the Commission did not pre-approve the proposed budget for the plan
and instead developed a review and recovery mechanism wherein costs for
individual projects can be approved after-the-fact.158 The decision also clarified
that the utilities may alternatively file for preapproval of specific projects seeking
approval of a cap or for other specific guidance.159 Subsequently, the
Commission authorized SoCalGas and SDG&E in D.16-08-003 to include in their
TY2019 GRC all PSEP costs not subject to prior applications including possible
review of any remaining 2018 Phase 1A and 1B capital costs.160 This GRC is the
first that includes any PSEP costs.
The primary objectives of PSEP are to enhance public safety, comply with
Commission directives, minimize customer impacts, and maximize cost
effectiveness of safety investments. PSEP is divided into two phases and each
phase is further subdivided into two parts resulting in four separate phases,
Phase 1A, Phase 1B, Phase 2A, and Phase 2B.
Phase 1A includes pipelines located in Class 3 and 4 locations and Class 1
and 2 locations in HCAs161 that do not have sufficient documentation of a

158 D.14-06-007 at 60 to 61.

159 Id. at 61.
160 D.16-08-003 at 16.
161With respect to natural gas, HCAs are specific locales and areas where a release could have
the most significant adverse consequences.

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pressure test to at least 1.25 times the maximum allowable operating pressure
(MAOP). The different classes are defined by the DOT’s definition of location
class which is based on levels of population density within a fixed distance from
a natural gas pipeline. Generally, Class 1 and 2 locations are located in
unpopulated areas.
The scope for Phase 1B includes the replacement of non-piggable pipelines
installed prior to 1946. Non-piggable pipelines are those that cannot
accommodate in-line inspection tools that assess pipeline integrity.
Phase 2A addresses transmission pipelines that do not have sufficient
documentation of a pressure test to at least 1.25 times the MAOP located in
class 1 and 2 locations that are in non-HCA areas.
Phase 2B pipelines are those that have documentation of a pressure test
that predates the adoption of federal testing regulations in 1970, specifically, Part
192 Subpart J of Title 49 of the CFR. Prior to this date, the applicable industry
standard was American Standards Association B31.8, which came into effect in
1955. No Phase 2B projects are included in this GRC but parties seek clarification
regarding these pipelines and the Scoping Memo determined that the
interpretation of D.11-06-017 regarding pressure testing of pipeline segments in
accordance with the Subpart J standard is within the scope of the proceeding.
Summary of Requested Costs
All costs requested for PSEP are for SoCalGas and total $249,467,456 for
O&M and $649,326,239 for capital. The above amounts will cover funding for 11
pressure test projects, 11 replacement projects, and 284 valve bundle projects in
furtherance of continuing to implement its authorized PSEP. All the requested
funds are RAMP-related to mitigate a top safety risk identified in the RAMP
Report namely, Catastrophic Damage Involving High-Pressure Pipeline Failure.

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Pursuant to D.16-06-054, costs relating to the Aliso Canyon gas leak

incident have been excluded from the TY2019 forecasts and from historical
information used by impacted GRC witnesses. Efficiencies relating to FOF have
been factored into the PSEP cost estimates.
17.1. Pressure Test Projects
This section contains the requests related to 11 pressure test projects as
part of the ongoing implementation of PSEP. The total amounts requested are
$236.379 million for O&M costs and $64.443 million for capital costs. According
to SoCalGas, because 2019 is a transition year as PSEP is incorporated into the
GRC process, costs presented represent the total costs over the three-year GRC
period and not just for the TY.
Certain costs already incurred from the planning and engineering of these
projects prior to 2019 are included in the Pipeline Safety Enhancement Plan –
Phase 2 Memorandum Account. SoCalGas will seek amortization of this
memorandum account in a separate proceeding as authorized under
D.16-08-003.162 SoCalGas also adds a request for five additional pressure test
projects in the 3rd PTY (2022) if the request for an additional attrition year is
approved in this decision.
SoCalGas describes the method for developing the project estimates in
Exhibit 231.163 These activities include planning, engineering design, input from
subject matter experts regarding project cost estimates, analysis of environmental

162 Exhibit 231 at RDP-A-21 and D.16-08-003 OP 1 at 14 to 15.

163 Exhibit 231 at RDP-A-23 to 27.

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impacts, inputs regarding construction, determination of required permits,

analysis regarding natural gas loads, and supply management.
The table below presents a breakdown and summary of the 11 pressure
test projects included in this GRC. All projects are Phase 2A projects and all costs
were forecast using a zero-based methodology.
Pressure Test Projects Mileage O&M Capital Total

235 West Section 1 - San Bernardino 24.6 $41,642,000164 $12,106,000 $53,768,000

County

235 West Section 2 - San Bernardino 20.3 $25,679,000 $11,181,000 $36,860,000

County

235 West Section 3 - San Bernardino 26.9 $14,119,000 $3,370,000 $17,489,000

County

407 - Santa Monica Mountains 4.0 $4,188,000 $962,000 $5,150,000

1011 - Ventura County 1.8 $4,421,000 $746,000 $5,167,000

2000 Chino Hills - Orange/Riverside 10.0 $33,964,000 $11,371,000 $45,335,000

County

2000 Section E – Riverside County 8.9 $13,955,000 $1,565,000 $15,520,000

2000 Blythe to Cactus City Hydrotest 64.7 $39,937,000 $11,908,000 $51,845,000

– Riverside County

2001 W Section C - Riverside County 13.9 $22,868,000 $3,361,000 $26,229,000

2001 W Section D - Riverside County 17.8 $24,404,000 $4,873,000 $29,277,000

2001 W Section E - Riverside County 8.9 $11,182,000 $3,000,000 $14,182,000

Total $236,379,000 $64,443,000 $300,822,000

164 This amount was revised but the total amounts do not include the change.

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Descriptions of each pressure test project are provided in Exhibit 231.

Most of the details are similar in nature depicting the pipeline length, location,
the number of test sections, and elevated areas. Capital cost descriptions are also
similar in nature describing the number of sections of pipeline to be replaced to
remediate anomalies and to facilitate hydrotesting. SoCalGas’ workpapers for
this section include more specific details for each project presenting more
detailed scope, individual test sections, and a map of the area covered by the
projects.
17.1.1. Positions of Intervenors
ORA developed statistical models for PSEP pressure test and replacement
projects based on up to five years of historical cost data from projects by PG&E,
SoCalGas, SDG&E, and Southwest Gas Company.165 ORA’s statistical models
use linear regression analysis to produce an equation that describes how costs
relate to certain project factors. The model uses a 90 percent threshold level
which means that there is a 90 percent probability that a future project will be at
or below the cost threshold established. The majority of the data uses early
Phase 1A data projects from PG&E and SoCalGas that are located in more urban
areas and which are shorter in length. The model also assumes cost
improvement over time. This model is the same model recommended by ORA
in A.17-03-021 but was updated to include more recent pressure test and pipe
replacement data. ORA did not apply the model to four pressure tests and two
replacement projects166 with longer pipeline mileage and considered these as

165 Id. at 23 to 24.

The model was also not applied to 4 projects scheduled for the 3rd PTY which the decision is
166

not considering as the request to include a 3rd PTY is being denied.

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outside the model’s range. ORA does not recommend costs for these in the
interest of applying the model conservatively.
TURN, SCGC, Lancaster, and IS recommend disallowance of the risk
assessment component which equals to a reduction of $63 million using TURN’s
and SCGC’s calculation and a reduction of $58.6 million using IS’ calculation.
17.1.2. Discussion
We carefully reviewed and analyzed ORA’s proposed model and the
method utilized by SoCalGas as well as the comments from the other
intervenors. Although we find merit in ORA’s proposed model and while
ORA’s model provides a foundation for per mile averages that may be used in
the future as the data becomes more refined, we find that SoCalGas’
project-specific evidence is more appropriate for the pressure test and capital
projects being proposed in this decision.
ORA’s model is based on using data from past projects to predict costs for
future projects. However, the model relies on general project data such as
pipeline length and diameter and project duration but does not apply factors
surrounding a particular project that may be specific to certain types of projects
or even a specific project only. Most of the data uses early Phase 1A projects
whereas the projects proposed in this application are Phase 2A and Phase 1B
projects. Also, 95 percent of the pressure test data are from PG&E PSEP
projects167 and does not account for project differences between different utilities.
ORA’s pressure test data also only applies O&M costs whereas the Pressure Test
Projects include both an O&M component and a capital component. The model

167 Exhibit 235 at RDP/SC-15 to 16.

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also does not specifically apply other factors such as elevation, terrain, and other
geographic conditions as well as the need to bypass private lands, the types of
permits and environmental clearances that are necessary, the engineering design
of a project, and other factors that may be relevant. Lastly, the model is not
applied to certain projects that fall out of range, which may lead to
inconsistencies if it is applied to some projects while SoCalGas’ method is
applied to projects that are considered outside the model’s range.
On the other hand, SoCalGas applies a more project-specific method to
develop its forecast costs, which we find more appropriate in this instance and
for the proposed projects specifically. SoCalGas provided what is referred to
under the American Association of Cost Engineers (AACE) cost estimate
classification system as Class 3 estimates for its proposed projects using around a
30 percent completion of engineering activities. SoCalGas explains that
according to the AACE classification system, Class 3 estimates are generally
prepared to form the basis for budget authorization or funding and typically
form the initial control estimate against which all actual costs and resources will
be monitored.168 Engineering is typically from 10 to 40 percent complete. This
level of estimate contains more specific details and is generally more reliable
than Class 4 and Class 5 estimates that are based on more limited information.
As discussed earlier, SoCalGas’ method for developing its project
estimates included planning, engineering design, input from subject matter
experts regarding project cost estimates, analysis of environmental impacts,
inputs regarding construction, determination of required permits, analysis

168 Exhibit 238 at RDP/SC-7.

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regarding natural gas loads, and supply management. The above activities are
more project-specific and take into account specific circumstances regarding each
project. This level of detail allows us to better evaluate and review costs
requested consistent with D.14-06-007, where the Commission stated that
ratepayers should have the benefit of detailed plans for the Commission to
consider before authorizing or pre-approving expenditures for PSEP projects.169
Cost estimates were developed using a zero-based method, which we find
reasonable in this instance as specific needs for each project are better taken into
account and incorporated into the forecast as opposed to basing costs on budget
history.
Based on all of the above, we find SoCalGas’ method and cost estimates to
be reasonable, appropriate for the proposed projects, and supported by the
testimony submitted.
Risk Assessment Component
SoCalGas’ project cost estimates include a risk assessment component
following a recommended practice from the AACE. This recommended practice
is based on the premise that unforeseeable events that occur lead to additional
costs, and project managers have a tendency to underestimate the cost of a
project. This contingency factor is reflected as a percentage of the forecasted cost
of a project. The appropriate level or amount is determined by subject matter
experts who examine and weigh the risks and contingencies surrounding each
specific project.

169 D.14-07-007 at 23.

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For its proposed PSEP projects, SoCalGas’ contingency amounts ranged

from 18 percent to 33 percent with Pressure Test Projects averaging 26 percent
and Replacement Projects averaging 25 percent.
We agree with the addition of a risk assessment component in this instance
to account for contingencies that may occur. The proposed projects are subject to
many variables and projects have particular circumstances that add to the
difficulty of making accurate cost estimates. The practice is also an
industry-recommended practice that aims to increase the quality and accuracy of
estimates, which we find appropriate for the proposed PSEP projects.
However, we share TURN/SCGC’s concerns that SoCalGas’ contingency
factors overinflate the overall costs given SoCalGas’ detailed project cost
estimates. We find that more conservative contingency estimates are appropriate
in this instance as the proposed Phase 2A Pressure Tests Projects and Phase 1B
Replacement Projects are subject to a lesser degree of unpredictable variables
relative to the earlier Phase 1A projects. SoCalGas also has more data from the
earlier PSEP projects within which to make more informed and more detailed
forecasts. According to SoCalGas, information from AACE shows that a
contingency range of 15 percent to 30 percent is appropriate for these types of
projects.170
Based on the above circumstances, we find that a contingency factor at the
lower range provided by AACE or an average of around 15 percent is more
reasonable in this case. Therefore, we find that SoCalGas’ total forecast for the 11
Pressure Test Projects identified in this section should be approved subject to a

170 Exhibit 235 at RDP/SC-29.

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10 percentage points reduction to the risk assessment component of each project.

In addition, as discussed later in Section 17.6, we find it reasonable to authorize
the establishment of a PSEP memorandum account to track possible cost
overruns for recovery in SoCalGas’ next GRC filing.
At this time, we also wish to highlight the Commission’s significant
concerns regarding SoCalGas’ Line 235, currently scheduled for pressure testing
during this GRC period. On October 1, 2017, a rupture occurred on Line 235. As
SoCalGas sought to bring Line 235 back into service, numerous leaks have been
found in the pipeline. The line is currently out of service as of the date of this
proposed decision. In part because of this highly concerning pattern of leaks on
Line 235, in June 2019 the Commission opened an investigation into SoCalGas’
safety culture.171 As noted by SoCalGas’ witnesses, the repairs to Line 235 may
be included in TIMP over the next rate case cycle172 and may also impact the
scheduling of the pressure testing of the line.173 We understand TURN/SCGC’s
concerns that the repaired segments on Line 235 will be accounted for both in
TIMP and PSEP, but we find it reasonable that the small non-contiguous portions
of the rupture cannot be easily removed from the continuous pressure testing as
it would not be cost-effective.
Given the numerous issues and uncertainty related to Line 235 and the
safety aspects to the repairs and the testing, we support immediate corrective
actions. However, we require SoCalGas to file a Tier II Advice Letter at the

171 I.19-06-014.
172 SCG-SDG&E Opening brief, p. 134.
173 Exhibit 231 at RDP-A-56.

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conclusion of the Line 235 West Sections 1 and 2 testing or replacement with
clear accounting delineations of which costs are subject to TIMP and which costs
are subject to PSEP before any of the associated costs can be placed into rates for
recovery. Such PSEP costs shall not be placed into rates for recovery and such
TIMP costs shall be made subject to refund until the Advice Letter is approved.
The Line 235 costs subject to this accounting requirement should include costs
SoCalGas is incurring for the additional permits, crews, environmental
monitoring, and all other costs associated with investigating and repairing the
ongoing leaks on Line 235.
Costs to repair the rupture and leaks to Line 235 are not requested in this
GRC but we find it reasonable to require SoCalGas to establish a memorandum
account to record all costs related to Line 235 (i.e., capital costs including rate of
return, operations and maintenance costs, repair and replacement costs, or any
other costs related to the line). This memorandum account will allow the
Commission the future ability to adjust SoCalGas’ TY2019 revenue requirement
for TY2019 and PTYs 2020 and 2021should a future inquiry find that Line 235 is
no longer used and useful and if costs relating to Line 235 are unreasonable.
17.2. Miscellaneous PSEP Costs
The table below shows the estimates for Miscellaneous Costs relating to
PSEP.
Miscellaneous Costs O&M Capital Total

Allowance for Pipeline $0 $6,170 $6,170,000

Failures
Implementation Continuity $3,741,000 $1,857,000 $5,599,000
Costs
Program Management Office $11,831,000 $29,606,000 $41,438,000
Total $15,573,000 $37,634,000 $53,206,000

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17.2.1. Allowance for Pipeline Failures

Costs associated with a pipeline test failure primarily consist of
replacement costs of the failed pipe segment and costs relating to water
containment following the failed test. No O&M costs are projected as there has
only been one incidence of a test failure out of 53 separate tests covering 90 miles
of pipeline. The forecast represents an allowance of three test failures for the
GRC period.
17.2.2. Implementation Continuity Costs
These costs include environmental permitting and land acquisition for
approximately seven projects anticipated in the next GRC. These costs are
requested now because of the length of time and advance preparation needed to
obtain necessary permits to ensure that the projects planned for the next GRC
cycle to ensure that the projects are completed in a timely manner.
17.2.3. Program Management Office
These costs represent General Management and Administration (GMA)
costs and company overhead costs incurred in support of PSEP that are not
charged to individual projects. Beginning in 2019, these costs will be
accumulated into the Project Management Office (PMO). The PMO will provide
oversight at the organizational level and develop reporting metrics to keep
management apprised of PSEP progress. The PMO will also provide functional
guidance on project design and construction to ensure that compliance
requirements are met and best practices are applied. The PMO will also develop
standards and procedures so PSEP projects are executed in a consistent manner
across projects.
17.2.4. Discussion
ORA recommends that Allowance for Pipeline Failures be denied if the
two-way balancing account treatment for the PSEP Balancing Account (PSEPBA)

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is authorized. We find however, that it is not necessary to rely on balancing

account treatment of Allowance for Pipeline Failures as the costs can be forecast
with a high degree of certainty based on the frequency of test failures that have
occurred to date, which is one test failure for every 90 miles. We also find the
estimate for test failure occurrences to be conservative and reasonable.
We also find the estimated amounts for Implementation Continuity Costs
and the PMO to be reasonable and supported by the evidence. Implementation
Continuity Costs will ensure that the permit process begins without having to
wait for approval of SoCalGas’ next GRC, which supports the timely completion
of projects planned for the next GRC. PMO costs will simply replace GMA costs
that were incurred prior to this GRC as those costs will now be accumulated into
the PMO. In addition, the PMO will provide needed oversight to help ensure
that projects are executed in a consistent, safe, and cost-effective manner.
Based on the above, we find that the requested Miscellaneous Costs
totaling $53.206 million for both O&M and capital are reasonable and should be
approved.
17.3. Capital Projects
Capital Projects consists of Replacement Projects and the Valve
Enhancement Plan.
17.3.1. Replacement Projects
This section discusses the 11 replacement projects that are planned by
SoCalGas in this GRC cycle. The total cost of these 11 projects is estimated at
$301.250 million. SoCalGas also requests an additional two replacement projects
and the remaining 50 percent of the 44-1008 replacement project if the request to
include a 3rd PTY is approved.

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Many of these projects are expected to be completed in 2020 and 2021 and
SoCalGas proposes that PSEP capital-related costs not fully reflected in the
TY2019 revenue requirement be included as part of the PTYs. SoCalGas states
that majority of PSEP capital expenditures are expected to close to plant in
service in 2020 and 2021 and these PSEP capital costs will not be fully reflected in
the TY2019 revenue requirement. SoCalGas’ PSEP capital-related revenue
requirement increases proposed in the PTYs are $13.7 million for 2020,
$34.4 million for 2021. SoCalGas also proposes an increase of $41.6 million for
2022 but as discussed in section 17.4 below, costs in 2022 are not included in this
GRC.
The table below presents a breakdown and summary of the 11 replacement
projects included in this GRC. All projects are Phase 1B projects except for the
last project, the 200-E Cactus City Compressor Station project which is a
Phase 2A project. All costs were forecast using a zero-based methodology.

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Replacement Projects Phase Mileage Capital

85 Elk Hills to Lake Station – San Joaquin 1B 13.0 $88,906,000

Valley
36-9-09 North Section 12 – Santa Barbara 1B 0.9 $9,813,000
County
36-9-09 North Section 14 – Santa Barbara 1B 1.9 $19,980,000
County
36-9-09 North Section 15 – Santa Barbara 1B 1.5 $14,193,000
County
36-9-09 North Section 16 – Santa Barbara 1B 2.0 $18,036,000
County
36-1032 Section 11 – Santa Barbara 1B 0.5 $8,692,000
County
36-1032 Section 12 – Santa Barbara 1B 5.2 $26,601,000
County
36-1032 Section 13 – Santa Barbara 1B 3.2 $17,811,000
County
36-1032 Section 14 – Santa Barbara 1B 1.7 $13,937,000
County
44-1008 (50%)174 – Central California 1B 54.9 $76,582,000
2000-E Cactus City Compressor Station – 2A 883 feet $6,698,000
Riverside County
Total $301,250,000

An overview of each of the 11 replacement projects is included in

Exhibit 231.175 Most of the descriptions are similar in nature with pipes of
varying vintages from the 1920s to 1940s being replaced to address anomalies,
facilitate hydrotesting, or to minimize impacts to private property owners and
existing farmland. SoCalGas also describes the activities conducted in
developing the project estimates, which include assessment of project
parameters, site visits, development of preliminary designs, identification of

174 SoCalGas intends to complete 50 percent of this project by 2021.

175 Exhibit 2313 at RDP-A-42 to 47.

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waterways, major highways, and railroads, surveys and preparation of base

maps, and analysis of environmental restrictions and concerns.
17.3.2. Valve Replacement Plan
SoCalGas is projecting a total of $246.000 million for 284 valve bundle
projects at various locations. The Valve Enhancement Plan is meant to comply
with the Commission’s directive in D.11-06-017to include plans for automated or
remote controlled shut-off valves as part of SoCalGas’ Implementation Plan. The
Valve Enhancement Plan enables automatic shut-off and remote control
capability at intervals of eight miles or less and enhances system safety by
improving existing valve infrastructure and accelerating the ability to identify,
isolate, and contain escaping gas in the event of a pipeline rupture.176 The Valve
Enhancement Plan also focuses on isolating transmission pipelines in Class 3 and
4 locations and Class 1 and 2 HCAs. Detailed information regarding specific
projects are included in SoCalGas’ workpapers.
This GRC application includes valve projects that are projected to begin
construction in 2019 and completed by 2021. Cost recovery for valve projects
that were in construction prior to 2019 are to be included in another application.
17.3.3. Positions of Intervenors
ORA recommends using its own model that was discussed in the Pressure
Test section to evaluate 10 of the 14 capital projects proposed. Applying ORA’s
model results in a reduction of $3.8 million to SoCalGas’ forecast.
TURN, SCGC and IS recommend disallowance of the risk assessment
component for the projects which equals to a disallowance of $55.5 million using

176 Id. at RDP-A-14.

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TURN’s and SCGC’s calculation and equals $49.7 million using IS’ calculation.
TURN and SCGC also recommend that costs of $76.6 million for Line 44-1008 be
disallowed, except for $0.7 million for permitting costs, because there is no
possibility that the project will be completed in this GRC cycle. SoCalGas does
not contest this assertion regarding timing for completing the 44-1008 project but
argues that the project can be substituted via the substitution process that it is
proposing and adds that projects should be completed as soon as practicable.
For the Valve Replacement Program IS recommends that the schedule for
completion of the Valve Replacement Plan be extended to six years instead of the
three years proposed by SoCalGas. IS also recommends that the risk adjustment
component for the project be removed, which it calculates at $42.2 million.
17.3.4. Discussion
ORA’s proposed model and disallowance of the risk assessment
component were addressed in our discussion of the Pressure Test Projects in
section 17.1.2 and we make the same findings and conclusions as we did there:
SoCalGas should reduce the risk assessment component for each project by
10 percentage points, resulting in an average risk assessment component of
16 percent.
Regarding Line 44-1008, we find that the project substitution process
should be utilized more as an exception rather than as a standard method of
substituting in a requested project that SoCalGas knows is delayed and will not
be completed within this GRC cycle. Our primary objective should be to fully
review proposed projects and should only allow project substitution in cases
when it is necessary and prudent to do so. In this case, the environmental
permitting process relating to the project may preclude SoCalGas from even
initiating construction during this rate case cycle. In addition, we find that the

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project may be better reviewed, analyzed, and evaluated as a whole project

rather than the 50 percent of the entire project that is proposed here. In any case,
because it is almost certain that the 50 percent project completion proposed here
will not be completed in this GRC cycle, we find it more reasonable that
authorization for this project be requested in SoCalGas’ next GRC application.
This results in a reduction of $76.6 million. In the event that SoCalGas initiates
the environmental review for Line 44-1008 during this rate case period, SoCalGas
may include the associated costs in the PSEP memorandum account authorized
in this section for review in its next GRC filing.
We also note the filing of A.19-04-003 in April 2019, which is PG&E’s
request for authorization to sell its transmission Line 306 to SoCalGas. In a
statement of support for PG&E’s application, SoCalGas submitted a formal
response stating that the purchase of Line 306 will save ratepayers money and
cause less environmental impacts compared to replacing parallel Line 44-1008.
We make no findings or determinations regarding the above proceeding but in
keeping with the Commission directive to complete PSEP projects as soon as
possible, in the event that a resolution for ensuring the safety of Line 44-1008
occurs during this rate case period, any associated Line 44-1008 costs may also be
included in the PSEP memorandum account.
With respect to the Valve Replacement Plan, SoCalGas’ Implementation
Plan authorized in D.14-06-007 includes the replacement of valves in order to
comply with the directive set forth in D.11-06-017177 that SoCalGas’ pipeline
systems include automated or remote controlled shut off valves that are

177 D.11-06-017 OP8 at 30.

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necessary to protect the public. Thus, we agree with SoCalGas’ assessment that
valve replacement is an ongoing activity.
Regarding the specific issue on timing for completion of the project, raised
by IS, we find SoCalGas’ proposal of completing the project within a three-year
timeframe more prudent and in alignment with the Commission’s objective that
PSEP be completed as soon as practicable. Pub. Util. Code § 957 also requires
that remote and automatic shutoff valves be installed as quickly as is reasonably
possible. The shut-off valves play an important role in accelerating SoCalGas’
ability to identify and isolate sections of pipelines to contain escaping gas in case
of a rupture. Based on the above, we find that SoCalGas’ proposal for a
three-year timeframe for completion of the project should be authorized. With
respect to the proposed costs, we find that the risk adjustment component should
be reduced by 10 percent consistent with our discussion above regarding this
issue. We therefore find that SoCalGas’ proposed costs for the Valve
Enhancement Project should be approved subject to a 10 percentage points
reduction of the risk adjustment component.
To summarize, the proposed costs for 10 of the 11 Replacement Projects are
approved subject to a 10 percent reduction of the risk assessment component
costs for each project. The Line 44-1008 replacement project is not authorized;
however, if SoCalGas does in fact begin project work on Line 44-1008, either
associated with environmental review or by receiving Commission approval to
purchase PG&E Line 306, those costs may be included in the PSEP memorandum
account authorized earlier. SoCalGas’ forecast for the Valve Replacement Plan is
approved subject to a 10 percent reduction in risk assessment component costs.
We also find SoCalGas’ proposal that PSEP capital-related costs not fully
reflected in the TY2019 revenue requirement be included as part of the PTYs

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reasonable and we approve it. This is because PSEP is being incorporated into
the GRC for the first time and timing and completion of the proposed projects
should not be delayed. We find the adjustment necessary in order to fully reflect
the capital costs we are authorizing but will not be fully reflected in the TY.
17.4. Fourth Year Projects (2022)
SoCalGas included seven projects plus the remaining 50 percent of project
44-1008 for 2022 in conjunction with its request to include a 3rd attrition year in
the current GRC. As discussed in section 5 of the decision, we are rejecting
SoCalGas’ request to change their current three-year GRC cycles into a four-year
cycle and so we deny approval of the fourth year PSEP projects as this GRC cycle
will only include TY2019 and PTYs 2020 and 2021.
17.5. Project Substitution
SoCalGas requests authority to substitute one or more PSEP projects
authorized in this decision with other PSEP projects in the event of a delay in
commencing construction of one or more of the authorized projects. SoCalGas
states that the substitution of projects will not result in costs exceeding the
aggregate amount authorized in this decision. Prior to substitution, SoCalGas
proposes to file a Tier 1 advice letter. The advice letter will contain the name and
scope of the delayed project, the circumstances that led to the substitution, and
identification of the substituted project as well as the scope and estimated costs
to complete the substituted project.
ORA recommends modification of the above proposal to allow for more
in-depth review of a proposed project substitution. ORA proposes that a
requested substitution be addressed through an expedited process and that
review be conducted by a working group consisting of Applicants, the
Commission’s Energy Division, ORA, TURN, OSA, and SED. ORA also

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proposes an alternative where projects that are of similar scope and costs be
allowed. If the above proposals are not adopted, ORA recommends denial of
SoCalGas’ project substitution proposal.
In analyzing SoCalGas’ request, we must balance two competing factors:
completing PSEP as soon as practicable and affording the Commission ample
opportunity to review the reasonableness of proposed projects and costs. We
understand SoCalGas’ concern about accelerating certain projects for safety and
reliability reasons or substituting new projects in case of delay so other projects
can be commenced. However, we must also consider that the projects
authorized in this decision were fully reviewed during the application process
while a substituted project would be largely unreviewed.
Based on our analysis, we find SoCalGas’ request for authority to
substitute one or more PSEP projects authorized in this decision with other PSEP
projects in cases of delay or when necessary to do so for safety or reliability
reasons should be approved. The procedure to request substitution described
above and in SoCalGas’ testimony178 should be followed except that SoCalGas
should file the request as a Tier 2 advice letter in order to afford the Commission
sufficient opportunity to review the proposal without unnecessarily delaying the
process.
17.6. PSEPBA
SoCalGas requests continuation of the 2-way balancing account treatment
of PSEP costs for this GRC cycle. CUE supports the request because costs are
uncertain while ORA, TURN, and IS oppose SoCalGas’ request.

178 Exhibit 231 at RDP-A-56.

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ORA states that project cost estimates are well developed and the majority
of the estimates contain project contingencies to account for some level of
uncertainty of costs. TURN adds that PSEP activities are not fundamentally
different from other activities not subject to balancing account treatment and that
the PSEP projects proposed in this GRC will be located in more rural areas and
subject to less uncertainty. IS adds that the PSEPBA would remove incentive for
SoCalGas to manage PSEP costs.
We reviewed the arguments raised by the above parties and agree with
ORA, TURN, and IS that PSEP cost estimates for the proposed Phase 2A and 1B
projects are better developed relative to Phase 1A projects that have been
undertaken by SoCalGas. The currently proposed projects also include project
contingencies to address some of the uncertainties as to costs. We also agree
with TURN that the proposed projects are located in areas that are less densely
populated, which make project costs less uncertain as compared to projects
located in more urbanized locations.
Nonetheless, we also recognize that PSEP is a large-scale project which
makes costs more difficult to predict. There is also a time lag from when
forecasts are made to when the projects will begin and circumstances relied on to
develop the forecasts may have change. However, instead of continuing the
two-way balancing treatment for PSEP, we find it more reasonable at this later
stage of PSEP to authorize the creation of a memorandum account to track
potential PSEP overrun costs. We recognize the uncertainty that sometimes
occur with construction and given that we are reducing the contingency factors,
the memorandum account will allow SoCalGas to track actual costs and request
recovery of additional costs that were not foreseen or due to circumstances
beyond SoCalGas’ control and at the same time afford the Commission sufficient

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opportunity to review the reasonableness of additional costs in the next GRC

filing. We note that recovery of any costs recorded in the above-mentioned
memorandum account shall not be automatically granted but shall instead be
subject to a reasonableness review by the Commission.
17.7. Clarification Regarding D.11-06-017
As stated previously in this section, SoCalGas seeks clarification regarding
the interpretation of D.11-06-017 regarding pressure testing of pipeline segments
that have documentation of a pressure test that predates the adoption of federal
testing regulations under Part 192 Subpart J of Title 49 of the CFR. Specifically,
SoCalGas seeks clarification whether Phase 2B work covering such pipelines is
required to be undertaken and completed.
Ordering Paragraph 4 of D.11-06-017 states provides:
No later than August 26, 2011, San Diego Gas & Electric Company,
Southern California Gas Company, Southwest Gas Corporation and
Pacific Gas and Electric Company must file and serve a proposed
Natural Gas Transmission Pipeline Comprehensive Pressure Testing
Implementation Plan (Implementation Plan) to comply with the
requirement that all in-service natural gas transmission pipeline in
California has been pressure tested in accord with 49 CFR 192.619,
excluding subsection 49 CFR 192.619 (c). The Implementation Plan
should start with pipeline segments located in Class 3 and Class 4
locations and Class 1 and Class 2 high consequence areas, with
pipeline segments in other locations given lower priority for
pressure testing. The schedule and cost detail for lower priority
pipeline segments may be limited.179
The above passage clearly indicates that all in-service natural gas
transmission pipeline be tested in accordance with 49 CFR 192.619, excluding

179 D.11-07-017.

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subsection 49 CFR 192.619 (c). Ordering Paragraph 4 reiterates the same

requirement discussed in page 20 of the D.11-06-017.
ORA provides a historical background of pressure standards in Exhibit 398
and explains that 49 CFR 192 came into effect on November 12, 1970 and that
prior to this date, the applicable industry standard was American Standards
Association B31.8 (ASA Code), which came into effect in 1955.180
ORA cites to D.15-12-020 to support its position that pipeline segments
that had been tested in accordance with the ASA Code need not be re-tested to
comply with D.11-06-017. TURN and SCGC support ORA’s position.
However, D.15-12-020 resolved an issue concerning cost recovery of
re-testing certain pre-1970 pipelines that do not have documentation of test
records. The decision held shareholders responsible for maintaining documents
of a prior pressure test and thus responsible for the costs of subsequent tests that
may be necessary because records of the prior test cannot be produced. On the
other hand, the issue before us involves pipelines tested under the ASA Code
where documentation of the pressure test exists.
TURN and SCGC add that Ordering Paragraph 4 of D.11-06-017 should be
read in conjunction with Ordering Paragraph 3. Ordering Paragraph 3 however,
refers to tests conducted prior to the effective date of GO-112 and not specifically
to tests conducted prior to the requirements of 49 CFR 192.619.
In analyzing the different positions presented before us, what is most clear
is that D.11-06-017 requires that all in-service natural gas transmission pipeline
be tested in accordance with 49 CFR 192.619 and the only exclusion that is clearly

180 Exhibit 298 at 32 to 33.

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stated is cases that fall under subsection 49 CFR 192.619 (c). The arguments
raised by ORA, TURN, and SCGC as well as the decisions cited by ORA in
Exhibit 398 either do not address the issue squarely or do not provide concrete
guidance that is clearer than what is provided in D.11-06-017.
Therefore, we conclude that pipelines under Phase 2B of SoCalGas’
Implementation Plan must comply with D.11-06-017. At the same time, it is
possible that a risk assessment today may find that the risk-spend efficiency of
some linear miles of transmission pipeline, particularly in Class 1 locations, is
low. To understand conditions on the ground today, and to ensure that
compliance with D.11-06-017 occurs in a manner that quantifiably mitigates risk
and ensures that funds spent are reasonable for ratepayers, we will require
SoCalGas to file a proposed implementation plan for the pipelines that may be
re-tested pursuant to this decision. SoCalGas shall file the re-testing
implementation plan as part of SoCalGas’s 2019 RAMP filing, and the plan shall
specifically include the following:
a. Identification of all in-service natural gas transmission pipelines (by
location and including linear feet and the pipelines’ categorization in
Class locations 1-4) that were tested under the ASA Code and for
which test records exist;
b. Identification of the subset of the above qualifying pipelines for
which SoCalGas recommends and does not recommend a re-test, in
particular in Class 1 locations in areas that are not High
Consequence Areas, and a statement explaining why a re-test is
proposed or not proposed;
c. Presentation of the pre-1970 ASA Code test records for the pipelines
proposed to be re-tested, and direct comparison of the test elements
shown in the records to the test elements set out in 49 CFR 192.619;
d. An evaluation by an independent engineer that SoCalGas’s
proposed determination of which pipelines to re-test or not to re-test
is a reasonable engineering judgement;

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e. The forecast costs of re-testing; and

f. Consistent with the RAMP framework, a complete discussion of the
risk-spend efficiency of the dollars proposed to be spent.
18. Procurement
This section discusses SoCalGas’ Gas Acquisition and SDG&E’s Electric
and Fuel Procurement (E&FP) requests. SoCalGas is also requesting
$2.201 million in 2017 and $0.270 million in 2018 for IT-related capital projects.
18.1. Gas Procurement (SoCalGas)
SoCalGas requests $4.23 million for Gas Procurement O&M costs for
TY2019. The forecast is for costs associated with activities of the Gas Acquisition
Department. These costs are non-shared.
The Gas Acquisition Department’s primary function is the procurement of
reliable natural gas supplies for both SoCalGas’ and SDG&E’s core customers at
a low cost. The Department also procures natural gas for Cap-and-Trade181
emissions compliance instruments for SoCalGas’ covered end-use customers and
transmission and storage facilities. Gas Acquisition aims to lower carbon
emission costs using Commission authorized procurement tools such as:
allowance purchases at CARB’s quarterly auctions, California Carbon Allowance
future purchases, etc. Activities are conducted daily and include negotiation and
maintenance of contracts for gas transactions, storage capacity, interstate

181A cap and trade system is a market-based approach to controlling pollution that allows
corporations to trade emissions allowances under an overall cap, or limit, on those emissions.
California’s Cap-and-Trade program was launched in 2013 and is one of the major policies
aimed at reducing greenhouse gas emissions.

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transmission capacity, intrastate backbone transmission rights, and carbon

emissions compliance instrument procurement transactions.182
SoCalGas’ testimony includes savings from FOF and excludes costs
relating to the Aliso Canyon storage facility gas leak incident.
18.1.1. O&M
The O&M forecast for TY2019 is composed of $3.867 million for labor costs
and $363,000 for non-labor. Compared to 2016 adjusted, recorded costs, the
TY2019 forecast shows an increase of $267,000 for labor and $50,000 for non-labor
or a total of $317,000.
Labor costs cover five functional groups that conduct (1) physical gas
trading, (2) energy and carbon trading and risk management, (3) gas scheduling,
(4) energy economic analysis, (5) finance, administration activities, and IT
support. Physical gas traders purchase and trade gas on a daily basis as well but
also conduct trades for monthly and long-term basis. Non-labor costs are for
subscription fees to industry publications, consultant and online services,
training, and travel expenses.
SoCalGas’ forecast methodology utilized base year costs as a basis because
the Department expects to maintain the same number of positions with the
increase representing the cost for filling two vacancies.
18.1.2. IT Business Unit Capital Projects
SoCalGas is also requesting $2.201 million in 2017 and $0.270 million in
2018 for two IT-related capital projects. Both projects consist of upgrades to the

182 Exhibit 282 at MFL-1 to 2.

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Pinnacle management application system and will replace the programming

language that has become obsolete.
18.1.3. Positions of Intervenors
ORA is the only intervenor to provide comments and recommends a
reduction of $250,000 to SoCalGas’ TY2019 forecast. This amount represents a
proxy amount for two employee positions:183 a director and analyst that
SoCalGas plans to be filled. ORA argues that the TY2016 authorized amount
included these two positions which were not filled and states that this
Department was able to conduct its activities without these two positions.
18.1.4. Discussion
ORA does not object to the increased forecast for TY2019 labor costs and,
instead, objects specifically to the need for the two positions that will be filled.
However, we find that SoCalGas provided sufficient justification for the two
positions identifying increased activities for the Gas Acquisition Department
including Cap-and-Trade related labor and administrative costs which were
originally charged to GHG activities. SoCalGas also identified increased
monitoring and analytical work, anticipated procurement of renewable natural
gas, and activities to maximize storage injections for system reliability and ORA
did not question these increased activities. We find that level of activities for
TY2019 differ from base year 2016 and find that this sufficiently justifies the need
for the two positions. With respect to the increased costs compared to base year
levels, we find these to be reasonable incremental adjustments due to escalation

183 The actual salaries for the two positions are confidential.

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of costs. Based on the above, we find that the O&M forecast of $4.23 million for
TY2019 is reasonable and should be authorized.
We reviewed the request for the two IT projects and find the request
reasonable and should be approved. No party objected to SoCalGas’ proposed
projects.
18.2. Electric and Fuel Procurement (SDG&E)
SDG&E is requesting $8.641 million for E&FP O&M expenses for TY2019.
These costs are non-shared. The TY2019 forecast represents an increase of
$679,000 from base year 2016 adjusted, recorded expenses.
E&FP is responsible for planning, procuring, managing, and administering
the energy supply resources needed to deliver safe and reliable energy to
customers.184 The actual costs to procure electricity supply are forecasted in the
Energy Resource Recovery Account (ERRA) proceeding but E&FP’s O&M costs
are included in the GRC.
SDG&E is also requesting $3.005 million in 2017 and $0.426 million in 2018
for capital projects necessary to maintain compliance with CAISO scheduling
services and for Sarbanes-Oxley compliance.
18.2.1. O&M
O&M costs are composed of Long-Term Procurement, Trading &
Scheduling, and Middle and Back Office.
[Link]. Long Term Procurement
Long Term Procurement consists of functions by a VP that oversees eight
different departments and activities of the Origination and Portfolio Design

184 Exhibit 285 at KKH-1.

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department. The Origination and Portfolio Design department is responsible for

soliciting energy supplies to meet long-term energy and capacity requirements.
The department also participates in regulatory proceedings and interacts with
many government agencies in order to develop plans and implement regulatory
mandates.
The forecast for Long Term Procurement for TY2019 is $2.203 million using
a five-year historical average. This includes both labor and non-labor costs.
[Link]. Trading & Scheduling
Trading and scheduling covers activities conducted by the Energy Supply
& Dispatch department which include electric procurement and trading, market
analysis, electric fuels, and market operations. Generally, this department is
responsible for planning, procurement, and trading for short-term transactions
or transactions within a five-year time frame.
The forecast for this cost category is $2.949 million using a five-year
historical average. This also includes both labor and non-labor costs.
[Link]. Middle and Back Office
Middle-Office and Back-Office contain activities performed by the Energy
Risk Management department and the Settlements and Systems department.
The Energy Risk Management department performs functions such as
identifying, managing, monitoring, and reporting market, credit, financial, and
operational risks relating to E&FP activities. This department also assesses credit
exposure for various contracts and transactions.
The Settlements and Systems department is responsible for financial and
accounting activities required to reconcile all energy contracts for power
procurement and to verify California Independent System Operator (CAISO)
requirements. The department also reviews daily CAISO charges and invoices

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for accuracy and is responsible for administration of vendor contracts associated

with software subscriptions and software systems used in gas and power
transactions.
The forecast for Middle and Back Office is $3.489 million using a five-year
historical average which includes both labor and non-labor costs.
18.2.2. IT Business Unit Capital Projects
SDG&E is requesting $3.005 million in 2017 and $0.426 million in 2018 for
capital expenditures to support technology upgrades required to maintain its
obligation to provide scheduling services within the CAISO market. Specifically,
the upgrades are for new software modules and configuration changes to
software applications necessary for communication with the CAISO system.
Another project is for maintaining systems up-to-date for Sarbanes-Oxley
compliance.
18.2.3. Discussion
We reviewed SDG&E’s forecast as well as the testimony submitted. We
find that the requested activities have been normally and regularly conducted by
E&FP and funded in prior GRCs. We find these activities to be necessary to carry
out the functions performed by E&FP. With respect to the forecast costs, we find
the use of a five-year historical average to be appropriate as the volume for
certain activities tend to fluctuate depending on the circumstances as well as
need and market conditions. Because of this, a five-year average is appropriate
in order to normalize these fluctuations.
Based on the above, we find that the requested O&M costs of
$8.641 million for TY2019 are reasonable and should be approved. ORA is the
only other party that provided comments and does not have any issue with
SDG&E’s forecast.

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We reviewed the request for the two IT projects and find the request
reasonable and should be approved. No party objected to SDG&E’s proposed
projects.
19. Advanced Metering Infrastructure
This section covers SoCalGas’ AMI implementation costs and discusses
how these are incorporated into TY2019 ongoing operations. The section also
addresses the Advanced Metering Organization (AMO) required to monitor,
operate, and maintain SoCalGas’ AMI technology.
The Commission authorized the AMI project in D.10-04-027 along with the
Advanced Metering Infrastructure Balancing Account (AMIBA) to record O&M
and related capital costs for the AMI project period which was from 2010 to 2017.
This timeframe was later modified to include 2018 as a bridge-year period which
resulted in the AMIBA also being modified to include a post-deployment phase
cost sub account.185 Integration of the impacts of AMI implementation into
SoCalGas’ continuing operations and associated GRC forecasts is being
conducted for the first time in TY2019.
Certain costs for AMI are associated with RAMP risks identified in the
RAMP Report. These RAMP costs are estimated at $0.456 million and involve
mitigation of risks covered in SCG-2 of the RAMP Report involving employee,
contractor, customer, and public safety. Specifically, risks being mitigated are
activities associated with Gas Consumption Analytics and the Data Collector
Unit (DCU) & AMI-installed Pole Inspections.186 Gas Consumption Analytics

185 Exhibit 287 at RFG-13.

186SoCalGas conducts cyclical inspections of poles that contain AMI and DCU equipment and
related materials attached to the poles.

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concerns technology that detects unauthorized meter turn-ons by unauthorized

persons at premises where technicians have previously turned service off. On
the other hand, DCU & Pole Inspections concerns technology that conducts
cylindrical inspections of AMI installed on poles and materials and equipment
that are attached to these poles.
19.1. O&M Costs
SoCalGas requests $10.477 million for TY2019 using a zero-based forecast
methodology for ongoing support to operate and maintain the AMI network,
equipment, systems, and related business processes.
19.1.1. Discussion
Parties do not oppose the requested amount for O&M although EDF
recommends that 10 percent of the AMI funding for the AMO be allocated
towards mitigating operational and market risks as part of its recommended plan
related to “Gas Electric Coordination.” However, we agree with SoCalGas that
AMI O&M costs have little connection with the Gas Electric Coordination
concept being proposed by EDF. We also find that EDF did not provide
supporting evidence and analysis to explain the basis and justification for its
recommendation. Therefore, we find that EDF’s proposal should be rejected.
Regarding the requested amount, we find it reasonable and supported by
the evidence. Exhibit 287 also includes the projected benefit for TY2019 of AMI
to various business areas. Table RG-9187 shows the estimated O&M and Capital
benefits and Table RG-10188 shows the impact to various business units affected.

187 Exhibit 287 at RFG-26.

188 Id. at RFG-27.

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Parties that reviewed SoCalGas’ request including ORA, did not oppose the total
amount. We likewise find the use of a zero-based forecast to be appropriate as
this is the first year in which AMI O&M expenses are being included in a GRC
following completion of deployment and post-deployment activities in 2018.
Based on the above, we find that SoCalGas’ requested amount of $10.477 million
for O&M costs should be approved.
19.2. Capital
Capital projects planned are Information Technology (IT)-related projects
concerning the DCU. The total amounts requested are $1.768 million for 2018
and $4.815 million for 2019. SoCalGas is also including capital costs recorded in
the AMIBA for 2017 and 2018.
19.2.1. AMI Balancing Account (Capital)
As stated in the opening portion of this section, AMI costs from 2010 to
2018 are tracked in the AMIBA and the balancing account is showing
$24.718 million in 2017 and $7.524 million in 2018 as capital costs. These
amounts are for rate base purposes only and the funds are not being requested in
this GRC as the AMIBA was previously authorized in D.10-04-027 and
D.16-06-054.
19.2.2. IT Capital Projects
[Link]. DCU LTE Upgrade Program
Each DCU contains a cellular communications card provided by Verizon
Wireless or AT&T that relays meter readings and other data back to an end
system. The current cards utilize 2G and 3G cellular technology and SoCalGas
plans to upgrade these cards and related equipment. The forecast for this
program upgrade is $1.051 million in 2018 and $4.265 million in 2019.

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[Link]. DCU Software IS Upgrade

This project will upgrade information security capabilities of the AMI
hardware and IT systems to better defend against cyber attacks. The forecast for
this upgrade is $0.248 million in 2018 and $0.316 million in 2019.
[Link]. DCU Compliance Inspection
Work Management
SoCalGas is proposing to transition its current AMI management system
from the 3rd party Sierra application to the SAP asset management system. The
management system manages the DCU, poles, compliance inspections,
installations, replacements, incidents, and inventory and the SAP system will
enhance the technology being utilized and aims to improve system performance.
The forecast for this project is $0.469 million in 2018 and $0.234 million in 2019.
19.2.3. Positions of Intervenors
ORA proposes disallowance of capital costs for curb meter installation and
CUE has proposals concerning annual replacement rate and failure rate of AMI
module replacements. These proposals will be discussed and addressed in our
discussion of Customer Services Field issues.
19.2.4. Discussion
The amounts recorded in the AMIBA have already been authorized in
D.10-04-027 covering AMI costs from 2010 to 2017 and in D.16-06-054 which
authorized AMI post-deployment activities in 2018. Thus, it is proper to include
these capital amounts for calculating rate base in TY2019.
With respect to the IT-related capital projects, we find all three projects to
be necessary. We agree with SoCalGas that it is necessary to upgrade the 2G and
3G cellular cards contained in the DCU to allow faster and more reliable
transmission of meter readings and information. Also, according to SoCalGas,
the 2G and 3G cards will no longer be supported by Verizon Wireless and AT&T

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making the upgrades necessary. For the software upgrade, we find that
upgrading IT security is a continuous process that occurs periodically and that
such is necessary in order to provide adequate protection against attacks that are
becoming more sophisticated over time. Finally, we find the proposed transition
into the SAP system to be reasonable as part of SoCalGas’ and also SDG&E’s
efforts to convert dated systems into more modern systems that can
accommodate new technology and meet regulatory and customer needs that are
becoming more complex. We also find that amounts requested for the IT projects
are reasonable and supported by the evidence. Based on the above, we find that
the requested amounts for capital projects totaling $1.768 million for 2018 and
$4.815 million for 2019 should be approved. We also find that it is proper to
include the AMIBA balances of $24.718 million in 2017 and $7.524 million in 2018
for rate base purposes.
20. Electric Generation
SDG&E’s Electric Generation request encompasses four primary areas:
Generation Plant; Administration; San Onofre Nuclear Generating Station
(SONGS) O&M; and Resource Planning.
The total forecast for TY2019 is $63.411 million which is $26.229 million
higher than base year levels. This is inclusive of $2.478 million in savings from
FOF which include goods and services benefits, water treatment and usage
programs, optimizing the maintenance frequency of gas turbines, and installing
plant cycling damage monitoring and diagnostics tools. For Capital Costs,

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SDG&E’s forecast is $13.314 million189 for 2017, $292.826 million in 2018, and
$17.371 million for 2019. The 2018 costs include $280.00 million to purchase the
Otay Mesa Energy Center (OMEC).190
Certain costs included in this section are RAMP-related costs supporting
activities that mitigate key risks identified in the RAMP Report. The key risk
being mitigated is failure to black start.191 RAMP-related costs are estimated at
$40,000 O&M and $1.106 million in capital costs. Risks related to Electric
Generation are generally related to safety, system reliability, site security and
cybersecurity, natural disaster, and recovery from grid outages.
20.1. Non-Shared O&M Costs
Non-shared O&M costs include costs related to Generation Plant,
Administration, and SONGS. The total forecast for TY2019 is $62.316 million
which is $25.881 million higher than 2016 costs. Most of the increase is due to the
addition of OMEC which accounts for $22.796 million of O&M costs.
20.1.1. Generation Plant
The Generation Plant group owns and operates four electric generation
plants as follows:

Revised from $13.314 million to $12.807 million in the Update Testimony (Exhibit 514) at
189

Attachment I.
190OMEC is a wholly owned indirect subsidiary of Calpine Corporation and it’s the owner of
the Otay Mesa generation plants. In this section, OMEC and the Otay Mesa plant are
sometimes used interchangeably when referring to what SDG&E will acquire pursuant to the
Put Option exercisable by OMEC.
191A black start is the process of restoring an electric power station or part of an electric grid
back to operation without relying on the external electrical power transmission network to
recover form a total or partial shutdown.

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a. Palomar Energy Center (Palomar), a 565 megawatt (MW)192 plant

located in Escondido;
b. Desert Star Energy Center (Desert Star), 480 MW located in
Boulder City, Nevada;
c. Miramar Energy Facility (Miramar), 92 MW located in San Diego;
and
d. Cuyamaca Peak Energy Plant (Cuyamaca), 45 MW located in
El Cajon.
Palomar and Desert Star are combined cycle power plants 193 while
Miramar and Cuyamaca are peaking plants194 used for peaking duty when there
is high demand. Since 2017, SDG&E added two battery energy storage system
projects, the Escondido Battery Energy Storage System (Escondido BESS) and the
El Cajon BESS, and the Ramona Solar Energy Project (RSEP).
The table below shows the TY2019 forecasts for Generation Plant as well as
the 2016 costs.

Generation Plant TY2019 2016 Costs Difference

Palomar $18,556,000 $17,583,000 $973,000
Desert Star $15,561,000 $14,419,000 $1,142,000
Miramar $2,380,000 $1,414,000 $966,000
Cuyamaca $1,078,000 $1,369,000 -($291,000)
Otay Mesa $22,796,000 $0 $22,796,000
Total $60,371,000 $34,785,000 $25,586,000

Except for the Otay Mesa generation plant, the forecasts for the other four
generation plants were developed based on a five-year average. The cost drivers

192 565 MW represents the full load at design conditions.

193A combined cycle power plant refers to an assembly of heat engines that work in tandem
from the same source of heat, converting it into mechanical energy which in turn powers
electric generators.
194 Peaking power plants generally only run when there is high demand for electricity.

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for the four generation plants are also the same with the majority of those costs
relating to maintenance outages.
[Link]. Otay Mesa Plant
SDG&E’s TY2019 forecast includes costs relating to Otay Mesa, a 608 MW
combined cycle power plant located near San Diego. SDG&E had contracted for
the use of OMEC through a non-renewable Power Purchase Tolling Agreement
(PPTA) from October 3, 2009 to October 2, 2019.195 The PPTA was authorized by
the Commission in D.06-02-031 but was modified by D.06-09-021196 to include
“Put” and “Call” options at the end of the 10-year PPTA.
The Call Option, which is exercisable at SDG&E’s sole discretion, would
require OMEC to sell the Otay Mesa plant to SDG&E at a price higher than the
price in the Put Option. Additional Commission review is necessary prior to
exercise of the Call Option. According to a Calpine’s Form 10Q filing, the price
of Otay Mesa plant under the Put Option is $280.0 million and $377 million
under the Call Option. Since then, SDG&E has chosen not to exercise its Call
Option which has expired.197
The Put Option is exercisable at OMEC’s sole discretion and would require
SDG&E to purchase the Otay Mesa plant at a set price that would be significantly
below the net book value of Palomar,198 which is smaller in size. Exercise of the
Put Option by OMEC is due no later than April 1, 2019 and requires no

195 Exhibit 97 at DSB-5.

POC filed a petition to modify D.06-09-021 on November 13, 2018 which was denied by the
196

Commission in D.19-03-012 on March 28, 2019.

197 Advice Letter 3294-E at 1 filed on October 26, 2018.
198 D.06-09-021 at 5.

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additional Commission review or approval.199 OMEC only needs to notify

SDG&E that it is exercising its Put Option on or before April 1, 2019.
SDG&E expects the Put Option to be exercised and requests authority to
establish the Otay Mesa Acquisition Balancing Account (OMABA), a one-way
balancing account. The OMABA will record the revenue requirement for the
Otay Mesa plant until SDG&E acquires ownership thereof so ratepayers are
indifferent to the timing of the actual transfer of ownership or in the event that
the PPTA merely expires without the Put Option being exercised. The balancing
account would also ensure that no revenue requirement prior to the transfer date
of plant ownership or if plant ownership does not occur, would be retained aside
from PPTA and equity rebalancing costs.
Otay Mesa costs were developed using Palomar costs as a basis because of
their similarities. Estimated plant operation and maintenance costs are shown as
non-labor costs because it is still unknown if the Calpine employees currently
operating Otay Mesa will be employed by SDG&E.
[Link]. Resolution E-4981
On February 21, 2019, the Commission issued Resolution E-4981
approving SDG&E’s request in Advice Letter 3294-E for a proposed Long Form
Confirmation for Resource Adequacy Capacity Product (Confirmation) between
SDG&E and OMEC for local, system and flexible capacity from the Otay Mesa
plant between October 3, 2019 through August 31, 2024. The Confirmation is
therefore set to begin immediately after the expiration of the 10-year PPTA
between SDG&E and OMEC. According to SDG&E, OMEC intends to relinquish

199 Exhibit 97 at DSB-5.

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its right to sell the Otay Mesa plant through the Put Option once Resolution
E-4981 becomes final. SDG&E will then consider its options on how to withdraw
its OMEC acquisition related requests in the GRC.200 However, on March 27,
2019, POC filed an application for rehearing of Resolution E-4981 which
prompted OMEC to exercise its rights under the Put Option on March 28, 2019 to
sell the Otay Mesa plant to SDG&E. In light of this development, SDG&E states
that it will commence the pre-ownership due diligence process set forth in the
PPTA. On August, 6, 2018, the Commission issued D.19-08-014 denying POC’s
application for rehearing of Resolution E-4981.
20.1.2. Administration
Administration is composed of Generation Plant Administration and
Electric Project Development. Costs were forecast using the base year method
because costs are expected to remain at around base year levels. The table below
shows the TY2019 forecasts for Administration as well as the 2016 costs.

2016
Administration TY2019 Difference
Costs
Generation Plant Administration $348,000 $348,000 0
Electric Project Development $121,000 $63,000 $58,000
Total $469,000 $411,000 $58,000

Generation Plant Administration

Provides managerial oversight and analytical support for Electric
Generation.

200 Resolution E-4981 at 5 to 6.

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Electric Project Development

Supports Electric Generation and Resource Planning, Smart Grid Projects,
and Distribution Planning.
20.1.3. SONGS
SONGS-related O&M consists of costs for Marine Mitigation and SONGS
Worker’s Compensation. The table below shows the TY2019 forecasts for
SONGS-related O&M costs as well as the 2016 costs.

2016
SONGS TY2019 Difference
Costs
Marine Mitigation $1,015,000 $946,000 $69,000
SONGS Worker’s Compensation $461,000 $293,000 $168,000
Total $1,476,000 $1,239,000 $237,000

SDG&E owns a 20 percent share of SONGS and incurs its share of Marine
Mitigation costs from the values determined in SCE’s TY2018 GRC. SCE
provides its Marine Mitigation forecast in its TY2018 GRC and then bills SDG&E
for SDG&E’s 20 percent share of expenses.201 Costs are tracked in the Marine
Mitigation Memorandum Account (MMMA) to ensure that ratepayers only pay
for what SCE bills SDG&E. Marine Mitigation costs are incurred for ongoing
projects designed to mitigate the turbidity effects caused by the movement of
ocean water to cool SONGS when it was operational.202
SONGS Worker’s Compensation
Similar to Marine Mitigation, SDG&E is billed by SCE for its 20 percent
share of SONGS Worker’s Compensation costs. SCE maintained a Master

201 Exhibit 97 at DSB-23.

202 Ibid.

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Insurance Program (MIP) and a Self-Insured Worker’s Compensation Program

for SONGS-related accident and injury claims while SONGS was still operating
and both programs will remain open until all claims are closed.
SONGS Balancing Account (SONGSBA)
SDG&E is requesting continuation of the two-way SONGSBA which
records non-decommissioning SONGS costs billed by SCE.
20.2. Shared O&M Costs (Resource Planning)
The only category under shared services is Resource Planning and the
TY2019 forecast for Resource Planning is $1.095 million which is $0.348 million
higher than 2016 costs. Costs were forecast using a five-year average with an
adjustment for incremental costs. Resource Planning is responsible for planning
the long-term electric generation needs of bundled customers as well as planning
for adequate resources to meet local capacity requirements of all customers.
20.3. Capital
As stated at the beginning of this section, SDG&E’s forecast for capital
costs is $13.314 million for 2017, $292.826 million in 2018, and $17.371 million for
2019. Costs were forecast using an adjusted five-year average which removes
large, one-time capital projects from historical costs. Rather than proposing
specific projects, SDG&E proposes to use a general capital budget to allow
flexibility and adaptability to meet current and future plant needs. The
underlying cost drivers for the capital projects relate to maintaining clean, safe,
and reliable operation of SDG&E’s Electric Generation plant assets. The table
below shows the forecasts for the different project categories.

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Capital 2017203 2018 2019

Capital Tools & Test Equipment $275,000 $275,000 $275,000
Miramar Energy Facility $2,580,000 $2,580,000 $2,580,000
Palomar Energy Facility $5,351,000 $5,351,000 $5,351,000
Desert Star Energy Center $3,361,000 $3,361,000 $3,361,000
Cuyamaca Peak Energy Plant $453,000 $453,000 $453,000
South Grid – Black Start CPEP $300,000 $806,000 $0
OMEC Acquisition $0 $280,000,000 $0
OMEC Ongoing Capital $0 $0 $5,351,000
Solar Photovoltaic Plant $994,000 $0 $0
Total $13,314,000 $292,826,000 $17,371,000

20.4. Position of Intervenors

ORA, TURN, and POC provided comments to SDG&E’s forecasts and
requests regarding Electric Generation.
ORA proposes that OMEC costs be removed from the GRC and be
addressed at a later time through a Tier 1 Advice Letter filing. ORA also
recommends that a reduction of $1.1 from OMEC O&M costs at the time the
Advice Letter filing is made. The reduction corresponds to an adjustment for
contracting and procurement efficiencies similar to an adjustment that was
applied to Desert Star. ORA also recommends using 2017 adjusted-recorded
costs for 2017 instead of the 2017 forecast.
TURN also recommends that OMEC costs be removed from the GRC and
be resolved at a later time when uncertainties relating to the OMEC acquisition
have been removed. TURN states that the closing date to purchase Otay Mesa, if
the sale occurs, would not happen until October 3, 2019 and no OMEC costs

203The following 2017 capital forecasts were revised to the following amounts in the Update
Testimony (Exhibit 514) at Attachment I: Capital Tools & Test Equipment $0.119 million,
Miramar Energy Facility $0.738 million, Palomar Energy Facility $4.438 million, Desert Star
Energy Center $3.394 million, Cuyamaca Peak Energy Plant $3.791 million, South Grid – Black
Start CPEP $0 million, Solar Photovoltaic Plant $0.327 million.

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would be incurred from January 1, 2019 to October 3, 2019 even though rates
would already include OMEC costs of approximately $51 million if costs for
OMEC are approved now.204 TURN adds that the acquisition price for OMEC set
at $280.0 million in the GRC, is also uncertain. TURN does not agree with ORA’s
recommendation that OMEC costs be addressed via a Tier 1 Advice Letter filing
as that process does not provide parties with an opportunity to weigh in on the
reasonableness of costs that will be proposed.
TURN also recommends reducing non-OMEC Generation Costs by
$1.878 million as a result of incorporating 2017 data and using a six-year average.
For Administration, TURN recommends using a three-year average from 2015 to
2017 resulting in a $91,000 reduction. For Resource Planning, TURN
recommends a reduction of $0.279 million stating that SDG&E did not provide
adequate testimony to justify the additional work that SDG&E claims is needed.
Finally, TURN also objects to the inclusion of chamber of commerce dues in
O&M costs.
POC states that SDG&E’s requests regarding OMEC should be denied
with prejudice and that the GRC is typically reserved for determining O&M
requests and not acquisition of large-scale plants.205 Alternatively, POC
recommends that SDG&E be required to file a separate application to acquire
OMEC if the Commission determines in this GRC that denial of OMEC costs is
without prejudice.

204 TURN Opening Brief at 51.

205 POC Opening Brief at 29 to 30.

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20.5. Discussion
20.5.1. OMEC
First, we disagree with POC that the GRC typically only considers O&M
costs and not the acquisition of large-scale plants. The GRC considers O&M and
capital costs as well as other requests relating to SDG&E’s revenue requirement
for the GRC TY and PTYs. This includes capital costs for projects that are of
considerable value. There is no limit on the amount or scale of capital projects
that may be reviewed. Moreover, this GRC is reviewing the possible OMEC
acquisition pursuant to the Put and Call Options that were authorized in
D.06-09-021 and we find no need to revisit the reasons for approving the Put and
Call Options that were included in the PPTA between SDG&E and OMEC. In
Resolution E-4981, the Commission also found that CAISO had determined that
OMEC is likely needed for the next five years for local reliability during that
period206 and we find no need to re-examine this finding regarding the necessity
for OMEC.
As stated above, OMEC exercised its rights under the Put Option to sell
the Otay Mesa plant to SDG&E which eliminates one of the concerns of ORA and
TURN on whether the OMEC acquisition would occur. We find TURN’s concern
about the uncertainty of the acquisition price to be of little merit as a valuation of
$280.0 million for the Otay Mesa plant was already approved in D.06-09-021207
and we find that any adjustments to the set price based on the results of
SDG&E’s due diligence would be minor relative to the acquisition price. In

206 Resolution E-4981 at 10 to 11.

207 Exhibit 100 at DB/GS-15.

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addition, the set price is significantly below the net book value of Palomar,208 a
comparable plant to Otay Mesa, so there is little danger of ratepayers paying
more than the value of the asset.
However, we find that Resolution E-4981 which approved SDG&E’s
request in Advice Letter 3294-E for a proposed Confirmation between SDG&E
and OMEC for local, system and flexible capacity from the Otay Mesa plant
between October 3, 2019 through August 31, 2024 makes the acquisition of the
Otay Mesa plant highly uncertain. We find this to be true despite the exercise by
OMEC of the Put Option to sell Otay Mesa to SDG&E and despite the fact that
D.19-08-014 denied POC’s application for rehearing of Resolution E-4981. Even
though the Put Option was exercised, sale of Otay Mesa will not become final
until October 3, 2019 or after the PPTA expires. Furthermore, the Confirmation
will not be final and unappealable until the time expires for POC to seek a Court
challenge to D.19-08-014 or a Court rejects any POC challenge. Therefore, we
find it prudent to consider the potential impact of Resolution E-4981 in our
analysis of the costs being included for the acquisition of Otay Mesa.
Removing OMEC costs results in the following totals to SDG&E’s O&M
and capital forecasts:

O&M and Capital 2017 2018 2019

O&M with OMEC n/a n/a $63,411,000
O&M without OMEC n/a n/a $40,615,000
Capital with OMEC $13,314,000 $292,826,000 $17,371,000
Capital without OMEC $13,314,000 $12,826,000 $12,020,000

208 Exhibit 97 at DSB-5.

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In its Comment to the Proposed Decision, SDG&E provided updated

information that OMEC agreed to rescind its exercise of and waive any further
right to the put option that the Commission approved in D.06-09-021, and which
OMEC had exercised on March 28, 2019. SDG&E states that it sent Notification
of Status of Capacity Agreement in R.17-09-020 and to the service list of this
proceeding on August 23, 2019, explaining that OMEC is rescinding its exercise
of the put option and that SDG&E will proceed in accordance with the terms set
forth in its Commission-approved 59-month Confirmation, as amended, and will
not purchase the OMEC facility.
In light of the recent developments described above, we find it reasonable
for OMEC-related costs to be removed from the GRC. We also find no need to
authorize establishment of the OMABA. The following OMEC costs should be
removed from SDG&E’s forecasts for Electric Generation: $22.796 million in
non-shared O&M costs and capital costs of $280.0 million in 2018 and
$5.351 million in 2019. TURN and ORA proposed reductions of $0.493 million
and $1.1 million for Otay Mesa O&M costs but these become moot since we are
disallowing the proposed OMEC costs.
20.5.2. O&M Costs
Consistent with other sections of this decision, we find that select use or
updates using 2017 data may lead to inconsistency since not all data will be
updated. We recognize that there are instances where this is necessary,
reasonable, and prudent but this is not the case here and especially because no
reason was provided on why it is appropriate to include 2017 data other than the
fact that 2017 costs are lower than the five-year historical average from 2012 to
2016. Thus, we find SDG&E’s use of a five-year average to be more appropriate
and reasonable. In its Reply Brief, SDG&E agreed to removed the small cost of

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$5,000 for chamber of commerce dues in Boulder City that TURN objects to. 209
SDG&E agrees with TURN’s position regarding $0.119 million in crane costs that
should be removed from costs for Palomar because these costs are not expected
to recur due to the installation of a steam turbine gantry crane in Palomar. This
reduces the TY2019 costs for Palomar to $18.437 million. Based on the above, we
find that the Generation Plant TY2019 forecasts of $18.437 million for Palomar,
$15.561 million for Desert Star, $2.380 million for Miramar, and $1.078 million for
Cuyamaca are reasonable and should be approved. Costs for these four
generation plants are relatively close to 2016 costs.
For Administration, the difference between TURN’s recommendation and
SDG&E’s proposal is the inclusion of two FTEs that are part of 2016 costs. One of
those positions remained vacant in 2017 and part of 2018 resulting in a lower
three-year average as compared to just base year costs. However, we find that
there is no indication from the evidence presented that the position that became
vacant in 2017 was meant to be vacant and that the job functions to be performed
by the position continued to exist. Thus, we find that base year costs are better
reflective of TY2019 costs and that SDG&E’ s forecast for Administration of
$0.469 million is reasonable and should be authorized.
Parties do not object to the forecast for SONGS and we find that the
reasonableness of the costs are to be addressed in SCE’s TY2018 GRC. SCE then
merely bills SDG&E 20 percent of the costs determined in SCE’s GRC
representing SDG&E’s 20 percent ownership cost for SONGS-related expenses.

209 SoCalGas and SDG&E Reply Brief at 133.

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With regards to the forecast for Resource Planning, SDG&E states that
incremental costs were added to the TY2019 forecast to reflect staffing needs to
meet GHG target and reliability needs as well as an additional FTE for a
Resource Planning Manager to address additional activities as the Commission
moves to an Integrated Resource Planning process as required by SB 350.
However, we agree with TURN that meeting GHG target needs should not be
considered as incremental work given that this has been a relatively
longstanding activity that is being performed by SDG&E. We also agree with
TURN that the testimony submitted by SDG&E concerning the additional FTE
for the Resource Planning Manager position only states that the position is being
added but does not clearly establish the work to be performed and that the work
is incremental in nature. Thus, we find TURN’s recommended forecast of
$0.815 million for Resource Planning is more reasonable and should be
approved.
To summarize, SDG&E’s TY2019 forecast $63.411 million for O&M costs
should be authorized except subject to reductions of $22.915 million for
Generation Plant and $0.280 million for Resource Planning. SDG&E should also
remove $5,000 for the chamber of Commerce dues in 2016 for Boulder City.
20.5.3. Capital Costs
For this rate case, we agree with SDG&E’s proposal to use a general capital
budget rather than specific capital projects to allow flexibility and adaptability to
meet current and future plant needs. SDG&E will instead plan, schedule, and
perform specific capital projects as appropriate. We agree with the method
proposed above. We also find that basing projected costs on the five-year
historical is appropriate and reasonable. We disagree with ORA’s proposal to
use 2017 recorded costs consistent with our view in this decision concerning

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updating only select data to 2017 actuals. Thus, for capital costs, we find that
SDG&E’s forecasts of $13.314 million for 2017, $12.826 million in 2018, and
$12.020 million for 2019 should be authorized. TURN and SDG&E agree with
TURN’s finding concerning two projects concerning Palomar that should have
been disallowed in 2012 and were still included in the revenue requirement
beginning in 2016.210 We agree with SDG&E’s proposal to remove these costs
retroactive to 2016 with overcollections returned to ratepayers.211 These costs
have already been removed from the TY2019 forecasts in SDG&E’s update
testimony.212
21. Electric Distribution
SDG&E operates and maintains an electric distribution system that serves
approximately 3.1 million people through approximately 1.4 million meters. Its
service territory spans more than 4,100 square miles. The system includes 134
distribution substations, 1,035 distribution circuits, 225,697 poles, 10,558 miles of
underground systems, 6,527 miles of overhead systems, and various other
components of distribution equipment.213 SDG&E’s customer mix is
approximately 1.27 million residential customers, 158,000 commercial and
industrial customers, and 46,000 street light customers. In addition, there are
approximately 450,000 trees that are in close proximity of overhead lines that are
managed through SDG&E’s vegetation management program. Around
62 percent of the distribution system is comprised of underground facilities.

210 Exhibit 494 at 65 to 66.

211 Advice Letter 3317-E
212 Exhibit 514 Attachment I at I-1.
213 Exhibit 68 at WHS-1.

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21.1. O