Introduction to Results of Operations Analysis

UCAN's testimony is not intended to be a comprehensive review of all issues identified in this proceeding. Instead, we have attempted in large part not to duplicate DRA's showing, but rather, to build upon it. Many of the items identified here call for disallowances that are either additional to DRA in whole or in part; most of the rest provide new information supporting DRA's position not addressed in DRA's report, or provide alternatives for the Commission to consider if DRA's position is not adopted. Failure by Mr. Marcus or any of UCAN's other witnesses to comment on any issue should not be construed as agreement with SDG&E's position.

Other testimony relating to San Diego Gas and Electric Company's results of operations is sponsored by Jeffrey A. Nahigian of JBS Energy, Inc. (metering, customer service operations and customer service and information), Gayatri M. Schilberg of JBS Energy,Inc. (electric distribution issues),Overland Consulting (relating to shared service and corporate costs allocated to SDG&E), Michael Majoros (relating to depreciation matters) and Michael Shames of UCAN on assorted customer service and operations issues UCAN also is not under any illusions that it has found everything additional to DRA's analysis that should be disallowed from rates. The large number of individual adjustments made by SDG&E makes it difficult to review each adjustment, much less find all unreasonable costs.

The testimony of JBS Energy witnesses recommends reductions to SDG&E's rate increase that total approximately $58 million (valuing the revenue requirement impact of plant-in-service reductions at 16% of the capital amount and other rate base reductions at 12.5% for return, depreciation, and taxes).

1. An increase of $869,000 in miscellaneous operating revenue at current rates.
2. An increase to SDG&E's pole attachment fee from $5.86 to $17.08, generating a further $1,070,000 in miscellaneous operating revenue.
3. A decrease of $242,000 in electric production expenses.
4. A decrease of $15,871,000 in electric distribution expenses.
5. A decrease of $397,000 in electric energy procurement expenses and $1,209,000 in gas procurement expenses.
6. A decrease of $1,304,000 of gas distribution expenses and $995,000 in gas engineering expenses.
7. Allowing SDG&E to recover actual distribution pipeline integrity management costs through a memorandum account.
8. A decrease of $7,779,000 in Customer Service Operations expenses and $5,777,000 in Customer Service and Information expenses, as recommended in the testimony of Mr. Nahigian.
9. A decrease of $811,000 in business services operations expenses.
10. A decrease of $4,538,000 in SDG&E shared services departments ($499,000 electric distribution, $1,279,000 customer service operations, $1,057,000 in customer service and information, and $1,703,000 in support services).
11. A decrease of $1,202,000 in A&G expenses (directors' and officers' insurance and CPUC short-term debt approval fees) and a minimum disallowance of $259,000 for the Edison Electric Institute and American Gas Association if DRA's position is not adopted for these organizations.
12. A decrease in the payroll tax rate from 7.54% to 7.02%, which reduces SDG&E's expenses by $828,000 (assuming SDG&E's employee levels).
13. Use four-year averages for tax deductions for cost of removal and percentage repair allowances, to reduce rates by $1,498,000.
14. Inclusion of the tax deduction for dividends paid to SoCal's portion of the Sempra Employee Stock Ownership Plan, which reduces rates by $5,521,000.
15. A reduction in weighted 2008 plant-in-service of $735,000 for the payroll tax rate change above and $255,000 for the CAC to CIAC transfer.
16. A reduction in weighted average plant for direct access and community choice aggregation of $860,000 ($1,720,000 end of year plant) and of $1,815,000 in weighted average plant rendered unnecessary by the approval of Automatic
Metering Infrastructure ($2,719,000 end of year plant), as sponsored by Mr. Nahigian.
17. A reduction in weighted average distribution plant of $1,500,000 ($2,000,000 end of year plant) in budget 229 (corrective maintenance), as sponsored by Ms.Schilberg.
18. An increase in customer advances for construction (reduction to rate base) of $1,107,000.
19. A decrease in cash working capital rate base (other than customer deposits) of $34,473,000.
20. Use of customer deposits as a rate base offset, reducing rate base by $39,023,000 and adding back $2,146,000 of interest as an operating expense.