SDG&E and SoCalGas
2016 Natural Gas Cost Allocation Proceeding
Phase 2: Demand Forecasts and Marginal Cost Updates



Approximately every three years SDG&E and SoCalGas propose how to allocate the costs of their natural gas storage operations across various customer classes. This Triennial Cost Allocation Proceeding (TCAP) also address other policy issues related to natural gas storage.  In December 2014, SDG&E and SoCalGas filed an Application in Phase 1 Natural Gas Rates, requesting CPUC approval to increase those rates effective January 1, 2016.  

In July 2015, SDG&E and SoCalGas filed their Application in Phase 2 to update demand forecast and marginal unit costs, effective January 1, 2017.  The purpose of Phase 2 is to allocate the revenue requirement established in Phase 1 amongst rate classes (such as between residential customers and industrial customers). 

On March 9, 2016, the CPUC issued a Ruling requesting SDG&E and SoCalGas provide testimony on its previously authorized normal operating costs associated with Aliso Canyon that it seeks to recover in rates in this proceeding. The purpose of the ruling is to identify those “business-as-usual” costs embedded in the utilities’ July 2015 application, not to address any costs associate with the Aliso Canyon gas leak. 

On March 28, 2016, SDG&E and SoCalGas issued their Supplemental Testimony. 


Proposed Settlement Agreement

On May 27, 2016, Public Advocates Office, SoCalGas, SDG&E and several other parties submitted a proposed Settlement Agreement to the CPUC, which reaches consensus on the following issues:

  • Demand forecasts which will be used to set transportation rates. 
  • SoCalGas curtailment penalty refunds.  
  • Submeter credits for mobile home customers. 
  • Natural Gas Vehicle compression rate adders, which would exclude subsidies from ratepayers. 
  • Marginal costs used to set transportation rates (See Appendix A).    
  • Transmission costs. 


Evidentiary Hearings

Evidentiary Hearings were held on June 6 and 7, 2016 at the CPUC to litigate unresolved issues, including the utilities’ proposals for a $10 per month residential customer charge. 


CPUC Decision

On October 13, 2016, the CPUC adopted its Final Decision adopting the Settlement. 


Public Advocates Office's (the Office) Position

Proposed Settlement 

The Office supports the Settlement Agreement that largely resolves major issues on cost allocation related to transportation rates. The Settlement would provide significant relief across customer classes by mitigating the burden of cost allocation and result in more reasonable rates for residential and other customers, compared to the utilities’ initial proposals.

The Office opposed both SoCalGas’ proposal to increase its residential fixed customer charge and SDG&E’s proposal to implement a new residential fixed customer charge. Accordingly, Public Advocates Office supports the CPUC's October 2013 Decision, which adopted Public Advocates Office's recommendation to implement a $3.00 minimum bill requirement for SDG&E customers, rather than SDG&E's $10 fixed chargePublic Advocates Office's analysis found that imposing a fixed customer charge would cause average monthly residential, multi-family gas bills to increase about 11.15% for SoCalGas and 21.85% for SDG&E. Such fixed charges do not reflect the amount of energy used by the customer and accordingly would not send any price signals to customers to influence their behavior to conserve energy.   


Public Advocates Office's Analysis of the Utilities' Proposals

The Office reviewed the utilities’ Application and does not oppose SDG&E’s and SoCalGas’ proposals for:  

  • Throughput Forecasts  
  • The Long Run Marginal Cost methodology and calculation for high or medium pressure distribution marginal costs. 
  • The embedded cost method for calculation of gas transmission services and rates. 

 However, Public Advocates Office recommended modifications to the utilities’ proposal, including:  

  • Retain SoCalGas’ monthly residential customer charge at $5, rather than its proposed increase to $10 per month. 
  • Approve an SDG&E $3 per month residential minimum bill, rather than its proposed new $10 per month residential customer charge. 
  • Use the New Customer Only method for natural gas distribution for marginal customer costs, rather than the rental method.   
  • Eliminate the unbundled storage transaction posting requirement.  
  • Retain the current SoCalGas residential tier differential calculation.   
  • Adopt the Public Advocates Office’s recommendations on cost allocation of gas transportation rates.  


 See the Public Advocates Office's March 11, 2016 Testimony:    


Proceeding Docket

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