Resolution No. 6763
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RESOLUTION NO. 6763
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A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION
OF A STIPULATION AND SETTLEMENT AGREEMENT IN
CPUC DOCKET NOS. A.91-03-039 AND A.93-09-006 BY
AND BETWEEN THE CITY OF VERNON AND SOUTHERN
CALIFORNIA GAS COMPANY
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WHEREAS, there exists controversies pending before the
Public utilities Commission raised by the City of Vernon
concerning Decision Nos. D.94-09-033, D.94-12-052, D.93-05-008 and
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D.93-11-072 involving applications filed by the Southern
California Gas Company (lfSoCaIGas") in Docket Nos. A.91-03-039 and
A.93-09-006; and
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WHEREAS, representatives from the City of Vernon and
SoCalGas have held settlement discussions over a period of several
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months to try to resolve the issues in dispute in the above-
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referenced matters; and
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WHEREAS, the City of Vernon and SoCalGas have negotiated
in good faith a compromise on the disputed issues and desire to
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enter into a Stipulation and Settlement Agreement which does not
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constitute or represent an admission or an acceptance of any fact,
principle, or position by any party and does not preclude the City
from asserting or taking legal action on any other claim against
the Gas Company which is not specifically precluded in said
StipUlation and Settlement Agreement.
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NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
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SECTION 1: The City Council of the City of Vernon does
hereby find and determine that the recitals contained hereinabove
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I are true and correct.
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SECTION 2: The City Council of the City of Vernon hereby
3 approves the stipulation and Settlement Agreement, a copy of which
4 has been presented to the City Council concurrently with this
5 resolution, and the city Council hereby orders said Agreement to
6 be received and filed by the City Clerk.
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SECTION 3: The City Council of the City of Vernon hereby
8 authorizes Hilario Gonzales, Councilman, and the city Clerk to
9 execute said Agreement for, and on behalf of, the City of Vernon.
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SECTION 4: The City Clerk of the City of Vernon shall
II certify to the passage of this resolution and thereupon and
12 thereafter the same shall be in full force and effect.
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APPROVED AND ADOPTED this 26th day of March, 1996.
?/~ ~., t!.:~"
HILARIO GONZALES Councilman
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17 BRUCE V. MALKENHORST, City Clerk
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I STATE OF CALIFORNIA )
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2 COUNTY OF LOS ANGELES )
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I, BRUCE V. MALKENHORST, City Clerk of the city of
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Vernon, do hereby certify that the foregoing Resolution, being
Resolution No. 6763, was duly adopted by the City Council of the
City of Vernon at an adjourned regular meeting of the City Council
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duly held on Tuesday, March 26. 1996, and thereafter was duly
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signed by a Councilman and Acting and Presiding Official of the
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City of Vernon.
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BRUCE V.
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BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
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In The Matter of The Application of
6 SOUTHERN CALIFORNIA GAS COMPANY
7 for Authority to Revise Its Rates Effective
October 1, 1991, in Its Biennial Cost
8 Allocation Proceeding (BCAP)
9 In The Matter of The Application of
10 SOUTHERN CALIFORNIA GAS COMPANY
for Authority to Revise Its Rates Effectiye
11 April 1, 1994, in Its Biennial Cost
12 Allocation Proceeding (BCAP)
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A. 91-03-039
A. 93-09-06
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STIPULATION AND SETTLEMENT AGREEMENT
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John W. Jimison
Thomas J. MacBride
David B. Brearley
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Attorneys for
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City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
[Telephone: (818) 336;.3408]
[Facsimile: (818) 330-5818]
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Thomas R. Brill
David B. Follett
Attorneys for
Southern California Gas Company
633 West Fifth Street, Suite 5200
Los Angeles, California 90071-2071
[Telephone: (213) 895-5134]
[Facsimile: (213) 629-9621]
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BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
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In The Matter of The Application of
S SOUTHERN CALIFORNIA GAS COMPANY
6 for Authority to Revise Its Rates Effective
October 1, 1991, in Its Biennial Cost
7 Allocation Proceeding (BCAP)
8 In The Matter of The Application of
9 SOUTHERN CALIFORNIA GAS COMPANY
for Authority to Revise Its Rates Effective
10 April 1, 1994, in Its Biennial Cost
11 Allocation Proceeding (BCAP)
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A. 91-03-039
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A. 93-09-006
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STIPULATION AND SETTLEMENT AGREEMENT
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Pursuant to Rules 51 through 51.10 of the Rules of Practice and
Procedure of the California Public Utilities Commission ("Commission"), the
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undersigned parties (the "settlement parties") hereby submit this Stipulation and
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Settlement Agreement (the "S&SA") in settlement of certain disputed issues in the
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above captioned proceedings. Specifically, this S&SA resolves the issues currently
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pending before the Commission as raised by the City of Vernon ("Vernon") in its
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Applications for Rehearing of Decision No. ("D.") 94-09-033 and D. 94-12-052 and
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sets forth agreements regarding the provisions of these two decisions and D. 93-05-008
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and D. 93-11-072.
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1 I.
2 INTRODUCTION
3 On May 7, 1993, the Commission issued D. 93-05-008 in Application
4 No. 91-03-039 (SoCalGas' 1991 BCAP) addressing the request of Vernon for the
5 Commission to establish wholesale service rates for the transportation of natural gas by
6 SoCalGas at the transmission service level. In this decision, the Commission
7 determined the basis for the wholesale service rates that would apply to Vernon as a
8 wholesale customer of SoCalGas. Subsequent to the issuance of this decision, Vernon
9 flIed both an Application for Rehearing and a Petition for Modification ofD. 93-05-
10 008. On November 23, 1993, the Commission issued D. 93-11-072 denying Vernon's
11 request for rehearing but making certain modiflcations to the original decision, D.93-
12 05-008.
13 After the issuance ofD. 93-11-072, a disagreement arose between Vernon
14 and SoCalGas regarding the appropriate method of implementing the wholesale rate
15 that would apply to Vernon during the interim period of time prior to its completing the
16 construction of a distribution system capable of serving all of the customers in Vernon
17 (the "interim wholesale rate"). As a result of the disagreement, Vernon flIed a Petition
18 for Modification on December 23, 1993 requesting the Commission to clarify D. 93-11-
19 072 with respect to (1) the basis on which the interim wholesale rate would be
20 established, and (2) the extent to which the interim wholesale rate methodology would
21 be subject to further litigation in subsequent SoCalGas BCAP proceedings. On
22 September 1, 1994, the Commission issued D. 94-09-033 denying Vernon's Petition.
23 On October 3, 1994, Vernon flIed an Application for Rehearing ofD. 94-09-033. This
24 Application is currently pending before the Commission.
25 During this same general period of time, the interim wholesale rate was
26 also an issue of contention in Application No. 93-09-006 (SoCalGas' 1993 BCAP). On
27 December 23, 1994, the Commission issued D. 94-12-052 establishing rates as a result
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1 ofSoCalGas' 1993 BCAP. In this decision, the Commission also adopted SoCalGas'
2 proposed methodology for establishing the interim wholesale rate that would apply to
3 Vernon. On January 23, 1995, Vernon filed an Application for Rehearing ofD. 94-12-
4 052. This Application for Rehearing is also currently pending before the Commission.
5 As a result of the encouragement of the Commission and members of the
6 California State Legislature, representatives of Vernon and SoCalGas met in
7 Sacramento, California on July 19, 1995 to discuss a proposal by SoCalGas that would
8 hopefully resolve the matters of contention between the two parties and, in particular,
9 the issues raised by Vernon in its two Applications for Rehearing. Subsequent to this
10 meeting, Vernon and SoCalGas held settlement discussions over a period of several
11 months and, on February 2, 1996, reached an agreement in principle regarding the
12 terms of a settlement.
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THE SETTLEMENT
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15 The settlement parties propose to resolve the issues in dispute with regard
16 to D. 93-05-008, D. 93-11-072, D. 94-09-033 and D. 94-12-052 as follows:
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Interim Wholesale Rate
Vernon agrees to withdraw its pending Applications for Rehearing of
19 D. 94-09-033 and D. 94-12-052 within 30 days after the Commission has approved the
20 settlement. Vernon further agrees to accept and abide by the provisions of these
21 decisions as they relate to the interim wholesale rate that will be applicable to Vernon
22 and not seek to reverse or modify these provisions before the Commission, in a court of
23 law, or in any other forum where such reversal or modification could be accomplished.
24 Moreover, Vernon agrees not to resist SoCalGas' efforts to implement the interim
25 wholesale rate so long as SoCalGas is in compliance with the provisions of these
26 decisions and the terms of the S&SA. It is expressly understood by the settlement
27 parties, however, that no 'provision of the S&SA prohibits Vernon from pursuing any .
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1 existing or future claims for damages or other legal relief in a civil court where such
2 claim does not seek to reyerse or modify the interim wholesale rate provisions provided
3 in D.94-09-033 and D.94-12-052.
4 For the purpose of calculating the weighted average retail rate of the
5 customers expected to be s7rved by Vernon which is to be used to determine the
6 interim wholesale rate applicable to Vernon, such calculation shall be based on the
7 actual rates paid by core and noncore customers in Vernon and shall incorporate fully
8 deayeraged G-IO and G-20 rates in Vernon or any applicable negotiated core or
9 noncore rates.
loA reputable and independent accounting finn contracted by SoCalGas
11 and acceptable to Vernon shall, with full access to all of SoCalGas' records pertinent to
12 the need for doing so, but subject to a confidentiality agreement, confInn that Vernon's
13 interim rate has been correctly calculated, appropriately reflecting actual retail rates
14 paid to SoCalGas including any relevant confidential discounts for customers Vernon
15 expects to serve.
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Traditional Wholesale Rate
SoCalGas agrees to the provisions of the Commission's decisions
18 regarding the applicability of a "traditional wholesale rate" to Vernon if and when the
19 City completes construction of a distribution system capable of serving all customers in
20 Vernon. With respect to the reference in D.94-12-052 regarding the Commission's
21 intent to reconsider the phrase "traditional wholesale rate," SoCalGas agrees not to put
22 forth, or cause to be put forth, any position or proposal that is inconsistent with
23 traditional wholesale rate methodology, as it would apply to Vernon. The parties
24 intend that the term "traditional wholesale rate" means, among other attributes, a rate
25 which reflects none of SoCalGas' own distribution-level cost or costs incurred for the
26 exclusive benefIt of SoCalGas' retail customers. The settlement parties also agree that
27 by approving the S&SA, the Commission affmns that Vernon will receive a "traditional
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1 wholesale rate" if and when Vernon completes construction of a distribution system
2 capable of serving all customers located in Vernon as such completion is defmed in
3 Ordering Paragraph No. 23 on page 31 ofD.93-11-072, amending Ordering Paragraph
4 No.3 on page 25 ofD.93-05-008. The parties further agree that at any time a
s wholesale rate design is proposed by SoCalGas or approved by the Commission for any
6 other wholesale customer ofSoCalGas which, in Vernon's sole opinion, is preferable to
7 the wholesale rate design proposed or approved for Vernon, Vernon may seek to have
8 the same wholesale rate design or treatment applied as well to Vernon, to be effective at
9 the same time. SoCalGas shall bear the burden of establishing that denying such
10 preferred rate design to Vernon is not unduly discriminatory. The parties agree, and the
11 Commission affirms, that, without prejudice to other arguments of either party, it would
12 be unduly discriminatory for Vernon to be denied such a preferred wholesale rate
13 design (I) on the grounds that Vernon has built facilities duplicating those of SoCal Gas
14 within the City of Vernon, or (2) because of the status or classification for rate
lS purposes of Vernon's retail customers, or their status as prior customers ofSoCalGas.
Accelerated G-IO Deaverae:ine:
The settlement parties agree that as a condition of its approval of the
18 S&SA, the Commission shall authorize the immediate implementation, of full core rate
19 deaveraging for those SoCalGas customers located in Vernon and served under the
20 series of SoCalGas' G-IO tariff rate schedules (e.g., GN-IO and GT -10). Moreover, the
21 settlement parties agree that immediate full core rate deaveraging in Vernon shall be
22 implemented as follows:
23 Upon Commission approval of the S&SA, SoCalGas agrees to file tariff
24 schedules implementing revised rates for G-I o customers located in Vernon. The
2 S revised G-IO rates shall become effective for service on the first day of the first month
26 following the effective date of Commission approval of the S&SA. The revised G-I 0
27 rates in Vernon shall be set equal to what SoCalGas' system average G-IO rates would
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1 be without including the "core ayeraging" revenue requirement currently applicable to
2 such rates. The resulting core deaveraged G-IO rates are shown in Attachment A
3 hereto. These illustrative core rates are based on SoCalGas' revenue requirement and
4 cost allocation as established on January I, 1995 pursuant to D. 94-12-052. The fully
5 deaveraged G-I 0 rates applicable to customers located in Vernon shall be revised from
6 time to time pursuant to any Commission decision that modifies SoCalGas' G-IO rates
7 (e.g., a change in cost allocation or revenue requirement for the G-IO class).
8 The settlement parties agree that, for the purpose of accelerated core
9 deaveraging, the rate savings afforded under the S&SA shall apply to those G-IO and
10 G-20 customers located in Vernon as of August I, 1995, and to any new customers
11 conunencing service after that date that meet the defmition of the G-IO and G-20
12 customer class in effect on August I, 1995.
13 SoCalGas agrees that its shareholders will absorb all of the revenue
14 shortfall resulting solely from the accelerated implementation of full core rate
15 deaveraging in Vernon. The total amount of the revenue shortfall (or core rate savings)
16 resulting from accelerated deaveraging in Vernon shall be fixed at $2.5 million.
1 7 SoCalGas further agrees that its shareholders will be at full risk for any revenue
18 shortfall resulting from any negotiated core contracts with its G-IO and G-20 customers
19 in Vernon (see Section IT.D herein).
20 Upon Commission approval of the S&SA, SoCalGas shall establish a
21 one-way regulatory memorandwn account with a balance of $2.5 million upon
22 implementation of fully deaveraged G-IO rates in Vernon. Further, SoCalGas shall use
23 the one-way memorandwn account to track the core revenue shortfall resulting from the
24 accelerated deaveraging of core rates in Vernon and thereby make the necessary
25 adjustments to its Core Fixed Cost Account ("CFCA") in order to av:oid a reallocation
26 of such revenue shortfall to SoCalGas' customers.
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1 The settlement parties agree that the recorded revenue shortfall will be
2 detennined as the difference between (1) the revenue SoCalOas would have collected
3 in Vernon at the tariffed 0-10 or 0-20 rates then applicable systemwide for the
4 volwnes of gas actually conswned by customers meeting the defmition of those classes
5 and (2) the actual revenue collected by SoCalOas from customers in Vernon at the fully
6 deaveraged 0-10 or 0-20 rates for those same volwnes. SoCalOas agrees that the'
7 customer rate savings resulting from any negotiated core contract or decrease in
8 volwnes shall not be counted when satisfying the fixed $2.5 million rate savings
9 amount.
10 The settlement parties agree that, if and when full core deayeraging is
11 implemented for SoCalOas' entire service territory, any remaining balance in the
12 memorandwn "savings" account shall be used to fund a further reduction in 0-10 and
13 0-20 rates for customers in Vernon, or to provide a direct refund to these same
14 customers. SoCalOas and Vernon agree to meet and confer at least sixty (60) days
15 prior to the implementation date of fully deaveraged rates for SoCalOas' other
16 customers in order to reach agreement on a mutually acceptable method for the
1 7 disposition of any remaining balance in the memorandwn savings account.
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Ne20tiated Core Contracts
The settlement parties agree that as a condition of the Commission's
20 approval of the S&SA, the Commission shall grant SoCalOas authority to enter into
21 discounted short-term and long-term transportation service contracts with its 0-10 and
22 0-20 customers in Vernon with usage of at least 50,000 therms per year. The authority
23 granted to SoCalOas by the Commission shall be the same as that existing for noncore
24 customers with the exception that there shall be no minimwn usage requirement for
25 long-term contracts filed by Expedited Application Docket pursuant to the provisions of
26 D. 92-11-052.
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1 III.
2 RESERVATIONS
3 The S&SA represents a negotiated compromise among the parties on a
4 number of issues. Except as expressly provided in Section II.A and II.B herein, the
5 execution of this S&SA by the parties shall not be deemed to constitute or represent an
6 admission or acceptance of any fact, principle, or position contained herein by any
7 party. In addition, except as expressly provided in Section lIB herein, adoption by the
8 Commission of this S&SA shall not be deemed to constitute approval of, or precedent
9 regarding, any principle or issue in this proceeding or in any other proceeding, present
10 or future. Nothing contained herein shall be deemed to constitute or represent an
11 admission or an acceptance of any fact, principle, or position contained herein by any
12 party.
13 The settlement parties have bargained earnestly and in good faith to
14 achieve this S&SA. The settlement parties intend that the S&SA be treated as an entire
15 package and not as a collection of separate agreements on discrete issues. In short, the
16 agreements and compromises reflected in the various sections of the S&SA are closely
1 7 interrelated. Accordingly, the settlement parties respectfully request the Commission to
18 promptly approve the S&SA without modification. The S&SA shall not be effective
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1 until receipt of mutually acceptable approval from the Commission and any material
2 change to this S&SA shall render it null and void.
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This S&SA is agreed to by the undersigned parties on the dates indicated:
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THE CITY OF VERNON
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BY:~J-.- Date: March 27.1996
. ~ HILARIO GONZALES, Councilman lit Acting
4305 Santa Fe Avenue Presiding Officer
Vernon, California 90058
[Telephone: (818) 336-3408]
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ATTEST:
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12 BRUCE V. MALKENHORST, City Clerk
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APPROVED AS TO FORM:
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16 DAVID B. BREARLEY, City Attorney
CITY OF VERNON
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SOUTHERN CALIFORNIA GAS COMPANY
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By: ~~.~
ERIC B. NELSON, Vice President
555 West Fifth Street
Los Angeles, California 90017
[Telephone: (213) 895-5134]
Date: 3 '~A . ~6
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24 APPROVED AS TO FORM:
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2 6 DAVID B. FOLLETT, Attorney for
27 SOUTHERN CALIFORNIA GAS COMPANY
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Attachment A
G-IO Settlement Rates
Current 0-10 TarifIVolumetric Rates (50% Deaveraged):
ON-I0 Tier I == 77.691 cents per therm
Tier n == 49.456 " " " "
OT-I0 Tier I = 60.247 " " " "
Tier n = 32.011 " " " "
S&SA Tariff Volumetric Rates (100% Deaveraged):
ON-I0 Tier I = 77.691 cents per therm
Tier n == 39.556 " " " "
OT-I0 Tier I = 60.247 " " " "
Tier n = 22.111 " " " "
Average Rate Comparison: ~ 20 Mtb 60 Mtb 180 Mth
ON-I0 Current == 66.397 51.997 50.303 49.738
S&SA = 62.437 42.988 40.700 39.937
Change == 3.960 9.009 9.603 9.801
OT-I0 Current == 48.953 34.552 32.858 32.293
S&SA == 44.993 25.543 23.255 22.492
Change == 3.960 9.009 9.603 9.801
Notes: All rates are shown in cents per therm.
Tariffrates in effect as of January, 1, 1996 pursuant to 0.94-12-052, D. 95-12-060, et al.
ON-IO provides both procurement and transportation service; aT -10 provides only transpOrt
Tier I applies to the first 100 therms of monthly use during April through November
and the first 250 therms of use during December through March.
Tier n applies to an usage above Tier I quantities.
Average rate comparison calculated for indicated annual 0-10 usage (Mtherms).
Average rate comparison excludes monthly customer charge and applicable surcharges.