ML19347D287

Prepared Testimony of Fh Ault Re 1982 Test Yr,Including Comparative Financial Data for 1978 & 79 & Summary of Earnings 1980-83

ML19347D287
Person / Time
Site:	San Onofre
Issue date:	12/31/1980
From:	Ault F SAN DIEGO GAS & ELECTRIC CO.
To:
Shared Package
ML13302A498	List: ML13302A497 ML19347D254 ML19347D261 ML19347D264 ML19347D268 ML19347D271 ML19347D274 ML19347D275 ML19347D276 ML19347D279 ML19347D281 ML19347D282 ML19347D287 ML19347D289 ML19347D290 ML19347D293 ML19347D294 ML19347D295 ML19347D297 ML19347D299 ML19347D300
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Sc.

O APPLICATION NO. 59788 (AMENDED)

- EXHIBIT NO. (SDG&E - 102)

DATE:

1 iSDG5 San Diego Gas & Electric u

1982 TEST YEAR COMPARATIVE FINANCIAL DATA 1978 VS.1979 l AND

SUMMARY

OF EARNINGS COMBINED DEPARTMENTS 1980,1981,1982 AND 1983 INCLUDING PREPARED TESTIMONY l -

BEFORE THE PUBLIC UTILITIES COMMISSION l OFTHE STATE OF CALIFORNIA l

6103110lRy n

COMBINED DEPARTMENTS CHAPTER TITLE 1 Balance Sheet, Comparative Income and Retained Earnings, Clearing Accounts 2 Allocation of Customer Accounting and Collecting Expenses 3 Allocation of Administrative and General Exp'enses 4 Allocation of Depreciation Reserve and Expense for Common Utility Plant 5 Summary of Earnings

y CHAPTER 1 COMBINED DEPARTMENTS BALANCE SHEET, COMPARATIVE INCOME, 2

RETAINED EARNINGS AND CLEARING ACCOUh"rS 3 PREPARED DIRECT TESTIMONY OF FRANK H. AULT 4 1. Q. Mr. Ault, what is the purpose of your testimony 5 before the Commission in this proceeding?

6 A. I am sponsoring Chapter 1 of this Exhibit regard-7 ing balance sheet, comparative income, retained 8 earnings, and clearing accounts for the Combined 9 Departments pertaining to the recorded years 1978 10 and 1979.

11 2. O. Please explain the significance of Tables 1-A 12 through 1-D.

13 A. These tables report the financial position of the 14 Company. The figures for 1978 and 1979 are on a

( 15 recorded basis. Table 1-A is a comparative'bal-16 ance sheet of the Company at December 31, 1978, 17 and 1979. Table 1-B is a schedule of investment 18 in utility plant on December 31, 1978, and 1979.

19 Table 1-C is a comparative statement of income and 20 retained earnings for the years ended December 31, 21 1978, and 1979. Table 1-D is a schedule of all L

22 Company clearing accounts and the uncleared bal-23 ances as of December 31, 1978, and 1979.

24 3. Q. Company assets on sheet 1 of Table 1-A increased 25 significantly from December 31, 1978, to 26 December 31, 1979. Would you please explain this 27 increase.

k- 28 l-1

s 1 A. The major item increasing assets from December 31, 2 1978, to December 31, 1979, was the addition to 3 utility plant on line 2 of S222 million. Table 4 1-B shows a complete breakdown of the amount of 5 Utility Plant, included on line 2, sheet 1 of 6 Table 1-A, by electric, gas and steam plant,- and .

i 7 shows whether the plant is in service, con-j 8 struction work in progress, plant held for future 9 use, plant completed-not classified, or plant 10 acquisition adjustments The figures in Table 1-B 11 include the allocation of common plant to each 12 department.

13 Utility Plant In Service, line 2 of Table 1-B 14 for the Electric Department, increased $129 mil-15 lion, primarily as the result of additional dis-16 tribution and transmission facilities to serve new 17 customers. The additional distribution and trans-18 mission facilities placed in Plant In Service in 19 1979 totaled $87 million. In addition, $18 mil-20 lion applicable to Encina Unit 5 and the Combined 21 Chimney on Encina Unit 5 was placed in Plant In 22 service in 1979, as well as $12 million in waste L ,

l 23 water treatment systems for four of the company's l-24 plants. Certain of these dollars placed in Plant 25 In service in 1979 were transferred from Plant 26 completed-Not Classified at the end of 1978, 27 ***

28 ***

l l-2

s 1 accounting for the reduction on line 5 of Table 2 1-B.

3 The other major item increasing Electric 4 Plant during the year 1979 was the addition of 5 S123 million in Construction Work In Progress.

6 S100 million of that increase was applicable to 7 San Onofre Units 2 and 3. Of the $447 million 8 of Construction Work In Progress at December 31, 9 1979, $379 million was applicable to San Onofre 10 Units 2 and 3.

11 4. What caused Fuel Oil, line 16 on Sheet 1 of Table Q.

12 1-A, to increase $28 million between December 31, ,

13 1978, and December 31, 1979?

14 A. This increase in fuel oil inventory was the result

-( 15 of two primary factors. First, the moving average 16 cost of fuel oil in inventory increased from 17 $17.08 per barrel at December 31, 1978, to $24.35 18 per barrel at December 31, 1979. At the same 19 time, the number of barrels in inventory increased 20 by 452,000 barrels in 1979.

21 Regulatory Balancing Accounts-Undercollected, line

5. Q.

22 18 on sheet 1 of Table 1-A, increased $42 million 23 during 1979. Would you please explain this in-

'24 crease?

25 A. Yes. $30 million of the 1979 undercollection was 26 applicable to the electric ECAC mechanism which 27 had an undercollected balance of $46 million as 28 1-3

1 of December 31, 1979. In addition, the PGA 2

balancing account increased $12 million during 3 1979, to a total undercollection of $22 million 4

as of December 31, 1979.

5 6. Q. Is there any relationship between the increase in 6

Extraordinary Property Losses and the decrease in l 7 other Deferred Debits, lines 23 and 24 on sheet 8

1 of Table 1-A?

l 9 A. Extraordinary Property Losses, shown on line 23, 10

increased approximately $31 million during 1979, 11 to a total of $38 million on December 31, 1079.

12 This increase was caused by the tr. sfer of ap-13 proximately $38 million of costs applicable to 14 the abandoned Sundesert Project from Other De-15 ferred Debits on line 24 during the year 1979, l

16 resulting from the Company's General Rate De-17 cision 90405, of June 5, 1979.

IO 7. Q. What caused the increase in total Proprietary 19 Capital as shown on line 9 on sheet 2 of Table 20 1-A bets' December 31, 1978, and December 31,

'21 19797 22 A. Common Stoci. Issued, line 3, increased $18 million 23 during 1979, and the Premium on Capital Stock, 24 line 6, increased approximately $36 million. The 25 increase in these two items was the result of the 26 Company's issuance of 3,595,000 shares of Common gy * *

• 28 1-4

1 Stock during 1979. 3,000,000 of these shares 2 were issued in a general sale to the public in 3 July, 1979, while the remaining 595,000 shares 4 were issued throughout the yea'r to the Company's 5 Dividend Reinvestment Plan and to the Company's 6 Employee Savings Plan.

7 8. Q. What Long-Term Debt did the Company issue in 1979?

8 A. Other Long-Term Debt, line 13 on sheet 2 of Table 9 l-A, increased approximately $68 million during 10 1979, primarily as the result of the company's 11 issuance of $65 million in term loans to three 12 foreign banks. These term loans are due during 13 the time period of 1983 through 1986. The addi-14 tion of this $65 million in foreign term loans

(,

15 increased total other Long-Term Debt to over 16 S125 million. The company also issued $5.7 17 million of pollution control bonds with the pro-

! 18 ceeds to be received as expenditures are made on 19 certain pollution control facilities. S4.7 20 million was received in 1979 via this financing 21 mechanism.

22 9. Q. Short-term borrowings in the form of Commercial 23 Paper and Bankers' Acceptances increased signifi-24 cantly in 1979. What caused these increases?

25 A. The Company's Commercial Paper outstanding at 26 December 31, 1979, line 17 on sheet 2 of Table I .

- 27 * * *

!( 28 * **

l-5 4

I l-A, totaled over $95 million, compared to approxi-2 mately $21 million at December 31, 1978. This 3 $74 million increase was used primarily to finance ,

4 the Company's construction program and ECAC under-5 collections. Bankers' Acceptances, shown on line 6 ~

18, are used to finance the Company's fuel oil 7 inventory. Total Bankers' Acceptances outstand-8 ing at December 31, 1979, were $60 million, an 9 increase of $36 million over the $24 million 10 outstanding at December 31, 1978. This increase 11 parallels the increase in fuel oil inventory 12 discussed in Answer 4.

13 10. Q. Regulatory Balancing Accounts-Overcollected, line 14 24 on sheet 2 of Table 1-A, increased $26 million 15 during 1979. What caused this increase?

16 A. The Company's Regulatory Balancing Accounts, which ,

t 17 were in an overcollected state as of December 31, 18 1979, totaled approximately $27 million, an in-19 crease of $26 million over the balance at Decem-20 ber 31, 1978. This $26 million increase in 1979 21 was all applicable to the gas supply Adjustment 22 Mechanism (SAM) and partially offsets the $42 23 million net undercollections experienced in 24 1979 in the Company's ECAC and PGA Balancing 25 . Accounts as shown on line 18 of sheet 1 of Table 26 1_a, gg a s e 28 ***

1-6

I 11. Q. What caused the $50 million decrease in the Cur-2 rent Portion of Long-Term Debt on line 25 on sheet 3 2 of Table 1-A in 1979?

4 A. The Current Portion of Long-Term Debt decreased 5 $50 million during 1979 as the result of the 6 Company's retirement, on December 15, 1979, of l 7 of its $50 million Series N First Mortgage Bonds 8 which became due on that date.

9 12. Q. Table 1-C shows the comparative statements of 10 income and retained earnings of the Company for 11 the years ended December 31, 1978, and 1979.

12 Please explain what caused the $132 million in-l 13 crease in Operating Revenues between 1978 and 14 1979.

15 A. Total Operating Revenues increased $132 million l 16 between the two years, primarily as the result 17 of increases in the Company's ECAC and PGA rates 18 to offset increased costs of fuel oil and natural 19 gas, and the $70.9 million of general rate relief 20 granted in the Company's Interim Rate Decision 21 89857 of January, 1979, and the General Rate 22 Decision 90405 of June, 1979.

23 13. Q. was the $113 million increase in Operating Expenses 24

- on line 7 of Table 1-C the result of increased 25 cost of fuel oil and natural gas, along with the 26 effects of inflation on other operating expenses?

27 r A. Yes.

28 ***

1-7

I 14. Q. What caused the $10 million increase in depre-2 ciation and amortization expense in 1979 com-3 pared to 19787 4

A. Depreciation and amortization of the Company's 5 Plant on line 9 of Table 1-C, increased approxi-6 mately $10 million. - This increase included 7 approximately $5 million of additional amor^iza-O tion attributable to abandoned plant, primarily 9 the Sundesert Plant, which is to be written off 10 over a five-year period in accordance with the 11 Company's General Rate Decision 90405 of June, 12 1979. The remaining increase in depreciation 13 and amortization is the result of the deprecia-14 tion on the Company's increased Plant In Service.

15 15. Q. Did the write-off of the Sundesert Allowance for 16 Funds Used During Construction (AFUDC), as ordered 17 in Decision 90405, impact. the amount shown in IO Table 1-C for 1979?

10 A. Yes. The total AFUDC, line 18 for Other Funds 20 and line 29 for Borrowed Funds, increased in 1979, 21 as compared to 1978 by approximately $3.5 million.

22 The increase was only $3.5 million as a result of 23 the Company writing off in 1979 approximately $3.1 24 million of AFUDC applicable to the Sundesert Plant 25 in accordance with the Company's June, 1979, 26 General Rate Decision 90405.

27 28 * * * -

1-8

t 1 Excluding the S3.1 million that was written r 2 off, AFUDC actually increased approximately $6.6 3 million. This increase was primarily due to the 4 expanded amount of Construction Work in Progress 5 represented by San onofre Units 2 and 3.

6 16. Q. Please explain the increase in the amount of Long-7 Term Debt interest in 1979 compared to 1978 as l 8 shown on line 25 of Table 1-C.

9 A. Interest on Long-Term Debt increased $7.3 million 10 in 1979 over 1978 as the result of $5.4 million

11 applicable to the $65 million term loan issued in 12 April, 1979, and $1.9 million of a full year's 13 interest on the Series R First Mortgage Bonds 14 issued in May, 1978.

(' 15 17. O. Referring to Table 1-D, please explain the basic l 16 purpose of clearing accounts as used by the 17 Company.

18 A. The Company maintains clearing accounts to dis-i 19 tribute charges of such a general nature that they 20 are not readily chargeable to a specific construc-21 tion or expense account.

22 18. O. What do the debit or credit balances in these 23 accounts represent?

24 A. The balances represent the difference between the 25 ; expenses charged to these clearing accounts and 26 amounts credited. For example, all expenses 27 associated with transportation, tool and work'

.( 28 **

• 1-9 N

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1 equipment are charged to that clearing account.

2 Credits are generated through the application of 3 hourly rates for the use of each type of vehicle 4 or piece of equipment.

5 19. Q. Have any of the figures in Chapter 1 been adjusted?

6 A. All figures shown in Chapter 1 are identical with 7 those on the Company's published financial state-8 ment for 1979.

9 20. Q. Does that conclude your Prepared Direct Testimony 10 on this Chapter?

11 A. Yes.

12 .

13 14 15 16 17 18 19f  ;

20 21 22 23 .

24 25 26 27 28 1-10

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CHAPTER 1 BALANCE SHEET, COMPARATIVE INCOME AND RETAINED EARNINGS, CLEARING ACCOUNTS t

LISTING OF TABLES TABLE TITLE PAGE Table 1-A COMPARATIVE BALANCE SHEET 2 Table 1-B UTILITY PLANT INVESTMENT 4 Table 1-C COMPARATIVE INCOME AND 5 RETAINED EARNINGS Table 1-D CLEARING ACCOUNTS 6 R

I e

TABLE l-A Sheet 1 of 2 TABLE 1-A COMPARATIVE BALANCE SHEET Thousands of Dollars Line December 31, December 31, No. Item 1978 1979

( A) (B) (C ) (D )

1. Assets and Other Debits

2. Utility Plant $1 568 472 S1 790 040 3.

Nuclear Fuel 11 185 11 185

4. Less Provision for Depreciation & Amortization 344 945 381 437

5. Net Utility Plant 1 234 712 1 419 788

6. Nonutility Property (Net) 5 529 5 196

7. Investments in Associated Companies 7 896 9 150

8. Other Investments 860 769

9. Sinking Funds 1 397 1 000

10. Total Other Property and Investments ,

15 682 16 115

11. Current and Accrued Assets

12. Cash and Temporary Investments 4 268 15 819

13. Notes and Accounts Receivable (Less Provision for Uncol-lectible Accounts: 1978,

$370,000; 1979, S486,000) 82 411 65 260

14. Nctes and Accounts Receivable l from Assoc. Companies 18 080 16 685 l 15. Plant Materials and Operating l Supplies 22 555 22 222

< 16. Fuel Oil 44 638 72 577

17. Prepayments 924 1 104

18. Regulatory Balancing Accounts-Underccllected 25 898 67 909

19. Other Current & Accrued Assets 81 81

20. Total Current & Accrued Assets 198 855 261 657

'21. Deferred Debits

22. Unamortized Debt Expense 1 410 1 411

23. Extraordinary Property Losses 7 431 38 195

24. Other Deferred Debits 82 423 45 399

25. Total Deferred Debits 91 264 85 005

26. Total Assets $1 540 513 $1 782 565 TABLE l-A Sheet 2 of 2 TABLE l-A g- COMPARATIVE BALANCE SHEET I

Thousands of Dollars December"fl,'

~

Line December 31, No. Item 1978 1979

~ (AI' (B) (C) (0)

1. Liabilities and Other Credits

2. Proprietary Capital

3. Common Stock Issued S 137 964 S 155 941

4. Non-Redeemable Preferred Stock 128 500 128 500

5. Redeemable Preferred Stock 85 000 85 000

6. Premium on Capital Stock 200 014 235 765

7. Less Capital Stock Expense 15 452 17 289

8. Retained Earnings 15/ 928 166 808

9. Total Proprietary Capital 693 954 754 725

10. Long-Term Debt

11. Bonds 494 000 494 000

12. Sinking Fund Debentures 24 600 23 825

13. Other Long-Term Debt 57 873 125 539

14. Discount Less Premium on Issues (3 408) (3 286)

15. Total Long-Term Debt 573 065 640 078

16. Current & Accrued Liabilities

17. Commerc al Paper 21 295 95 420

18. Banker Acceptances 23 600 60 000

19. Accoun.. ?ayable 55 252 73 817

20. Customar Daposits 5 561 6 287

21. Taxes Accrued 12 311 19 472 2 2. - Interest Accrued 13 808 14 510

23. Dividends Payable 14 344 16 261

24. Regulatory Balancing Accounts-Overcollected 1 225 26 853

25. Current Portion of Long-Term Debt '53 037 3 058 .

26. Other Current & Accrued Liabilities 16 538 15 754

27. Total Current & Accrued Liabilities 216 971 331 432

28. Deferred Credits

29. Customer Advances for Construction 21 291 24 577 i '30. Other Deferred Credits 31 468 30 202

31. Total Leferred Credits 52 759 -

54 779

32. Injuries & Damages Reserve 1 553 1 332

33. Deferred Income Taxes 2 211 219

( .'34. Total Liabilities $1 540 513 S1 782 565

(

L

, TABLE l-B Sheet 1 of 1-TABLE l-B UTILITY PLANT INVESTMENT Thousands of Dollars Line December 31, December 31, No. Item 1978 1979 (A) (B) '(C) (ii)

1. Electric Plant

2. Plant in Service S 882 636 S1 011 625

3. Construction Wo rk in Progress 324 077 446 759

4. Plant Held for Future Use 63 528 65 556

5. Plant Completed - Construction not Classified 77 125 29 212

6. Plant Acquisition Adjustment 816 816

7. Total Electric Plant 1 348 182 1 553 TE_E_

8. Gas Plant.

9. Plant in Service 212 827 228 506

10. Construction Work in Progress 1 145 1 120

11. Plant Completed - Construction not Classified 4 947 5 069

12. Plant Held for Future Use 45 45  ;

13. Total Gas Plant 218 964 234 740

14. Steam Plant

15. . Plant in Service 1 300 1 326

16. Construction Work in Progress 8 2

17. Plant Completed - Construction i not Classified -

18 4

18. Total Steam Plant 1 326 1 332

19. Total Utility Plant S1 568 472 51 790 040 l

l l

l l

TABLE l-C TABLE l-C Sheet 1 of 1 COMPARATIVE INCOME AND RETAINED EARNINGS (Thousands of Dollars)

For the 12 Months Ended r- Line December 31, December 317

! No. Item 1978 1979 (A) (B ) (C) (D)

1. Operating Revenues

2. Electric S 468 400 S 592 549

3. Gas 144 210 151 700

4. Steam 1 013 983

5. Total Operating Revenues 613 623 745 232

6. Operating Expenses

7. Operating 428 186 540 842

8. Maintenance 23 839 31 218

9. Depreciation & Amertization 37 980 47 592

10. Taxes 32 209 28 347

11. Total Operating Expenses 522 214 647 999

12. Net Operating Income

13. Electric 68 026 89 305

14. Gas 23 412 7 912

15. Steam (29 ) 16

16. Total Net Operating Income 91 409 97 233

17. Other Income & Deductions

18. Allowance for Other Funds Used During Construction 13 900 18 033

(,'

19. Other Income 3 024 5 278

20. Other Income Deductions 982 1 550

21. Taxes on Other Income &

Deductions (8 602) (7 397)

22. Total Other Income & Deductions 24 544 29 158

23. Income Before Interest Charges 115 953 126 391

24. Interest Charges

25. Long-Term Debt 47 390 54 657

26. Short-Term Borrowing 8 956

• 7 083

27. Amortization of Debt Discou.nt

& Expense, Less Premium 382 380

28. Other 286 1 307

29. Allowance for Borrowed Funds Used During Construction (7 863) (7 202) 30.. Total Interest Charges 49 151 56 225

, 31. Net Income 66 802 70 166

32. Retained Earnings

33. Retained Earnings at Begin-ning of Period 143 813 157 928

34. Total 210 615 228 094

35. Dividends

36. Preferred 17 230 17 643

( 37.

38.

39.

Common Total Dividends Retained Earnings at end of 35 457 52 687 43 643 61 286 Period S 157 928 $ 166 80_8 i-

TABLE 1-D Sheet 1 of 1 TABLE l-D CLEARING ACCOUNTS (Thousands of Dollars)

Uncleared Balances Line 1 December 31, December 31, No. Description 1978 1979 (A) B) (C) (DJ

1. Transportation, Tool and Work Equipment Expense $1 391 S3 053

2. Sales of Merchandise, to Employees 76 115

3. Shop Expense 8 (5)

4. Labor Distribution Adjustment (27) 60 l

5. Multilith and Ozalid Operation 23 20

6. Engineering Overheads (6) 172

7. Data Systems 35 (64)

8. Work Order Clearing 1 023 200

9. Miscellaneous 2 2 l

10. Totals $2 525 $3 553 1

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.A.

3 CHAPTER 2 COMBINED DEPARTMENTS 2 ALLOCATION OF CUSTOMER ACCOUNTING AND COLLECTION EXPENSES PREPARED DIRECT TESTIMONY OF ERNEST G. ANDRADE 3

4

1. O. Mr. Andrade, what is the purpose of your testimony 5 bef re the Commission in this proceeding?

6

^* I am sponsoring Chapter 2 of this Exhibit 7 regarding allocation of customer accounting and g collection expenses.

9 2. O. Would you briefly explain the types of items 10 which are included in customer accounting and 11 collection expenses and to which accounts these 12 expenses are charged?

13 A. The Company's customer accounting and collection 14 expenses include such items as employee salaries and expenses for billing, collecting, meter

( 15 16 reading, processing customer orders, charges for 17 data systems, postage and uncollectible accounts.

18 These expenses are recorded in Accounts 901 f 19 through 905.

i 20 3. O. Are these expenses allocated to the various 21 departments?

A.

~

22 Yes, with the exception of uncollectible accounts, l 23 Account 904. These expenses are allocated based 24 on the number of customers in each department, i

25 with extra weight being given to customers 26 requiring special handling. A customer account 27 requiring special handling is one which is not

( 28' a joint gas and el*ctric account or one requiring 2-1 l

I a manual bill.

2

4. Q. In the derivation of the allocation percentages 3

for customer accounting and collection expenses 4

shown in this Chapter?

5 A. Yes, the derivation of the actual allociation 6

! percentages for the years 1979 and 1980 are shown 7

in Table 2-A. As shown on this table, 62.72 8

percent of customer accounting and, collection expenses were allocated to the Electric Department

. 10 in 1979. This percentage increased to 62.94 11 l The Gas Department all'ocation percent in 1980.

. 12 l

for 1979 was 37.27 percent, which decreased to 13 37.05 percent in 1980. The Steam Department 14 l allocation was 0.01 percent in 1979 and 1980.

l I

15 The allocation percentages for 1981 through 16 1983 were estimated by taking estimated customers 17 l

at December 31, 1980, 1981 and 1982, respectively, 18 and calculating the percentage by department in 19

$ the same manner as 1979 and 1980 actual. As shown 20 in Table 2-A, the Electric Department allocation percent for 1981 is estimated at 63.23 percent, 1982 at 63.48 percent and 1983 at 63.76 percent.

The allocation percentages for the Gas and Steam Departments for 1981 through 1983 were derived in the same manner as for the Electric Department.

As shown in Table 2-A, the allocation percentages for 1981, 1982 and 1983 for the Gas Department were 36.76 percent, 36.51 percent and 36.23 percent, 2-2

I respectively. The allocation percent to the Steam

' 2 Department was 0.01 percent each year.

3

5. O. Is the method of deriving customer accounting and 4f collection expense allocation factors shown in .

5 Table 2-A the same method used by the Commission 0

and Company in previous rate proceedings?

7

, A. Yes, this method was first adopted by the Com-0 mission in Decision 62446 on Application 42887 of August 22, 1961, the Company's 1961 gas rate case and it has been used ever since.

II

6. O. Were the allocation factors derived in Table 2-A 12 E j used to, allocate customer accounting and collection 13 expenses for 1980 through 1983 to the Electric, 14 Gas and Steam Departments in the various Results 15 of Operations Exhibits?

I0 A. Yes.

17

7. O. You indicated in Answer 3 that Account 904 was not 18 allocated; please explain how Account 904 was 19 l estimated.

20 A. The estimates of Account 904, Uncollectible Accounts, 21 were derived individually by department based on 22 the expected revenue to be derived from the sale 23 of electricity and natural gas.

24

! 8. Q. Does that conclude your Prepared Direct Testimony i 25 on this Chapter?

i 26 i A. Yes.

27 t

2h 2-3

l l

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CHAPTER 2 ALLOCATION OF CUSTOMER ACCOUNTING AND COLLECTION EXPENSES LISTING OF TABLES TABLE TITLE PAGE Table 2-A CALCULATION OF PERCENTAGES USED OR TO BE USED TO ALLOCATE CUSTOMER ACCOUNTING AND COLLECTION EXPENSES FOR YEARS 1978, 1979, 1980, 1981, 1982 AND 1983 2

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TABLE 2-A

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CALCULATION OF PERCENTAGES USED OR TO BE USED TO ALLOCATE CUSTOMER ACCOUNTING AND COLLECTION EXPENSES FOR YEARS 1979, 1980, 1981, 1982 AND 1983 Line r No. Year 1979 Electric Gas Steam Total (A) (B) (C) (D) (E) (F)

1. Total Customers (Decembe r 31, 1978) 716 927 477 383 64 1 194 374

2. Add for special handling . 86 796 220 64 87 080

3. Total 803 723 477 603 128 1 281 454

4. Percentage 62.72 37.27 0.01 100.00 Year 1980 9

i 5. ' Total Customers (December 31, 1979) 750 902 492 584 64 1 243 550 8

6. Add for special handling _85 991 98 64 86 153

7. Total 836 893 492 682 128 1 329 703

8. Percentage 52.94 37.05 0.01 100.00 Year 1981 -

9. Percentage - Estimated 63.23 36.76 0.01 100.00 Year 1982

10. Percentage - Estimated 63.48 36.51 0.01 100.00 y8 m$

Year 1983 gg

11. Percentage - Estimated 63.76 36.23 0.01 100.00 ,

~

a e

l I CIIAPTER 3 COMBINED DEPARTMENTS 2 ALLOCATION OF ADMINISTRATIVE AND GENERAL EXPENSES PREPARED DIRECT TESTIMONY OF FRANK H. AULT 3

4 1. O. Mr. Ault, what is the purpose of your testimony 5 before the Commission in this proceeding?

6 A. I am sW usoring Chapter 3 of this Exhibit regarding 7

the allocation of administrative and general 0 expenses. ,

9 O.

2. Would you briefly explain the type of expenses 10 included in administrative and general expenses 11 and to which accounts these expenses are charged?

12 A. The Company's administrative and general expenses 13 include such items as salaries and expenses of 14 general officers and general office employees, 15 l directors' fees, regulatory commission expenses, 16 l printing and stationery, other office supplies, 17 l legal and audit expenses, pension, life and health IO insurance and other employee benefits. It also 19 includes franchise fees and the cost of insurance, 20 injuries and damages.

These expenses are recorded 21 in Accounts 920 through 932.

22

3. O. Are some of the administrative and general 23 expenses allocated to specific departments?

A. Yes. Portions of the administrative and general 25 expenses are related to specific operations.

26 Accordingly, such expenses are charged directly to 27 one or more of the Company's departments, as k- 28 appropriate. Many of the expenses, however, are 3-1

, I no general that they must be prorated to all 2 operating departments. Those which are allocated 3 are based on the average of the four factors shown 4 in Tables 3-A and 3-B for the recorded years 1979 5 and 1980.

6 4. Q. Is this four factor method the same method used 7 by the commission and the company for allocating 8 administrative and general expenses in previous 9 rate proceedings?

10 A. Yes. It is widely accepted.

11 5. Q. How were the administrative and general expense 12 allocation percentages for 1981 through 1983 13 derived?

14 A. Table 3-C shows the recorded allocation percentages .,

15 by department for the years 1976 through 1980.

l l 16 The estimated percentages for 1981 through 1983 i .

17 were derived by a least square trend of the recorded 18 figures for 1976 through 1980.

19 6. Q. were the allocation factors derived in Table 3-c 20 used to allocate administrative and general 21 expenses for 1980 through 1983 to the various 22 departments in'the Results of Operations Exhibits 1

23 (SDG&E-103), (SDG&E-104), and (SDG&E-105)?

~

24 A. Yes.'

25 7. Q. How were Franchise Fees in Account 927 allocated?

26 A._ The. estimates were derived individually by department 27 '

based on the expected revenue to be derived from the 28 sale of electricity and natural gas.

W

1- 8. O. Does that conclude your Prepared Direct Testimony f~ 2 on this Chapter?

3 A. Yes.

4 5

6 7

8 9

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17 18

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- 20 21 22 I . :23

- 24

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CHAPTER 3 ALLOCATION OF' ADMINISTRATIVE AND GENERAL EXPENSES LISTING OF TABLES TABLE TITLE PAGE

(

Table 3-A DERIVATION OF PR0 RATION PERCENTAGES FOR APPORTIONMENT OF ADMINISTRATIVE AND GENERAL EXPENSES FOR YEAR 1979 2 Table 3-B DERIVATION OF PR0 RATION PERCENTAGES FOR APPORTIONMENT OF ADMINISTRATIVE AND GENERAL EXPENSES FOR YEAR 1980 3 Table 3-C PERCENTAGES FOR APPORTIONMENT OF ADMINISTRATIVE AND GENERAL EXPENSES FOR YEARS 1975, 1976, 1977, 1978,.1979, 1980, 1981, 1982 AND 1983 4

-k

/

TABLE 3-A -

DERIVATION OF PRORATION PERCENTAGES FOR APPORTIONMENT OF ADMINISTRATIVE AND GENERAL EXPENSES FOR YEAR 1979 (Thousands of Dollars)

Line Electric Gas Steam Total No. Description Department Department Department Departments (A) (B) (C) (D) (E) (F)

1. Operating and maintenance expenses less uncollectibles and adminis .

trative and general expenses $325 824 $ 59 797 01 094 S 386 715

2. Per Cent 84.26 15.46 0.28 -

100.00

3. Net plant less intangibles plus

. complete CWIP 943 742 211 716 1 273 1 156 731 h) 4. Per Cent 81.59 18.30 0.11 100.00

5. Operating payroll less administra-tive and general expenses and plant construction weekly 30 256 11 705 65 42 026

6. Per Cent 71.99 27.85 0.16 100.00 7.- Number of customers as of December 31, 1978 716 927 477 303 64 1 194 374

8. Per Cent 60.03 39.97 -

100.00

9. Sum of percentages 297.87 101.58 0.55 400.00 mg

10. 100.00$

Average of percentages 74.47 25.40 0.13 m e$

nn W ta t%

,~. 7, .

TABLE 33 DERIVATION OF PRORATION PERCENTAGES FOR APPORTIONMENT OF ADMINISTRATIVE'AND GENERAL EXPENSES g FOR YEAR 1980 (Thousands of Dollars)

Line. . . Electric Gas Steam Total No. Description Department Department Department Departments (A) (B) (C)- (D) (E) (F)

1. Operating.and maintenance expenses less uncollectibles and adminis-trative and general expenses S406 602 Sil7 332 S 840 S 524 774

2. Per Cent 77.48 22.36 0.16 100.00

3. Net plant less intangibles plus complete CWIP S1 023 471 S227 010 $1 281

, S1 251 762 ea 8

4. Per Cent 81.76 18.14 0.10 100.00

5. Operating payroll less administra-tive and general expenses and plant construction weekly S 36 873 S 13 117 S 73 S 50 063

6. Per Cent 73.65 26.20 0.15 100.00

7. Number of customers as of

. December 31, 1979 -

750 902 492 584 64 1 243 550

8. Per Cent 60.38 39.61 0.01 100.00

9. Sum of percentages 293.27 106.31 0. 12 400.00

10. . Average of percentages 73.32 26.58 0.10 100.00$E

• ?

E"

9 TARLE 3-C PERCENTAGES FOR APPORTIONMENT OF ADMINISTRATIVE AND GENERAL EXPENSES FOR YEARS 1976, 1977, 1978, 1979, 1980, 1981, 1982 and 1983 LINE Electric Gas Steam Total NO. Description Department Department. Department Departments

( A) (B ) ( C) (D ) (E ) (F )

1. Average of proration per-centages 1976 70.80 29.04 0.16 100.00

2. Average of proration per-centages 1977 71.79 28.06 0.15 100.00 I

T' 3. '

Average of proration per-centages 1978 72.62 27.24 0.14 100.00

4. . Average of proration per-centages 1979 74.47 25.40 0.13 100.00

5. Average of proration per-centages 1980 73.32 26.58 0.10 100.00

6. 1981 - Estimate 74.91 24.98 0.11 100.00

7. 1982 - Estimate 75.68 24.22 0.10 100.00

8. 1983 - Estimate 76.45 23.46 0.09 100.00 me kN

%N

-m 8

Hi

~

g

I CHAPTER 4 y ,

COMBINED DEPARTMENTS

( "

ALLOCATION OF DEPRECIATION RESERVES AND EXPENSES FOR COMMON UTILITY PLANT 4

PREPARED DIRECT TESTIMONY OF ALAN G. STRACHAN 4 fl. O. Mr. Strachan, what is the purpose of your testimony 5' before the Commission in this proceeding?

6 A. I am sponsoring Chapter 4 of this Exhibit regarding 7 the allocation of depreciation reserves and expenses 8 for Common Utility Plant.

9 What is Common Plant?

2. O.

10 Common Plant consists of land, structures and equip-A.

11 ment used jointly by several departments of the I2 Company. Costs associated with this plant are I then allocated to these departments. The allocation I4 is done by factors based on a detailed analysis

( 15 of usage by each operating department of the 16 facilities in each Common Plant Account.

17

3. O. What are the allocation factors?

IO A. The Electric Department is assigned 72.47%, the I9 Gas Department 27.34% and the Steam Department 0

0.19%.

21- How are the depreciation calculations made for

4. . O.

22 Common Plant?

I 23 l A. They are made on a strsight-line remaining life 4

basis.

'25

5. Q. What do Tables 4-A and 4-B show?

26 A. , Table 4-A shows the estimated allocation for 1980, 27 1981, 1982 and 1983. Table 4-B shows the year-end

( 28 depreciation reserve accrued on Common Plant.

t 4-1

l

, i These tables include the accrued reserve for -

1 2 Transportation and Power Operated Equipment. The 3 associated depreciation expense on this equipment 4 does not appear in this chapter. It is calculated 5 on each piece of equipment using the straight-line 6 method. This depreciation expense is then charged 7 through clearing accounts, by hourly rates, for 8 use of the equipment. ,

9 6. O. Will you explain how the depreciation accruals 10 were calculated?

11 A. The recorded 1975 through 1979 accruals were cal-

~

12 eulated on an individual account basis by applying 13 an approved depreciation rate to each depreciable 14 account balance. The 1980 and 1981 as expected 15 depreciation accruals were developed' based on the 16 depreciation rate approved in Decision 90405 17 issued in June, 1979. The Test Year 1982 and 1983 18 accruals reflect new mortality studies, new salvage 19 studies and a new concept in estimating composite 20 remaining life.

21 7. o. Please describe the new mortality and salvage 22 studies which were undertaken.

23 A. Our mortality studies were updated to include more 24 current retirement data. similarly, our salvage 25 studies were revised in order to account for pro-26 jected changes in all the variables affecting 27 salvage values.

28 8. O. Please describe the new concept used to estimate 4-2

I composite remaining life.

2 .A. In order to determine depreciation expense, the f

3 composite remaining life of each of our plant 4 accounts must be estimated. For any given account, 5 this is accomplished by first estimating the j

6' expected remaining life for each vintage group of I

7 plant. A weighted average of the individual 8 estimated remaining lives is then calculated in 9 order to arrive at an estimate of composite remaining 10 life for the account as a whole.

11 Historical dollars are an approximate and 12 convenient surrogate for units of physical plant 13 when the number of physical units within any given 14 account is difficult or impossible to obtain. In 15 the above estimation process, if the chosen weight 16 associated with any given vintage of plant is its 17 share of total historical dollar plant, the result-18 ing estimate of composite remaining life is not independent of the price' level.

19 However, the 20 estimate should be independent as the price level

! 21 is a variable unrelated to the actual remaining l

22 life of the account. ThdP weight assigned to any 23 given vintage of plant should reflect the associated 24 share of total real plant. This may be accom-l l 25 p11shed by measuring plant in comparahie dollars.

26 In this instance, plant dollars have been brought l

27 to a common base year by means of the Handy Whitman 28

{ Index of Public Utility Construction Costs and the 4-3

_ _ _ . _ - = _ . -.

g Marshall and Swift Valuation Service Index. These 2 indices provide a consistent means for measuring 3 plant across vintages. The resulting estimates of 4 composite remaining life are independent of the 5 price level and accurately represent the com-6 position of the account as a whole in terms of 7 remaining life of real plant.

3 9. Q. Are dollars in the depreciable base altered in any 9 way when this concept is applied? .

10 A. No. They are left unaltered at their historical 11 values. The concept should by no means be confused 12 with constant Dollar or current cost Depreciation.

13 In fact, to emphasize this distinction, we have 14 used, in most instances, 1916 or 1917 dollars.

15 10. Q. What does Table 4-c show? ,

16 A. Table 4-c shows the derivation of the factors used 17 for the years 1977 through 1983 to allocate common 18 utility plant to the Electric, Gas and Steam Depart-19 ments. In order to develop the allocation factors 20 shown at the bottom of the page, a detailed analysis 21 of the usage by each department of the facilities 22 in each common plant account was made. The analysis 23 shown in Table 4-c was made in 1976.

24 11. Q. Does that complete your Prepared Direct Testimony 25 on this chapter?

26 A.. Yes.

27 28 4-4

/

CHAPTER 4 ALLOCATION OF DEPRECIATION RESERVE AND EXPENSE FOR COMMON UTILITY PLANT LISTING OF TABLES TABLE TITLE PAGE Table 4-A ALLOCATION TO DEPARTMENTS OF 2 DEPRECIATION EXPENSE RELATING

( TO COMMON UTILITY PLANT Table 4-B ALLOCATION TO DEPARTMENTS OF 4 DEPRECIATION RESERVE RELATING TO COMMON UTILITY PLANT Table 4-C. DERIVATION OF COMMON ALLOCATION 6

~

FACTORS l

I 4 e

6

TABLE 4-A ALLOCATION TO DEPARTENTS OF DEPRECIATION EXPENSE RELATING TO COM W UTILITY PLANT (Thousands of Dollars) 1980 1981 LINE NO. DESCRIPTION AS EXPECTED AS EXPECTED

1. Electric 4 Proration Percentage 72.47 72.47 >

a Depreciation Expense 549 64 9

'2. Gas Proration Percentage 27.34 27.34 Depreciation Expense 207 244

3. Steam tn a Proration Percentage 0.19 0.19 T @;

EN Depreciation Expense 1 2 eo

4. Total Common Utility Plant Expense o5 757 895

]

W-

p. m, .

TABLE 4-A ALLOCATION TO DEPARTMENTS OF DEPRECIATION EXPENSE RELATING TO CO.9 TON ITTILITY PLANT (Thousands of Dollars) 1983 1982 TEST YEAR (1982 TEST YEAR LINE NO. DESCRIPTION 1982 TEST YEAR (PROPOSED RATES) PROPOSED RATES)

1. Electric Proration Percentage 72.47 72.47 72.47 Y Depreciation Expense 972 972 1,170

2. Gas Proration Percentage 27.34 27.34 27.34 Depreclation Expense 367 367 441

3. Steam Proration Percentage 0.19 0.19 0.19 Deprecistion Expense 3 3 3

4. Total Common Utility Plant Expense 1,342 1,342 1,614 me j

ID

• s

" I' a*

~

TABLE 4-B ALLOCATION TO DEPARTMENTS OF DEPRECIATION RESERVE RELAIING TO CON G UTILITT PLANT (Thousands of Dollars) 4 1980 1981 LINE NO. DESCRIPTION AS EXPECTED AS EXPECTED

1. Electric Proration Percentage 72.47 72.47 Y -

5,906 6.526 Depreciation Reserve

2. Gas Proration Percentage 27.34 27.34 Depreciation Reserve 2,228 2,462

3. Steam Proration Percentage 0.19 0.19 un s Depreciation Reserve 16 17 gg SE

4. Total Cosumon Utility Plant Reserve 8,150 9,005 y, oOn m

O

p r *' ,. .

TABLE 4-B ALLOCATION TO DEPARTMENTS OF DEPRECIATIO4 RESERVE RELATING TO COMON UTILITY PLANT (Thousands of Dollars) 1983 1982 TEST YEAR (1982 TEST YEAR LINE NO. DESCRIPTION 1982 TEST YEAR. (PROPOSED RATES) PROPOSED RATES)

1. Electric Proration Percentage 72.47 72.47 72.47 h Depreciation Reserve 7,496 7,496 8,685

2. Cas Proration Percentage 22 .34 27.34 27.34

. Depreciation Reserve 2,828 2,828 3,277

3. Steam Proration Percentage 0.19 0.19 0.19 Depreciation Reserve 20 20 23

[h to ra

4. Total Common Utility Plant Reserve 10,344 10,344 11,985

, [

. E m

. TABLE 4-C Sheet 1 of 1 TAB 1E 4-C DERIVATION OF COMMON ALLOCATION FACTORS (THOUSANDS OF DOLLARS)

Derived Allocation Common Account Electric Gas Steam Total 389.1 Land 1,270.7 64 9.7 3.8 1,924.2 389.2 Land Rights 1.1 .1 -

1.2 390 Structures & Improvements 4,447.2 2,116.2 11.9 6,575.3 391 Office Furniture & Equip. 1,815.9 714.9 4.7 2,535.5 392.1 Transportation Eq.-Autos 2,356.0 1,228.7 15.0 3,599.7 392.2 Transportation Eq.-Trailers 413.0 131.8 .1 544.9 393 Stores Equipment 228.0 45.1 .3 273.4 394.1 Portable Tools 433.3 106.0 .7 54 0.0 3 94 .2 Shop Equipment 181.5 71.6 -

253.1 394.3 Garage Equipment 248.4 84.5 .9 333.8 395 Laboratory Equipment 42.4 7.8 .1 50.3 -

396 Power-operated Equipment 2,719.7 473.4 .5 3,193.6 397 Communication Equipment 1,8 58.8 4 54 .8 2.3 2,315.9 398 Miscellaneous Equipment 480.0 138.9 1.6 620.5 T:tal Allocated Common Accounts 16,496.0 6,223.5 41.9 22,761.4 l

l Corposite Allocation % 72.47 27.34 .19 Th3 totals in the table above are as of 12-31-75, adjusted to exclude facilities removed from utility use. Individual account totals were allocated to departments uoing various allocation methods.

l l

! 4-c-1

6 y CHAPTER S COMBINED DEPARTMENTS 2

SUMMARY

OF EARNINGS

' PREPARED DIRECT TESTIMONY OF JOSEPH E. HITT III 3

1. O. Mr. Hitt, what is the purpose of your testimony in 4

5 this proceeding?

6 A. 1 am sponsearing chapter 5 of this I:xhibit regardinq 7 nuimna ry of earnings. The components of the figures g in t.hia Chapter will b discussed in greater det.iil 9 by other witnesses in their respective areas of 10 expertise. In addition, I intend to discuss the 11 major economic assumptio'ns underlying the estimates.

12 2. Q. Please describe the tables included in the Chapter.

13 A. Historical data for the years 1975, 1976, 1977, 1978, 14 and 1979, and projected data for 1980, 1981, 1982, 15 and 1983 Combined Departments is depicted in Table

(

16 5-A. " Combined Departments" for this proceeding 17 consist of the Electric, Gas anet Steam Department.s.

18 Table 5-D displays projected data for the Electric l

19 Department, while Table 5-C shows similar data for

! 20 the Gas Department. Table 5-D displays recorded and 21 projected data for the Steam Department.

l 22 The four sets of-tables, 5-A, 5-B, 5-C, and 23 5-D are constructed using the same format. Five i 24 columns of recorded data are provided, where approp-25 riate. Referring to the projected data, columns C l 26 and D, 198D and 1981, respectively, are both shown on

! - 27 an as expected basis and include fuel expenseu.

( 28 Column E represents 1982 Test Year at present rates.

5-1

1 l

l 1 Column F also depicts 1982 Test Year at present 2 rates, but it has been adjusted to a zero fuel basis.

-l 3 The Test Year at proposed rates, column G, is also 4 depicted on a zero fuel basis, as are columns H and 5 I.i column H represents 1983 at the 1982 Test Year 6 proposed rates, while column I shows 1983 with a rate

7 adjustment for attrition.

8 3. O. Please discuss the adjustments made to exclude fuel-9 related items. -

10 A. Adjustments have been made to the Electric, Gas and l

11 Steam Departments to exclude all fuel-related revenues 12 and expenses which are treated in separate filings 13 before the Commission. These adjustments would, of 14 course, carry over into combined Department results.

15 In the operating revenue section of Table 5-A, sales 16 to customers (line 1), interdepartmental (line 2),

17 PGA and SAM adjustment (line 4), and ECAC adjustment 18 (line 5) are all affected by the zero base fuel 19 adjustment. Fuel expense, shown in line 7, has also 20 been adjusted. Customer accounting and collection 21 expenses (line 12), and administrative and general 22 expenses (line 14), are adjusted commensurately, because 23 uncollectibles and franchise fees are a function of 24 gross revenues.

25 4. O. Do any of these adjustments affect the overall rate 26 of return shown on line 24 of Table 5-A7 27 A. No, they do not.

28 5. Q. What are the major economic assumptions underlying 5-2

l I the estimated data?

b 2 A. For 1980, 1981, 1982, and 1983, the Consumer Price 3 Index (CPI) is assumed to be 14.0 percent, 10.0 4 percent, 10.0 percent, and 9.5 percent. respectively.

5 The Producer Price Index (PPI) is estimated to be 6 15.0 pe'r cent in'1980, 13.0 percent in 1981, 11.0 I percent in 1982, and 11.5 percent in 1983. The O Company subscribes to a well-known econometric 0 forecasting service provided by Data. Resources, 10 Inc. (DRI). DRI publishes a monthly review of the 11 United States economy which contains, among.other II things, forecasts of basic economic parameters I such as the CPI, PPI, etc. The DRI forecasts I4 published in May, 1980, and November, 1980, were

(. 15 utilized for the Company's estimates.

16 6. o. what are the wage increase assumptions in the II Company estimates. and when are they assumed to U

become effective?

19 The internal labor increase for 1980 is 9.5 percent A.

20 which has been ratified by the Union and implemented

! by the Company. The labor increase for 1981 in 22 assumed to be 13.5 percent, which represents the 23 impact of an offer made in 1980 by the Company, but 24 not yet accepted by the Unior. The 1982 and 1983 25 labor escalation rate is assumed to be 10.0 percent 26 in each year.

27 The wage increase for 1980 is assumed to be 28 ef fective on February 1, and for 1981 is assumed to be 5-3

4 ef fective March 1. The 1982 and 1983 wage increases 1

2 are effective March 1 also. These dates coincide 3

with the uxpiration date of our contract with the 4 Union.

5 All of these escalation assumptions were used 6 by all witnesses in estimating the various expenses.

7 7. O. Please identify the rate increases requested by the 8 various departments for the 1982 Test Year.

9 A. The total increasb in base rates requested for 1982 10 in this proceeding is $227,482,000. This assumes 11 an increase in 1981, based on the original application of 59788, of $100,000,000. This also equates to a iS 13 total 1982 revenue requirement of $670,250,000.

14 t200,870,000 of the 1982 increase is attributable 15 to the Electric Department, $26,460,000 relates 16 to the Gas Department and $152,000 is attributab!e to 17 the steam Department.

18 8. O. Please describe, in general, the methodology used to 19 derive these rate increase requests.

20 A. Based upon the projected data for the Test Year at l

l 21 present rates, shown in Table 5-A, column J, revenues 22 were increased by the consolidated Finance Model to 23 generate a 19 percent ratemaking return on equity for 24 the 1982 Test Year as developed in the Cost of

! 25 capital testimony, Exhibit (SDGEE-101). The 26 19 percent return on common equity equates to a 13.9 percent return on rate base (column K, line 24), as 27 28 discussed in the cost of capital Exhibit. The total 5-4

I rate increase was allocated to the departments on the 2 basis of a uniform rate of return. This process also

?

3 reflects appropriate increases in expenses for uncol-4 lectibles, franchise fees and income taxes. Any 5 decrease in these rate increase requests woul<1 cause 6 the company to fall short of the 13.9 percent rate of 7 return, and the requested 19 percent return on 8 common equity.

9 9. Q. Mr. !!itt, has methodology been requested in this 10 proceeding to combat the effects of financial and 11 operational attrition in 19837 12 A. Yes. Ilowever, the attrition increase shown in the

~

13 summary of earnings exhibits is provided for infor-14 mational purposes only. This information was derived 15 by extending the same trends and methodologies used 16 in ca'1culating the 1982 results for an additional i 17 year. This procedure produces an attrition increase 18 ef $60,844,000 for the Cor'f.nedi Departments as shown 19 in column I of Table 15-A. 550,420,000 of the in-20 crease is attributed to the Electric Department, 21 $10,416,000 relates to the Gas Department, and S8,000 22 is attributed to the steam Department. The increase 23 is, of course, over and above the amount requested 24 in 1982. This would translate into a total revenue 25 requirement in 1983 of $742,044,000 for the Combine <l 26 Departments.

27 Again, I wish to stress that column I is provided 28 for informational purposes only. In a separate

(

5-5

~

3 chapter in the Application, the Company is pro-2 posing an attrition allowance procedure which w uld derive different results if implemented.

3

10. Q. What methodology was utilized to derive the summary 4

f earnings data provided in column I?

5 6

A. Based upon the projected data for 1983 (at 1982 rates) shown in Table 5-A, column H, revenues were 7

g increased so that the Company might maintain the 9

19 percent ratemaking return on equity requested in the 1982 Test Year. The total rate increase 10 gg was allocated to the departments on the basis of a uniform rate of return. This process also reflects 12 13 appropriate increases in expenses for uncollec-tibles, franchise fees and incoise taxes.

14

11. Q. What would be the effect on the Company's presen-15 tation if the Commission were to authorize imple-

, 16 mentation of the customer connection charge re-17 18 quested by'SDG&E in A. 60021, commencing in 19827 19 A. Foremost is the fact that the overall revenue 20 requirement could be reduced by approximately 21 $32,000,000 in the 1982 Test Year, as shown in 22 Exhibit (SDG&E-101), and discussed by Mr.

23 Korpan in his testimony. The various components f ,

of this reduction and the impact on the individual 24 25 revenue and expense catagories are discussed by 26 each respective witness in the Results of Opera-

?S tions Reports, as appropriate. A summary of 28 earnings for the Combined Departments, with and 5-6

without.the connection charge, is shown in Table 7-A 3

of Exhibit (SDGEE-120).

(. 2 3 11. O. Does that conclude your Prepared Direct Testimony on this Chapter?

4 5 A. Yes.

6 7

8 9

10

~

j. 11 12 13 14 Y -

15 16 17

.18 19 ,

20 21 22 23 24 ,

25 26 27 L 28 1

5-7

f CHAPTER 5

SUMMARY

OF EARNINGS LISTING OF TABLES TABLE TITLE PAGE Table 5-A

SUMMARY

OF EARNINGS - COMBINED

([ DEPARTMENTS 3 Table 5-B

SUMMARY

OF EARNINGS - ELECTRIC DEPARTMENT 6 Table 5-C

SUMMARY

OF EARNINGS - GAS DEPARTMENT 8 Table 5-D

SUMMARY

OF EARNINGS - STEAM DEPARTMENT 11 b

e y

~ '

~r. D m _

TABLE 2-A 371:1ARY OF 2AP.NINGS - CCil3INED DEPARTMENTS (1)

(Thousands of D0113rs)

LI!E MO. TITLE 1975 1976 977 1978 1979 (A) (SJ (C) (D) (E)

OPERATING KEVENUES

'1. Sales to custcmers $372.393.2 $459.304.9 C483.839.8 2589.007.0 $ 692,401.9

2. Interdeportnental (1) 14.615.3' 19 J55.2 38.548.2 55.687.8 85.516.1

3. Miscellaneous 1,858.4 (1,1"3.2) 1.494.2 1.621.6 9.514.9 C. PGA/ SAM Adjustncnt --

(3.130.1) 2.459.3 610.5 (13,254.6)

5. ECAC Adjustr. tnt --

(12.522.6) -- -- 27,485.4

6. P. operty Tax Adjustment -- -- --

(1.125.5) 155.4

7. TOTAL CPERATING REVEt:UES $368.866.9 $461,953.2 $531.341.2 $645.801.4 $ 801.820.1 OPERATING EXPENSES

8. Fuel (1) 222,536.1 250,167.7 327,246.6 362.867.4 487.649.0 9 Gas Storate 625.7 617.3 734.1 930.6 1.775.6

10. Other Production 12.465.1 11,365.4 (14.945.8) 35.632.0 40,613.6

11. Transmission 5,458.8 5.071.5 5,801.3 5.877.6 7.615.2

12. Distributien 17,557.7 18.037.2 19.085.3 22.246.0 26.114.9 y13. Custoner Accounting and Collection 10,085.6 11,352.5 12,065.2 12.947.4 14.514.6

14. Conservation 1.373.6 1.754.3 2.046.2 2.574.8 4.178.5

15. Administrative and General 25.288.2 30,449.4 36.539.9 41.127.1 46.187.3

16. SUBTOTAL 8295.440.8 $328,844.4 $308.573.3 5484.202.9 $ 628.648.4

17. Depreciation and Amortization 28,376.4 30,267.3 33.735.1 37,930.1 47.592.4 TAXE5

18. Ad Valorem 15.S20.1 18,026.8 19.417.1 16.551.3 13.159.1

19. Incone 2,193.0 19,414.0 5.70'.0 12.338.0 12.412.0 28 Payroll and Miscellaneous 1.710.6 1,977.1 2,152.8 2.348.0 3,026.4

21. TOTAL TAXE5 $ 18.923.7 3 39,417.1 $ 27.356.9 $ 31,287.3 $ 28.587.5

22. TOTAL OPERATING EXPENSES 343.240.9 358,529.7 64b665.3 553.470.3 704.828.3

$. "5

23. Het Operating Incone $ 45,626.0 0 63.423.5 $ 41.675.9 $ 92.331.1 8 96,991.8 $M

24. Weighted Average Rate Base 747,724.9 794,365.0 833.492.1 944.720.3 1.018.73521

((

25. Rate of Return (%) 6.10% 7.98 ; 9.80% 9.77% 9.52%

]

(1) Adjustments finde to.Both Expensr.s and Revenues for L31chcing Account Uhder/Over Collections in 1975-1978. Adjustnents Made to Reve'tue f or r,alshcing Account Under/Over Collect.acns in 1979 (2) Includes Costs of GN-5 Gcs (3) Incont Texes Adjusted fo- Ratenaking Methodology

?

TABLE 5-A

SUMMARY

OF EARNINGS - COMBINED DEPARTMENTS (Thousands of Dollars) -

LINE 1988 1981 NO. TITLE AS EXPECTED AS EXPECTED (A) (8) (C) (D)

OPERATING REVENUES

1. Sales to Customers t 954.872 $1.978,322

2. Interdepartnental (1) 122,455 107,644

3. Miscellaneous- 7,131 7,191

4. PGA/ SAM Adjustment 13.50f (18.851)

5. ECAC Adjushat ( 24. 96 ')) (28.354)

6. TOTAL OPERATING REVENUE 5 61.072,164"' 81,145,952 0?ERATING EXPENSES

7. Fuel (1) 728,351 807.423

8. Gas Storage 1,826 2.333 p 9. Other Prwuctica 47.114 59,239 e le. Transmission 8.531 18,351

11. Distribution 29,222 36.573

12. Customer Accounting and Collection 15.993 17.888

13. Conservation 9.537 13,596

14. Administrative and General 59.883 71.114

15. SUBTOTAL 8 900,457 81,818,549

16. Depreciation and Amortization 53,877 58.546 TAXE5

17. Ad Valorem 13,739 14.603

18. Income 21.807 17.514 19 Payroll and Miscellaneous 3.392 4.276

29. TOTAL TAXE5 38.938 8 8 36.393 Eh

21. TOTAL OPERATING EXPENSE 5 993.272 1.113,,448 N

22. Het Operating Income 8, 78,892 6 32,504

)[

23. Weighted Average Rate Base 1,132.441 1.269.885 ]

23. Rate of Return (X) 6.97% 2.56%

C (1) Includes Cost of GN-5 Gas 9

b

f.

i  %' .

TAELE 5-A SUMrtARY OF EARNINGS - CCM8!MED DEPARTMENTS (Thousands of Dollars) a 1983 a4 1982 1982 W 1982 TEST YEAR N (1982 TEST YEAR 1983 *=

LINE TEST YEAR (PROPOSED RATES) PROPOSED RATES) W/ ATTRITION ADJ MO. TITLE TEST YEAR (F)- (G) (H) (1)

(A) (5) (E)

OPERATING REVENUES

$ 657,448 $ 668,359 s 729,200 Sales to Custoners $1.120,005 8 326.813

1. 5.532 5,532 5.532

• . Interdepartmental (1) 123.745 5.532 7,310 7,318

3. Miscellaneous 7.3C1 7,301 7.244 -- --

4. PGA/5AM Adjustment 45.814 -- --

2 2 7.514 28 32

5. ECAC Adjustment

$ 670,256 $ 681.203 $ 742.344

6. TOTAL OPERATING REVENUES 51.303.579 8 339,674 OPERATING EXPEMSES 13,672 2,507 2,507 Fuel (1) 957,795 13.672 2.661 7.

Gas Storage 2,401 2,401 2,401 2.661 8.

74,351 71,804 71,804 71.287 71.257 8 9. Other- Production 16,528 16,528 20,534 20.534 T 10. Transmission 16.528 56,129 56,129 58.631 50.631 50.631

11. Distribution .

Customer Accounting and Collection 20.240 19.039 19,536 21.505 21.597

12. 23.360 23,360 23,360 29,308 21.385

13. Conservation 79,609 63,575 70.188 77.729 78.958

14. Administrative and General

$1,224.915 8 261,010 $ 268.128 $ 281.660 $ 282,981

15. SU8TCTAL 81.930 81.930 81.930 89.332 89.332

16. Depreciation and Amortization TAXE5 .

15,802 15.802 16.608 16,688

17. Ad Valorem 15.802 106,894 94,441 124.968 28,258 28,258

18. Income 4.819 5.381 5.381 19 Payroll and Miscellaneous 4.81) 4.819 48,879 $ 48,879 $ 127,515 $ 116,430 $ 146,897ro e TOTAL TAXE5 8 20.

519,218 ?C

21. TOTAL OPERATING EXPENSES 1.355,724 391.819 477.565 487,422 g Met Operating Income $ (52.145) (52,145) 192.691 193.781 222.834 w y 22.

Weighted Average Rate Base 1.386.038 1,386.038 1.386 038 1.557.206 1.557.206 S #

23.

(3.76%) 13.90% 12.44% 14.31%

! 24. Rete of Return (%) (3.76%)

0 Zero Fuel Basis 2:2 Included for the Purpose of Attrition Calculation (1) Includes Cost of GM-5 Gas D

'i TABLE 5-B SuretARY OF EARMINGS - ELECTRIC DEPARTMENT (Thousands of Dollars) a LINE 1980 1981 Me. TITLE A5 EXPECTED AS EXPECTED (A) (B) (C) (D)

OPERATING REVENUES

1. Sales to Customers S 796,672 8 886.669

2. Miscellaneous 5,905 5.992 ECAC Adjustment (25,1943 (28,228) 3.

4. TOTAL OPERATING REVEMUES 8 777,387 8 858.433 OPERATING EXPENSES

5. Fuel 493,870 580.912 Other Production 47,067 59,172

6. 8,723

7. Transmission 6.828 8

8. Distribution 19,610 25.248 10.353 11,610 7 9. Customer Accounting and Collection Conservation 7,348 9.582

16. 55.334

11. Administrative and General 46,441 SUBTOTAL 8 634,741 6 750,581 12.

Depreciation ano Amortization 45,749 49,779 13.

TAXE5

14. Ad Valorem 11,262 11.975 18,400 14,887

15. Incone 3.219 16 Payroll and Miscellaneous 2.553

17. TOTAL TAXE5 8 32,215 8 30.081 708,665 830,441 to e

18. TOTAL OPERATING EXPENSES

- YC

19. Met Operating Income S 68,722 $ 27.192 e, p

28. Weighted Average Rate Base - 983,380 1.186,067 ey

21. Rate of Return (%) 6.99% 2.53% S" to

~

5 -

m -

n 3 .

9 TABLE 5-B

SUMMARY

OF EARH1HG5 - ELECTRIC DEPARTMENT

, (Thousands of Dollars)

=

1983 mm n LINE 1982 1982 m 1982 TEST YEAR * (1982 TEST YEAR 1933 mm MO. TITLE TEST YEAR TEST YEAR (PROPOSED RATES) PROPOSED RATES) W/ ATTRITION ADJ (A) (8) (E) (F) (G) (H) (1)

' OPERATING REVENUES

1. Sales to Customers 8 982.073 8 278,382 8 567,471 3 578.344 S 628,761

2. Miscellaneous 6,101 6,101 5,978 6,093 6.093

3. ECAC Adjustnent 7.458 28 32 2 2

4. TOTAL OPERATING REVENUES S 995,632 S 284,511 8 573,481 8 584,439 8 634,856

, OPERATING EXPENSES

5. Fuel 708.192 11.311 14,311 3,311 3.311

6. Other Production 74,274 71,727 71.727 71,226 71,226 e 7. Transmission 14,734 14,734 14.734 18,489 18.489

.-4 8 . Distribution 36,849 36,849 36,849 40,911 40.911

9. Customer Accounting and Collection 13.240 12.190 12,624 13,937 14,013

10. Conservation 16.242 16,242 16,242 21,619 21,619

11. Administrative and General 63,649 50,006 55,642 6?,501 63.484

12. 8 233.055 SU8 TOTAL $ 927,180 $ 216,659 $ 222,129 $^'231,994

13. Depreciation and Amortization 69,521 69,521 69,521 75,863 75,863 TAXE5

14. Ad valoren 12,900 12,900 12,900 13,565 13,565

15. Income 24,302 24,302 96,552 86,943 112,206 If Payroll and Miscellaneous 3,628 3,628 3,628 4,051 4,051

17. TOTAL TAXE5 $ 40,830 $ 40,830 $ 113.080 $ 104,559 $ 129,822

18. TOTAL OPERATING EXPENSES 1,037,531 326.410 404,730 412,416 438.738 h

19. Met Operating Income (41,899) (41,899) 168.751 172,023 196,118 $ N

20. Weighted Average Rate Base $1,213,817 91,213,817 21,213,6;7 $1,370,482 S1,370,482

}

21. Rate of Return (%) (3.45%) (3.45%) 13.90% 12.55% 14.31%

u Zero Fuel Basis WW Included for the Purpose of Attrition Calculation 9

a

5 TABLE 5-C

SUMMARY

OF EARNINGS - GA5 DEPAP.TMENT (Thousands of Dollars)

LINE 1988 1981 No. TITLE AS EXPECTE0 AS EXPECTEG (A) (8) (C) (D)

OPERATING REVENUES

1. Sales to Customers 8 156,638 9 19s.983

2. Interdepartnental (1) 122.455 107.644

3. Miscellaneous 1.196 1.199

4. PGA & 5AM Adjustment 13.505 (18.851) 5 '. TOTAL OPERATING REVENUE 5 4 293.794 8 286.075 OPERATING EXPEN5ES

6. Ias Supply (1) 234.545 225.361

7. Gas Storage 1.826 2.333

8. Transmiss ton 1.711 1.628 9 Distribution - 9.548 11.232 MS. Customer Accounting and Collection 5.638 6.268 Fil. Conservation 2.197 4.014

12. Administrative and General 13.382 15.697

13. SU8 TOTAL 4 268.839 6 266.533

14. Depreciation and Amortization 8.893 8.728 TAXE5

15. Ad valorem 2.462 2.613 Income 3.401 2,627 16.

17 Payroll and Miscellaneous 832 1.e48

18. TOTAL TAXE5 S 6.695 8 6.288 9

19. TOTAL OPERATING EXPEN5ES 283.627 231.549 as a tr

-- 20. Het Operating Income 19.167 4.526 N

21. Weighttd Average Rate Base

• 148.766 s 163.427 g s, e

• 0 O

22. Rate of Return (%) 6.83X 2.77%

so "U (1) Includes Cost of GN-5 Gas e

7 l- .[- .q q O

TABLE 5-C

SUMMARY

OF EARNINGS - G45 DEPARTMENT (Thousands of Dollars)

N 1983 du a LICE 1982 1982 N 1982 TEST YEAR u (1982 TEST YEAR 1983 au N3. TITLE TEST YEAR ' TEST YEAR (PROPOSED RATES) PROP 35ED RATES) W/ ATTRITION ADJ (E, ~

(F) (G) (ii) (1)

OPERATING REVENUES

$ 89,571 99,987 1.- Tales to Custoners 3 136,316 123,745

$ 48,128 8 89,522 5,532 5,532 8

5,532

2. Interdepartnental (1) 5.532 1,266 1,217 1,217

3. Miscellaneous 1,200 1,200

4. PGA 8 SAM Adjustment 45,014 -- -- --

TOTAL OPERATING REVENUES S 305,275 6 54,860 8 96,320 t 96,320 $ 106,736 5.

OPERATING EXPENSES

'6. Gas Supply (1) 248,250 (650) (650) (Sc8) (803)

7. Gas Storage 2,401 2,401 2,401 2.661 2.661 1,794 1,794 1,794 2,045 2,045

8. Transmission 15,105

-9. Distribution 13,680 13,680 13,680 15,105 Customer Accounting and Collection 6,998 6,847 6,910 7,566 7,582

, 10 . .

7,689 7,689 w)11. Conservation 7,118 7,118 7.118 15,168 8 12. Administrative and General 15,875 13,511 14,484 15.413

$ 296,116 9 44,701 6 45,737 s 49,426 6 49,687

13. SUBTOTAL

14. Depreciation and Ar.ortization 12,354 12,354 12.354 13.412 13.412 TAXE5 Ad valorem 2,887 2.887 2,887 3,028 3,028

15. 10,285 7,443 12,642

16. Income 3,956 3,956 Payroll and Miscellaneous 1.181 1,181 1,181 1,319 1,319 17 8,024

• 8,024 $ 14,353 $ 11,790 $ 16,989

18. TOTAL TAXES S

19. TOTAL OPERATING EXPENSES 316',494 65,079 72,444 74,628 80,088

- 20. Het Operating Income (10,219) (10,219) 23,876 21,692 26,648 h

21. Weighted Average Rate Base $ 171,765 S171,765 6171,765 $ 186,251 $ 186,251 SN

22. Rate of Return (%) (5.95%) (5.95%) 13.90% 11.65% 14.31% ~Y oa N

~

(1) Includes Cost of GN-5 Cas

, M 2ero Fuel Basis um Included for the

Purpose:

of Attrition Calculation s

9

3 '

--g .

TABLE 5-D '

SUMMARY

OF ~AFNINGS - STEAM DEPARTMENT (Thousands of Dollars)

LINE NO. TITLE 1975 1976 1977 1978 1979 (A) (6) (C) (D) (E) (F) LG)

OPERATING REVENUES

1. -Sales to Custer.ers S 70S.3 $ 795.6 $ 740.7 81.161.1 $1,057.7

2. ECAC Adj ustnent -- -- -- --

(75.5)

3. Property Tax Adjustment -- -- --

(2.1) 9.5

4. TOTAL OPERATING REVENUES 705.3 795.6 740.7 1,159.0 982.7 OPERATING EXPENSES

5. Fuel 626.4 651.3 766.9 843.6 715.4

6. Other Production 83.7 69.5 (114.1) 195.9 49.5

7. Distribution 39.7 49.9 57.6 53.1 73.4

8. Custoner Accounting and Collection 0.9 1.0 1.2 1.2 1.3

9. Admir.istrative end General 43.8 51.1 53.3 65.2 63.8 e

U 10. SU8 TOTAL 794.5 822.8 764.9 1,159.0 903.4 8

11. Depreciation and Anortization 32.3 33.2 31.9 34.1 34.7 TAXES

12. II'Valoren 20.7 25.8 27.5 22.3 15.8 7.0

13. Incone (1) -- -- -- --

14 Payroll and Miscellaneous 4.8 5.4 5.3 5.0 6.0

15. TOTAL TAXES 25.5 31.2~ 32.8 27.3 28.8

16. TOTAL OPERATING EXPENSES . 852.3 887.2 829.6 1.220.4 966.9

17. Het Operating Income (147.0) ( 91.6) ( 88.9) ( 61.4) 15.8

18. Weighted Average Rate Base , 347.9 382.0 356.3 355.4 338.0 h

19. Rate of Return (%) (42.25%) (23.98%) (24.95%) (17.28%) 4.67% $$

Y W

(1) Operating Le:s for Ratensking Purposes 1975 Through 1978

~.~

4

TABLE 5-D

SUMMARY

OF EARNINGS - STEAM DEPARTMEili (ihousands of Dollars)

LINE 1980 1981 NO. TITLE AS EXPECTED AS EXPECTED (H) (1)

OPERATING REVENUES

1. Sales to Customers S 762 8 1,570

2. ECAC Adjustment 221 (126)

3. TOTAL OPERATING REVENUES S 983 8 1,444 OPERATING EXPENSES

4. Fuel -

736 1,150

5. Other Production 47 67

6. Distribution 72 93-

7. Customer Accounting ahd Collection 2 2

8. Administrative and General 60 83 i e U

e

9. SUBTOTAL S 917 8 1,395

10. Depreciation and Amortization 55 39 TAXE5

11. Ad Valorem 15 15

12. Incosse 6 0 13 Payroll and Miscellaneous 7 9

14. TOTAL TAXE5 8 28 $ 24

15. TOTAL OPERATING EXPENSES 980 1,458

16. Het Operating Incone 3 (14)

17. Weighted Average Rate Base 8 295 8 391 to a

- 18. Rate of Return (X) 1.03% (3.59%) {$

?+ N

"?

w e

G

' ' ~

.- r.

e i

TABLE 5-D SUMMA 8tY OF EARNINGS - STEAM DEPARTMENT

'(Thousands of Dollars)

M 1983 Wm a 1982 1982 m 1982 TEST YEAR d (1982 TEST YEAR 1983 mm LINE (PROPOSED RATES) PROPOSED RATES) W/ ATTRITION ADJ NO. TITLE TEST YEAR TEST YEAR (J) (K) (L) (M) (N)

OPERATING REVENUES

$ 1,616 4303 $455 8444 $452

1. Sales to Customers -- -- --

2. ECAC Adjustment 56 --

S 1,672 $303 $455 $644 $452

3. TOTAL OPERATING REVENUES OPERATING EXPENSES 1,353 11 11 4 4

4. Fuel 61 61

• 77 77 77

-5. Other Production 102 102 102 113 113

6. Distribution 2 2

7. Customer Accounting and Collection 2 2 2 85 62 60 61

, 8 .' Administrative and General 58 6 1,619 1250 $254 $240 $241

9. SUBTOTAL 55 55 57 57

10. Depreciation and Amortization 55 TAXES 15 15 15 15 15

11. Ad Valorem 57 55 60

12. Income 0 0 10 11 11 13 Payroll and Miscellaneous 10 10 TOTAL TAXES 4 25 $ 25 $ 82 8 81 $ 86

'14.

1.699 330 391 378 384

15. . TOTAL OPERAT1HG EXPENSES (27) (27) 64 66 68

16. Het Operating Income 456 4456 8456 $473 8473 ma

17. Weighted Average Rate Base 4 (5.99%) (5.99%) 13.94% 13.87% 14.43% #5

- 18. Rate of Return (%)

"Y P, "

W u Zero Fuel Basis un Included for the Purpose of Attition Calculation

~

t .