Working Capital and Customer Advances for Construction 1. Please update the monthly accounts receivable balance and sales balance (corresponding to Schedule C) for each month from January, 2002 to the latest available date. : Monthly accounts receivable and sales balances have been updated from January, 2002 to September, 2002, the latest available date, and are provided in the attached excel file SCGTurn001-Q1Response.xls.
2. Please explain how the high cost of gas in the winter of 2000 and spring of 2001 affected (a) accounts receivable as a percentage of sales; (b) revenue c collection lags, and (c) uncollectible accounts expenses. : 2a. Attached in the excel file SCGTurn001-Q2Response.xls, please find the comparison of the Sales to A/R ratio for the winter 2000 and spring 2001 period, to winter 1999 and spring 2000. The ratio of sales to accounts receivable for the requested period is 7.61, whereas the ratio for the comparative period when the gas prices were significantly lower, as shown in the sales amount, is 7.86. 2b. Based on the ratios calculated in 2a above, the difference in the revenue lags between the two periods is not significant. 2c. The operational write-off factor for the residential and small commercial/industrial customers for 2001 was comparable to the previous three year average. However, the write-offs for large commercial & industrial customers increased by approx. $2.0M over the previous three year average due to default in payment of commodity-related imbalance charge.
3. Please explain how, if at all, SoCal has incorporated the impact of its proposed late payment charge into its estimate of revenue lag days. : SoCalGas has not incorporated the impact of the proposed late payment charge into its estimate of revenue lag days for Test Year 2004. SoCalGas proposes to implement the late payment charge one year after receiving approval from the CPUC, which will provide adequate time for SoCalGas to modify its business systems and to notify affected customers.
4. Please provide information on the time between the issuance of a check and its cashing for payroll checks. : SoCalGas selected seven payroll periods from June 1, 2001 to August 24, 2001 to analyze the time between the issuance of payroll check and its cashing. The results below represent the time when a check is cashed from the date of issuance: Cashed the same business day 19.3% Cashed the 2 nd business day 47.8% Cashed the 3 rd business day 18.6% Cashed the 4 th business day 6.4% Cashed the 5 th business day 5.1% Cashed after 5 th business day 2.8% Total 100.0%
5. Please divide company labor payments on a percentage basis into (a) direct deposits; (b) checks issued; (c) tax withholding; (d) other withholding. : SoCalGas selected seven payroll periods from June 1, 2001 to August 24, 2001 to divide company labor payments into the following categories: % of Amount Direct deposit 43.6% Checks Issued 10.2% Tax withholdings 23.7% Other withholdings 22.5% Total 100.0%
6. Please provide more detailed workpapers showing the calculation of lag days for goods and services. Explain how check float lag days were factored into the calculation. : Attached please find an excel file SCGTurn001-Q6Response.xls with the detail of invoices used in calculation of the lag days for goods and services. Due to the volume of data, data for three random months is being provided. The check float lag days was factored in the calculation of lag days by taking the difference between the invoice date and the check clearing date. The check clearing date is captured in the Accounts Payable system.
7. Please update Schedules P-3 and P-3-1 through the latest available information in 2002. : Schedules P-3 and P-3.1 have been updated with the latest information available through September, 2002. See attached excel file SCGTurn001-Q7Response.xls.
8. Please provide the information in Schedule P-3-1 for the year 2000. : Please see attached Excel file SCGTurn001-Q8Response.xls for information in Schedule P3.1 for the year 2000
9. Please explain the reason for the high balance in December, 2000 on Schedule P-3 and specify whether it is likely to recur. : The high December 2000 balance is primarily the result of gains associated with SoCalGas hedging programs. The gains were the result of high volatility in the gas markets at the time and generally would not be expected under normal market conditions.
10 Re: Schedule P-3-1: a. Are appliance contracts part of the utility s cost of service? Please explain. b. What is the treatment of Gas Sales Hub and Swap revenues in the utility s cost of service? Are these revenues subject to the GCIM Please explain. c. Are delinquent accounts in litigation considered to be uncollectible? Please explain. : 10 a. Yes, the Appliance contract is a fringe benefit that has been provided historically to all active employees and retirees receiving a monthly pension annuity for the purchase of new Gas fired appliances. 10 b. Gas Sales and Swap revenues are treated as reductions to cost of gas. The Hub revenues are treated as offsets to cost of gas in the PGA Regulatory Balancing Account. Yes, these revenues are subject to GCIM. The sales, swap and hub revenues are all treated as offsets to cost of gas in the GCIM. 10 c. No. The amount placed in the delinquent receivable account was for a single customer. This amount was fully recovered in April 2001.
11. Please provide actual customer advances for construction on a monthly basis from January 1997, through the latest date available in 2002. : Below is a listing of monthly customer advances for construction from January 1997 through September 2002. YEAR MONTH AMOUNT 1997 January $ 572,945 1997 February 849,575 1997 March 798,024 1997 April 1,101,374 1997 May 723,921 1997 June 779,524 1997 July 851,438 1997 August 705,426 1997 September 895,985 1997 October 1,185,955 1997 November 840,031 1997 December 691,039 1998 January 695,463 1998 February 635,537 1998 March 937,189 1998 April 723,665 1998 May 644,288 1998 June 784,045 1998 July 1,064,352 1998 August 767,487 1998 September 860,799 1998 October 901,669 1998 November 476,431 1998 December 784,512 1999 January 402,306 1999 February 663,954 1999 March 877,262 1999 April 908,104 1999 May 725,790 1999 June 785,582 1999 July 820,392 1999 August 1,991,506 (Page 1 of 2)
(Continued to Question 11) TURN Data Request Number 1 YEAR MONTH AMOUNT 1999 September $ 778,613 1999 October 1,013,138 1999 November 722,967 1999 December 788,336 2000 January 742,626 2000 February 598,018 2000 March 751,193 2000 April 1,055,882 2000 May 728,696 2000 June 607,657 2000 July 674,177 2000 August 886,279 2000 September 1,187,034 2000 October 865,201 2000 November 988,252 2000 December 617,473 2001 January 493,503 2001 February 933,078 2001 March 729,345 2001 April 1,293,868 2001 May 1,192,872 2001 June 2,066,107 2001 July 2,833,309 2001 August 1,105,275 2001 September 1,279,190 2001 October 1,166,043 2001 November 1,768,447 2001 December 909,208 2002 January 1,330,350 2002 February 1,471,372 2002 March 1,831,168 2002 April 1,615,723 2002 May 1,813,415 2002 June 1,340,303 2002 July 1,109,010 2002 August 1,264,896 2002 September 1,088,505 (Page 2 of 2)
12. Please provide year-end customer advances for construction and net meters set for each year from 1989 to 2001 recorded. : Below is the year-end Customer Advances for Construction (CAC) balances and net meters set from 1989 through 2001. Year Ended CAC December 31: Balance Net Meters Set 2001 $ 23,267,970 59,896 2000 20,777,713 54,179 1999 28,367,125 51,651 1998 31,564,548 45,997 1997 36,314,309 43,720 1996 43,781,835 44,406 1995 48,617,344 41,018 1994 45,211,063 43,431 1993 47,067,402 46,959 1992 48,391,283 55,775 1991 41,473,259 75,818 1990 44,598,625 103,222 1989 56,045,995 122,467
13. Regarding Accounts Receivable for Contributions in Aid of Construction (CIAC) and Customer Advances for Construction (CAC): a. Provide typical timelines showing when the amount of CAC and CIAC is first estimated, when applicants are billed for CAC and CIAC, when they pay those bills, when expenditures are made on plant covered by CIAC, when plant covered by CIAC is completed for typical distribution extensions or relocations, and when CAC or CIAC estimates are revised (if at all) and when the revised bills are paid or credited. b. Identify the percentage of CAC and CIAC costs which are billed but unpaid after (a) 30 days; (b) 60 days; (c) 90days; (d) 120 days; (e) 150 days or longer : (a) 1. CAC SoCalGas Customer Advances for Construction (CAC) process typically has no billing prepared when the estimate is first provided to the applicant. Allowances based on Rules 20, 21, and 22 are generally calculated with the initial estimate to an applicant. If the applicant agrees with the terms and conditions of the contract, and when the allowances do not cover the estimated project costs, a deposit is then collected from the applicant at the time the contract is executed. Subsequent to the completion of the project, SoCalGas performs a reconciliation of actual and estimated allowances, which is reflected in the original contract, and sends a deficiency bill to the applicants for any discrepancy in the allowances and any change in project scope in accordance with the tariff rules. A general timeline for CAC is as follows: As described above, the estimate is provided to the applicant as part of the contract. The contract states the required deposit. Applicants are billed for CAC within 30 days upon completion of reconciliation as described above when a deficiency bill occurs. Applicants pay deficiency bills between 20 to 30 days from the bill date. Aside from the deficiency billings, CAC cost estimates are generally not revised and no additional billings are made. 2. CIAC Similar to CAC, there is an estimate is provided to the customer, not a bill. This estimate is included in the contract for the job to be performed. If the customer agrees to the terms and conditions of the contract, the customer pays the required advance. In this illustration, SoCalGas selected 19 projects that had completed the entire billing-construction-collection cycle between 2000 and 2002. Of these 19 projects, SoCalGas did not receive advances for 3 of these projects. As a general practice, SoCalGas does not receive advances for projects from governmental agencies. There is no typical timeline for CIAC projects; however, the average timeline based on the 19 projects identified is as follows: Page 1 of 2
(Continued to Question 13) TURN Data Request Number 1 As described above on CIAC, the estimate is provided to the customer as part of the contract. The contract states the required advance. Of the 16 projects that SoCalGas received customer advances, the average number of days from when the contract is executed, and when the customer submits the required advance, is 2 days. Of the 16 projects that SoCalGas received customer advances, SoCalGas incurred expenditures on average 35 days before the advance was received from the customer. For the 19 projects that completed the entire billing-construction-collection cycle, the average number of days that plant is covered and completed by CIAC is 306 days after expenditures are initially made for these extension or relocation projects. CIAC cost estimates are generally not revised. However, when the project is completed, SoCalGas bills or refunds the customer based on the reconciliation between actual expenditures and the customer s advance. Of the 16 projects that SoCalGas received customer advances, those that were billed, averaged 109 days after the billing date before payments were received. However, refunds are given to the customer immediately upon completion of project reconciliation. For projects that SoCalGas did not receive an advance, payment was received from the customer an average of 55 days after the billing date. b.1. Based on the CAC Accounts Receivable Aging Report resulting from deficiency billings, shown below is the accounts receivable balance of CAC as of December 31, 2002. CAC Outstanding Accounts Receivable Percentage 0-30 days 31-60 61-90 91-120 Over 120 days days days days 30% 4% 6% 2% 58% 2. Based on the most recent 12 monthly Account Receivable Aging reports, the average outstanding accounts receivable balance of CIAC is comprised as follows: CIAC Outstanding Accounts Receivable Percentage 0-30 days 31-60 31-90 91-120 Over 120 days days days days 14% 12% 9% 7% 58% Page 2 of 2
14. Please provide the total amount of customer deposits outstanding on a monthly basis from 1998 to the latest available information in 2002. : Below is the monthly total amount of Customer Advances for Construction (CAC) deposits outstanding (net of refunds and forfeitures) from January 1998 to September 2002. The CAC account is comprised of line extension work involving mains, stubs, services and meter set assemblies. CAC Balance 2002 January $ 22,988,435 February 22,541,282 March 24,504,590 April 24,415,728 May 24,810,540 June 25,630,654 July 25,513,506 August 26,217,515 September 26,310,803 2001 January 20,085,458 February 20,240,314 March 19,677,578 April 19,799,735 May 20,256,568 June 20,844,443 July 21,892,034 August 22,458,042 September 22,562,466 October 22,582,413 November 23,444,356 December 23,267,970 Page 1 of 2
(Continued to Question 14) TURN Data Request Number 1 CAC Balance 2000 January $ 27,122,256 February 26,820,407 March 25,570,818 April 26,545,259 May 26,808,988 June 27,035,638 July 27,215,186 August 27,392,110 September 22,792,340 October 21,936,694 November 21,639,508 December 20,777,713 1999 January 31,466,787 February 31,001,558 March 30,639,318 April 30,640,004 May 29,524,474 June 29,137,237 July 28,715,128 August 28,298,823 September 28,209,470 October 27,524,870 November 27,285,400 December 28,367,125 1998 January 35,672,134 February 34,773,278 March 33,312,101 April 32,938,081 May 30,685,341 June 30,026,622 July 29,832,688 August 29,387,446 September 29,676,437 October 29,763,970 November 29,611,390 December 31,564,548 Page 2 of 2
15. Please provide total amount of customer deposits outstanding at year-end for each year from 1990-1997. : Below is the Customer Advances for Construction (CAC) balance (net of refunds and forfeitures) at year-end for 1990 to 1997. Year Ended December 31: CAC Balance 1997 $ 36,314,309 1996 43,781,835 1995 48,617,344 1994 45,211,063 1993 47,067,402 1992 48,391,283 1991 41,473,259 1990 44,598,625
16. Please provide and document the most recent interest rate on customer deposits. : There is no interest calculated on customer advances for construction (CAC).
17. Please identify any changes in policy regarding the amount of deposit requested or the factors leading to the request for a deposit subsequent to January 1, 2000. : There were no policy changes regarding the amount of customer advances for construction (CAC) deposit requested. However, a new ITC (Income Tax Component of Contributions & Advances for Construction) factor of 27% as compared to 35% was implemented effective 7/1/2002 (Resolution G-3337 and Advice Letter 3154).
18. Regarding commodity price forecasts affecting municipal tax offsets to cash working capital: a. Please identify the average commodity rate in $/MMBtu underlying the figure in the lead-lag study. b. Please identify the average commodity rate in $/MMBtu for December, 2000 December 2001. c. Please identify the average commodity rate in $/MMBtu for September, 2001 August 2002 (time period used to compute municipal tax offset to cash working capital). : 18a. The average commodity rate used for 2004 projection for the lead-lag study is the Retail Core Commodity WACOG rate of $3.58/MMBtu. This rate is the adjusted Single Portfolio WACOG in Gas Accounting's PGA Reports and it measures the actual gas commodity cost including hub activities and derivatives. 18b. The average commodity rate used for calculation of Municipal Surcharge for December 2000-December 2001 was $5.15/MMBtu. This rate is the Retail Core Subscription WACOG. The Retail Core Subscription WACOG is an estimated cost of flowing gas supplies from the basins updated at each month end for the next month. 18c. The average commodity rate used for calculation of Municipal Surcharge during September 2001- August 2002 was $1.95/MMBtu.
Payroll Taxes 19. Please provide detailed workpapers supporting the calculation of (a) OASDI taxes; (b) Medicare taxes; (c) Federal unemployment taxes. (d) State unemployment taxes. : Please see the attached spreadsheet.
Capitalization of Supervision and Engineering and Administrative and General Costs 20. Please identify and provide quantitative workpapers supporting the historical O&M/capital percentages for clearing accounts referenced on MCS-16, lines 11-12. : The attached schedule provides the computations of historical O&M/Capital Percentages for the Clearing Accounts.
21. With reference to the phrase Organizations whose costs support construction activity were surveyed (Ex. SCG-13, MCS-16, lines 16-17), please identify each organization surveyed, identify its total costs, identify its reclassified costs, describe the basis of the reclassified costs, and provide copies of the surveys as filled out. : Requests and responses for this data followed previous practice for each company. SDG&E and SECC clients were surveyed via a formal e-mail document request. Requests to SCG clients were verbal or via e-mail. Survey responses for SECC and SDG&E organizations supporting SCG and supporting documentation for SCG organizations are attached.
22. Please provide a detailed explanation of how a portion of costs originally assigned to administrative and general expense are transferred to capital. The testimony on page MCS-16 contains no explanation and supporting workpapers contain no detailed computations. : Administrative & General (A&G) expenses are forecast in their respective FERC accounts. The amount of A&G to be capitalized is calculated as follows: 1. Certain A&G organizations provided a forecast for their organization and an associated percentage representing the amount of support given to construction-related activities. 2. Those percentages were applied by each organization to their SCG retained costs. 3. The sum of the resulting amounts from Step 2., above are escalated. 4. The result of Step 3., above is the A&G reassignment to capital. 5. The A&G reassignment amount serves as an input to the CapEx model. This amount is spread over forecasted capital expenditures and is included in the Summary of Earnings Reassignment line as a reduction to expense.
23. Please state specifically the percentage of cost of the office of the President of Sempra Energy assigned to SoCal Gas that is transferred to capital and provide supporting workpapers. : The percentage of cost of the office of the President of Sempra Energy assigned to SoCalGas that is transferred to capital is Zero Percent (0%).
24. Please provide quantitative workpapers showing the transfer to capital of workers compensation and pensions and benefits. : Labor overheads such as workers compensation and pension and benefits are reassigned to capital based on the labor reassigned from clearing accounts, supervision and engineering accounts, and administrative and general accounts to capital, and labor that is directly charged to capital projects. Please see the attached file for quantitative workpapers.