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COM/GFB/dmg/naz Mailed 3/25/02
Decision 02-03-055 March 21, 2002
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking Regarding the Implementation of the Suspension of Direct Access Pursuant to Assembly Bill 1X and Decision 01-09-060.
(Filed January 9, 2002)
(See Appendix C for List of Appearances)
Table of Contents
Appendix A DWR Revenue Requirement
Appendix B Water Code Sections
Appendix C List of Appearances
In 1995, this Commission issued a comprehensive decision for electric restructuring, which included the adoption and implementation of a direct access program. (Re Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation [Decision (D.) 95-12-063, as modified by D.96-01-009] (1995) 64 Cal. P.U.C.2d 1, 24 (Preferred Policy Decision).) The Legislature codified the Preferred Policy Decision in Assembly Bill No. 1890, Stats. 1996, ch. 854 (AB 1890).
By "direct access" California customers are permitted to choose from whom they wished to purchase their electricity. Customers could subscribe to bundled service from the public utility or direct access service from an electric service provider (ESP). Customers who purchase bundled service from the utility pay an electricity charge to cover the utility's power supply costs. For those bundled service customers, their total bundled bill includes charges for all utility services, including distribution and transmission as well as electricity. A direct access customer receives distribution and transmission service from the utility, but purchases electricity from its ESP. (See D.01-09-060, p. 2.)
Recently, major events in the California electric market have caused a significant change in the area of direct access. On January 17, 2001, the Governor issued a proclamation declaring that an emergency existed in the electricity market in California, and stating that "the solvency of California's major public utilities" was threatened. In response to this emergency, the Legislature enacted Assembly Bill No. 1X (AB 1X) , AB 1Xwhich, among other things, required that the California Department of Water Resources (DWR) procure electricity on behalf of the customers of the California utilities. (Stats. 2001 (1st Extraordinary Sess.), ch. 4.) With respect to direct access, AB 1X added Water Code §80110,1 which provides:
"After the passage of such period of time after the effective date of this section as shall be determined by the commission, the right of retail end use customers pursuant to Article 6 (commencing with Section 360) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code to acquire service from other providers shall be suspended until the department [the Department of Water Resources] no longer supplies power hereunder." (Water Code, §80110 see also, AB 1XStats. 2001 (1st Extraordinary Sess.), ch. 4, § 4, p. 10.)
AB 1X was an urgency statute and was given effect as of February 1, 2001. The statute was necessary "to address the rapid, unforeseen shortage of electric power and energy available in the state and rapid and substantial increases in wholesale energy costs and retail energy rates, that endanger the health, welfare, and safety of the people of [California]." (AB 1XStats. 2001 (1st Extraordinary Sess.), ch. 4, §7, p. 16.)
In compliance with the mandate concerning direct access in AB 1X, we issued D.01-09-060, an interim order, effective September 20, 2001, which suspended the right to enter into new contracts or agreements for direct access after September 20, 2001. We reserved for subsequent consideration matters related to the effect to be given to contracts executed or agreements entered into on or before the effective date. We especially put all parties on notice "that we may modify this order to include the suspension of all direct access contracts executed or agreements entered into on or after July 1, 2001." (D.01-09-060, pp. 8-9.) We acted promptly in issuing D.01-09-060 to prevent the adverse cost-shifting impacts on bundled service customers caused by customers switching to direct access. (D.01-09-060, pp. 8-10.) Also, D.01-09-060 was issued to facilitate the transactions of the State of California, in the issuance of bonds at investment grade necessary to ensure the repayment of the expenditures made from the State's General Fund to procure power for the utilities' customers. These expenditures were made to help weather the energy crisis confronting all retail end users statewide. (D.01-09-060, pp. 4 & 8; see also, Water Code, §80000.)
In D.01-09-060, we specifically reserved for a subsequent decision any issues related to an earlier suspension date. As we said: "All other pending issues concerning direct access contracts or agreements executed before today remain under consideration by the Commission and will be resolved in a subsequent decision." (D.01-09-060, pp. 8, 9.) We concluded that "[t]he effect to be given to contracts executed, agreements entered into or arrangements made for direct access [on or] before [September 20, 2001], including renewals of such contracts, as well as comments of the parties will be addressed in a subsequent decision." (D.01-09-060, p. 10 [Conclusion of Law 4] & p. 13 [Ordering Paragraph 9].)
In D.01-09-060, we recognized that merely suspending direct access was not enough. Many issues remained.
"All other pending issues concerning direct access contracts or agreements executed before today remain under consideration by the Commission and will be resolved in a subsequent decision. In other words, effective today, no new contracts or agreements for direct access service may be signed; the effect to be given to contracts executed or agreements entered into before the effective date of this order, including renewals of such contracts or agreements, will be addressed in a subsequent decision. We put all those concerned about these matters on notice that we may modify this order to include the suspension of all direct access contracts executed or agreements entered into on or after July 1, 2001. Parties' comments regarding retroactive suspension, including the July 1, 2001 date, will be addressed by a subsequent decision." (D.01-09-060, pp 8-9.)
In D.01-10-036, our order denying rehearing, we modified D.01-09-060 for purposes of clarification and added the following language:
"D.01-09-060 is modified to add the following clarifying language between lines 11 and 12 on page 8 of D.01-09-060:
We are aware that some parties have asked for us to hold hearings on the timing of the suspension of direct access. We have carefully reviewed the comments filed by various parties on this point and are not convinced that any party has identified any material factual issue that requires an evidentiary hearing. Thus, we do not intend to hold evidentiary hearings, especially as we are simply implementing a clearly worded statute that directs the Commission to suspend direct access. Further, we see no need to hold evidentiary hearings at this time, especially in the light of the important need to implement the Legislature's directives to suspend direct access, under the circumstances described above, and in the manner we did in today's interim order." (D.01-10-036, pp. 23-24.)
Following our directive the Presiding Administrative Law Judge (ALJ) set a prehearing conference on November 7, 2001, "to clarify the issues remaining to be resolved. . . ." (ALJ Ruling of October 11, 2001.) On October 23, 2001, an Assigned Commissioner's Ruling was issued by Commissioner Wood requesting written comments on various issues, including whether the Commission should consider a July 1, 2001, suspension date. At the prehearing conference of November 7, these matters were considered with particular emphasis on the issue of suspending direct access on a date prior to September 20, 2001.
On November 11, 2001, the Presiding ALJ issued a Ruling stating that:
"Proposals to implement the Commission's September 20 Order (D.01-09-060) will be filed by the utilities on November 16, 2001; all parties may comment on or before November 28; all parties may respond to comments on or before December 4.
A prehearing conference to consider the implementation proposals, and issues regarding PX credits, will be held December 12, 2001 at 2 p.m. in the Commission Courtroom, State Office Building, 505 Van Ness Avenue, San Francisco, California."
On November 19, 2001, an Assigned Commissioner's Ruling stated that parties could file supplemental comments on January 4, 2002, to the comments filed in response to the Assigned Commissioner's Ruling of October 23, 2001.
At the prehearing conference on December 12, 2001, the matter of implementation of the order suspending direct access was submitted, subject to supplemental comments to be filed on January 4, 2002. (Tr. p. 133.)
"The issues of implementation of the Commission's order suspending Direct Access (Decision 01-09-060) and whether to choose a date earlier than September 20, 2001 for the suspension to go into effect are submitted as of January 4, 2002, the date for filing supplemental comments."
Supplemental comments were filed on January 4, 2002.
On January 14, 2002, we issued the instant rulemaking, Order Instituting Rulemaking (R.) 02-01-011. This rulemaking was issued to consider the pending issues regarding direct access, including those issues concerning an earlier suspension date, the provisions in contracts or arrangements entered into prior to September 21, 2001 involving renewals, assignments, transfers, and/or add-ons, and other implementation issues concerning the suspension of direct access. (R. 01-02-011, pp. 4-5.) These issues had been pending in the proceedings involving Application (A.) 98-07-003, A.98-07-006 and A.98-07-026 (A.98-07-003, et al.) This proceeding had also involved issues concerning the PX credit. As a matter of efficiency, we decided to keep the record for the direct access suspension separate from the PX credit issues, and thus, issued this instant rulemaking. (R.02-01-011, p. 5.) The administrative record relating to these specific issues in A. 98-07-003, et al. has been incorporated into this rulemaking by judicial notice. (R.01-02-011, p. 5.) Judicial notice has also been taken of specific information in the DWR Revenue Allocation Proceeding A.00-11-038, et al.), in particular those involving the magnitude of costs incurred by DWR on behalf of customers of the California utilities during the energy crisis. (See Letter of January 25, 2002, to the parties that accompanied the Draft Decision of ALJ Barnett). Comments were filed on the Draft Decision of ALJ Barnett and Alternate Draft Decision of Commissioner Brown on February 14, 2002. The administrative record for this rulemaking has been developed through notice and comment.