November 7, 2002 PUC: 104 Docket #: R.02-01-011

Media Contact: PUC Press Office, 415.703.1366, news@cpuc.ca.gov

PUC ESTABLISHES SURCHARGES FOR
DIRECT ACCESS CUSTOMERS

The California Public Utilities Commission (PUC) today established procedures to implement Cost Responsibility Surcharges (CRS) with an interim overall cap of 2.7 cents/kWh for Direct Access customers within the service territories of Pacific Gas and Electric Company (PG&E), Southern California Edison Company, and San Diego Gas & Electric Company (SDG&E). The level of the interim cap will be subject to adjustment after an initial six-month review period to provide assurance that capped surcharges are sufficient to cover Direct Access customers' full obligations over time.

The Surcharges are needed for Direct Access customers to pay their share of electricity procurement costs incurred during the energy crisis and to prevent such costs from being unfairly shifted to residential utility customers. Previous Commission decisions suspended new Direct Access contracts, but permitted Direct Access contracts entered into on or before September 20, 2001 to remain in effect on the condition that residential ratepayers would not be adversely impacted in terms of cost.

Today's decision adopts the necessary measures and processes to implement Direct Access Cost Responsibility Surcharges. The CRS will be determined on a total portfolio basis, taking into account both DWR and utility-procured resources, and will reflect Direct Access customers' respective share of costs associated with those resources. Direct Access customers will pay their fair share of DWR's historic and future costs, as well as utility net uneconomic (stranded) costs. The payment of charges by Direct Access customers will be subject to an overall cap of 2.7 cents/kWh. The cap will also cover Direct Access customers' obligations for the "Historic Procurement Charge" that was previously approved for Edison earlier this year. This CRS will result in nearly $500 million in payments per year from Direct Access to bundled customers.

The Direct Access CRS will be composed of the following elements:

· DWR bond charge, the actual amount of which will be computed and implemented through a separate decision in the Bond Charge proceeding (A.00-11-038, et al).

· DWR power charge covering Direct Access customers' share of procurement costs between September 21, 2001 and December 31, 2002, representing Direct Access customers' share of the above-market portion of DWR costs incurred after Direct Access was suspended. The actual final amount of the DWR power charges will be based on the specific forecast variables underlying the 2003 DWR revenue requirement that will be implemented in A.00-11-038.

· DWR power charge applicable to prospective costs for calendar year 2003 and ongoing subject to a subsequent annual update proceeding for future years, representing Direct Access customers' share of the above-market portion of prospective DWR power costs.

· A separate charge to cover the ongoing net above-market portion of utility-related generation costs.

The above-market portion of utility-related generation costs will be applicable to all Direct Access customers. The DWR bond charge will be applicable to all Direct Access customers except for those who never took procurement service on or after DWR began procuring power for utility customers, that is, continuous Direct Access customers. The DWR ongoing power charge likewise will be applicable to all Direct Access customers except for continuous Direct Access customers who never took utility electricity after February 1, 2001.

###