3. Discussion
We agree with applicant that our treatment of SCE's EDRs must be re-examined given events after December 7, 2000. For example, on January 17, 2001, Governor Gray Davis proclaimed a State of Emergency. The proclamation was based on the electricity market experiencing shortages, blackouts, and dramatic price increases, thereby creating a condition of extreme peril to the safety of persons and property within the state. The State of Emergency continues.
On January 26, 2001, we issued an emergency order to address potential jeopardy to public health, safety and welfare that might be caused by our interruptible programs. (D.01-01-056.) We found that customers on interruptible rate schedules faced the increasingly irreconcilable dilemma of either curtailing their electricity service or paying large penalties, either choice unacceptably causing harm to themselves and the California economy. As a result, we temporarily waived the tolling of hours and numbers of curtailment events against program maximums. We also waived penalties that customers would otherwise incur for failing to curtail when requested.
On April 3, 2001, we made important improvements to interruptible tariffs and rotating outage programs. (D.01-04-006.) Among other things, we found that the electricity market was operating outside reasonable bounds, and that it was unlikely customers could have realistically foreseen the dramatic events that led the Governor to declare a State of Emergency. As a result, we permitted SCE interruptible rate customers, including those on Schedule I-6, to opt-out of those rate schedules back to November 1, 2000 without penalty.
As applicant points out, these same dramatic events affected EDR customers. In fact, EDR customers with Schedule I-6 as their OAT were hit twice. First, they were subjected to frequent interruptions, and large penalties for failure to interrupt.
Second, they were forced by Resolution E-3707 to continue to pay minimum charges. The minimum charges resulted in their paying rates greater than those under their OAT. SCE reports that all EDR customers have paid monthly bills exceeding what they would have paid under their OAT. This situation began, according to SCE, when wholesale energy prices skyrocketed while the OAT remained frozen. Wholesale prices began to dramatically increase in the middle of 2000.1
EDR customers were recruited by the State of California's Red Team, or otherwise encouraged, to locate, continue or expand load within California that might otherwise be located, moved or expanded outside the state. These customers acted upon a reasonable belief that EDRs would normally result in a discount from the OAT for the first five years. Minimum charge provisions were not reasonably expected to be used often, if at all, just as the number of calls to interrupt and penalty provisions were not reasonably expected to dominate the interruptible program. No reasonable person could have foreseen these effects.2 The profound dysfunction of the electricity market in 2000 and 2001 produced different outcomes. These outcomes resulted in our taking extraordinary actions in D.01-01-056 and D.01-04-006 for interruptible programs, and require similar actions here.
We specifically retained the ability to re-examine and modify EDR rates and ratemaking treatment as necessary given uncertainties in the electricity industry:
"Given the uncertainties over how unbundling, performance-based ratemaking, and other aspects of the restructured electric industry will develop in the future, we will retain the ability to re-examine special rate discounts (and associated ratemaking treatment) as restructuring unfolds...We retain the authority to modify contracts signed in the interim pursuant to GO [General Order] 96-A. We note that Edison did not seek a waiver of this authority, nor do we adopt one. [Footnote 34 in original]...Similarly, we retain authority to change the ratemaking treatment adopted today if it becomes incompatible with other ratemaking adopted." (D.96-08-025, 67 CPUC2d 297, 328.)
"[Footnote 34 in original]: Under GO 96-A, all contracts are required to contain substantially the following provision: `This contract shall at all times be subject to such changes or modifications by the Public Utilities Commission of the State of California as said Commission may, from time to time, direct in the exercise of its jurisdiction.' " (D.96-08-025, 67 CPUC2d 297, 354.)
We grant the application based on developments after December 7, 2000, the continuing State of Emergency, similar treatment for interruptible rate customers, and our commitment to re-examine special rate discounts and ratemaking when needed as restructuring unfolds. As a result, customers on SCE's EDR rates are permitted to opt-out of those agreements effective December 7, 2000, the date of Resolution E-3707, with all liquidated damages waived. That is, EDR customers may elect to change service to that as if they had been served under the OAT, with an effective date of December 7, 2000, with liquidated damages waived.
We waive liquidated damages in order to make the opt-out option viable. That is, EDR agreements require a customer to pay liquidated damages equal to the total accrued discounts if the customer elects to terminate before the full term of the agreement. EDR customers may always opt-out by paying liquidated damages. The requested relief would be meaningless if the liquidated damages provision is not waived.
Further, we agree with SCE that enforcing the liquidated damages provision would frustrate the fundamental purpose of the EDR. That is, EDR customers who have substantially complied with their agreements to locate, retain or expand load should receive the benefit of their agreement consistent with their performance. An EDR customer who elects now to opt-out back to December 7, 2000 should retain the benefits otherwise received pursuant to the EDR agreement through December 7, 2000, in exchange for having located, retained or developed load in SCE's area and successfully performed under the agreement.
SCE also proposes that the same relief be afforded to one customer who prematurely terminated its EDR agreement, and paid liquidated damages prior to December 7, 2000. At least one EDR customer reports that it terminated its EDR agreement in 2001, and paid liquidated damages. Additional pleadings suggest that other EDR customers may have terminated their EDR agreements and paid liquidated damages.
We adopt SCE's recommended relief, but, in fairness to all similarly situated customers, we apply this relief to all EDR customers from July 1, 2000, or mid-2000, when wholesale prices began to increase unreasonably. Moreover, we extend this relief to any customer who terminated its EDR agreement and paid, or incurred obligation for, liquidated damages, through the date the customer is notified of this order. That is, a customer may have terminated after December 7, 2000, obviously without knowledge of the relief provided in today's order. We are aware of no reason to limit the relief to only one customer who terminated before the date of Resolution E-3707, or to some other date before customers are notified of this order.
SCE proposes that the opt-out choice be limited to a one month period subsequent to the issuance of this decision. We agree that the opt-out choice should not be indefinite, and we adopt SCE's recommendation.
To implement this order, SCE should inform EDR customers of this opt-out option within 30 days of the date that revised tariffs become effective. EDR customers should have up to 30 days after the date of notification from SCE to make the election whether or not to opt-out effective December 7, 2000. The notification should clearly state the available relief, and that the option expires 30 days after the date of notification.
Finally, we address shareholder and ratepayer effects. We note that Resolution E-3707 provided SCE the option of capping EDR rates at OAT rates for services rendered before December 7, 2000 (the date of the resolution), as long as SCE's shareholders absorbed the difference between the billed amount and amount due. SCE declined to exercise this option. Applicant asserts that this option is not an appropriate remedy, and that shareholders should not be penalized. Applicant proposes that the revised Resolution delete the language regarding this option. In its response, SCE does not seek or propose any special or unique ratemaking treatment.
We decline to delete the language regarding the option given SCE, since it was a viable, even if unexercised, option. Consistent with the pleadings, however, we do not adopt or authorize any special or unique ratemaking treatment. That is, by not adopting special or unique ratemaking treatment, we do not authorize recovery from ratepayers of any revenue adjustments that result from this decision. The rate freeze itself has this effect during its duration.3 Moreover, just as we did in D.96-08-025, we exclude revenue shortfalls from costs to be subtracted or netted out before sharing. (67 CPUC2d 297, 324.) Revenue shortfalls here include any revenue adjustments resulting from this decision.
4. Need for Hearing, and Scoping Memo
We preliminarily categorized this proceeding as ratesetting, and preliminarily determined that hearing was necessary. (Resolution ALJ-176-3069, August 23, 2001.) The matter is uncontested, however, and no material issues of fact are in dispute. We now find that no hearing is necessary.
Further, we waive Rule 6.3 (Scoping Memos). That is, we resolve the application directly in this decision. As a result, there is no need for the Assigned Commissioner to issue a Scoping Memo to determine the schedule and issues.
1 SCE originally requested that Advice Letter 1461-E become effective August 2, 2000.
2 "It is unlikely that any customer could have realistically foreseen such dramatic events as those that led the Governor to declare a State of Emergency." (D.00-04-006, mimeo., page 14.)
3 We note that recent settlement of litigation between SCE and the Commission results in "frozen," or stabilized, rates for up to several years beyond March 31, 2002, the date that might otherwise control pursuant to Pub. Util. Code § 368.
