III. Joint Roles of CPUC and DWR in Implementation of DWR Requirements

The process for the compilation, review, and implementation of the DWR revenue requirement must conform to the governing requirements of the California Water Code pursuant to AB1X. The process involves joint roles for both DWR and the Commission. Water Code Section 80110 provides that DWR "shall be entitled to recover, as a revenue requirement, amounts and at the times necessary to enable it comply with Section 80134, and shall advise the commission as the [DWR] determines to be appropriate."

As provided for under Pub. Util. Code § 451, however, charges for DWR's revenue requirements that are passed through to utility customers must be "just and reasonable." Pub. Util. Code § 451 states in relevant part:




"All charges demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge demanded or received for such product or commodity or service is unlawful."

In this regard, Water Code Section 80110 states:




For purposes of this division and except as otherwise provided in this section, the Public Utility [sic] Commission's authority as set forth in Section 451 of the Public Utilities Code shall apply, except any just and reasonable review under Section 451 shall be conducted and determined by [DWR].

Consistent with Water Code Section 80110, this Commission continues to have authority under Pub. Util. Code § 451 for determining the allocation of DWR's revenue requirement among California utility customers. Nonetheless, "any just and reasonable review [of the aggregate DWR revenue requirement]...shall be conducted and determined by" DWR.

The California Constitution provides that the Legislature may confer additional authority on the Commission "unlimited by the other provisions of this constitution but consistent with this Article [XII]." (California Constitution, Article XII, Section 5.) In confirming the authority of the Commission to set charges and terms for DWR power sales pursuant to Pub. Util. Code § 451 "for purposes of this division," the Legislature is acting within its powers, notwithstanding DWR's status as a state agency.

In this decision, we therefore establish charges to recover the revenue requirement for DWR as presented to us pursuant to Section 80110. The revenue requirement includes forecasts and representations about future events, including estimates of reserve requirements and interest rates that may or may not reflect actual conditions over time. We accept these forecasts and representations, in view of this uncertainty. As appears more fully below, we intend to establish a mechanism for reconciling forecasted revenue requirements with actual costs, for rate setting purposes.

On an interim basis, the Commission has issued several orders during 2001 to permit DWR to collect revenues for its power purchases. We made those decisions with limited information because of the urgent need to provide immediate revenue to DWR. Today's decision establishes charges based on a final DWR revenue requirement for the 2001-2002 timeframe, based on the modeling information provided by DWR. As the agency responsible for implementing utility charges to collect the DWR revenue requirement, the Commission has worked cooperatively with DWR to facilitate DWR's determination of its revenue requirement, and to provide the opportunity for parties in this proceeding to participate in that process, including through workshops, written comments, and data requests, as described below.