IV. Procedural Summary of DWR Revenue Requirement Implementation
DWR communicated its initial estimate of its revenue requirements by letter to the Commission dated May 2, 2001.9 In that letter, DWR requested that the Commission "establish specific rates payable to the Department for power sold by the Department to retail end use customers within the State."
On June 18, 2001, PG&E filed a motion for evidentiary hearings on the calculation, allocation, rate design and implementation of DWR's revenue requirement under AB1X. PG&E sought to consolidate DWR revenue requirement issues with the scheduled hearings to establish the URG revenue requirement in this docket. A companion motion was filed by SCE on June 19, 2001, supporting PG&E's proposal.
The assigned Administrative Law Judge (ALJ) issued a ruling dated July 12, 2001, that denied these motions, but provided an opportunity for parties to file comments on DWR revenue requirement and allocation issues. The ruling also provided an opportunity for parties to review and comment on the DWR response to data requests sent by Commissioner Geoffrey F. Brown.10 The ruling stated that a separate Commission decision would be prepared to address the DWR revenue requirement and allocation issues. These actions were prompted by the evident sense of urgency in moving forward with the Commission decisions that were predicates for the issuance of the bonds developed and structured by DWR and the Treasurer's Office.
A. July 23, 2001 Update
DWR responded to Commissioner Brown's data request on July 23, 2001, concurrently revising its revenue requirement. The DWR July 23 submittal was served on the parties as an attachment to a Joint Assigned Commissioners' Ruling (ACR) on July 24, 2001, and also on parties in the SDG&E dockets. The ACR sought further information from DWR, allowed parties to comment on DWR's submission, and convened a technical workshop on July 27. Parties filed written comments on August 3 on DWR's revenue requirement submittal.
B. August 7, 2001 Update
DWR submitted another update on August 7, incorporating revised calculations relating to its forecasts. DWR's update revised the quantities of bilateral contracts held by PG&E and SDG&E, the level of QF contract output for SDG&E, and the quantity and associated costs of QF output for SCE, which in turn affected ancillary service costs. The cumulative result lowered the share of the net short energy requirements for SDG&E and, to an extent, for SCE customers. It increased the net short energy requirements for PG&E customers. An August 9 ALJ ruling allowed parties to comment on DWR's updated revenue requirement.
PG&E, SCE, SDG&E, TURN, the Office of Ratepayer Advocates (ORA), Aglet Consumer Alliance (Aglet), the Federal Executive Agencies (FEA), and (jointly) the California Large Energy Consumers Association (CLECA) and the California Manufacturers and Technology Association (CMTA) filed comments on August 3, 2001, in response to the July 23 DWR revenue requirement submittal. Various parties also filed supplemental comments to the August 7 DWR update, and to the questions raised in the August 9 ruling.
An ALJ Draft Decision to implement cost recovery of the DWR revenue requirement was mailed on September 6, 2001. Comments on the Draft Decision were filed on September 12, 2001. The Draft Decision was subsequently withdrawn from Commission consideration following the issuance of a ruling setting hearings on revenue allocation issues as explained further in Section IX below.
C. October 19, 2001 Preliminary Update
On October 19, DWR submitted a preliminary draft of another DWR revenue requirement update, and ultimately answered the previously submitted data requests in the context of the revised revenue requirement. DWR's revisions from its August 7 submittal included changes to reflect the following:
1. Increased direct access loads resulting from the Commission's September 20, 2001 cutoff date for retail end-users to enter into contracts with alternative electric service providers;
2. Increased financing costs principally resulting from delay in the issuance of long-term bonds to refinance the Department's interim loan;
3. Reductions in natural gas prices;
4. Load forecast changes to reflect the effects of only the 20/20 Program for the year 2001 and those demand-side management ("DSM") and conservation-related activities that were authorized by legislation;
5. Revised power volumes under long-term contracts;
6. Revised methodology for calculating ancillary service costs;
7. Revised prices estimates for sales of contracted power to wholesale power purchasers; and
8. Revised timing of the receipt of revenues by DWR.
DWR held its own informational workshop on the preliminary update in Sacramento on October 22, and received informal comments on October 26, 2001. Those comments focused on the financing, power contracts, past costs and the models supporting the filing. On November 1, 2001, DWR provided responses to parties' data requests. In consideration of those comments, DWR finalized its draft, and made a formal revised submittal to the Commission on November 5, 2001.
D. November 5, 2001 Final Update11
In its November 5, 2001 revised submittal, DWR included changes from its October 19 draft relating to: the interim financing rolling coverage requirements; accounting of cash flows due to cash reporting of the Power Fund received from the Department of Finance; and updated volumes and costs of the net short, ancillary services and associated ISO charges through October 2001. DWR is also acquiring, through the ISO's ancillary services market, the electric energy and capacity required for grid reliability in the utilities' service areas, to the extent these services are not otherwise provided by the utilities through their retained generation, as described more fully later in this order.
E. February 20, 2002 Revision
On February 21, 2002, DWR submitted a revision to its November 5, 2001 revenue requirement. The changes made by DWR reflect the concerns raised by parties in this proceeding regarding the need to include in the revenue requirements at this time, financing costs that will only be incurred if bonds are not issued as planned. DWR's revised request removes a portion of those contingent costs. In addition, DWR's revision reduces the November 5 revenue requirement to reflect corrections to mathematical errors and calculation of lead/lag costs.
