DISCUSSION

Rates

Energy Division has reviewed the rates filed in AL 1972-E and has found them to be in compliance with D.00-02-046 and D.99-06-058.

Uncollectible Factor

Aglet protested PG&E's uncollectible factor. Aglet argues that the text of the decision and the appendices supporting the text are inconsistent. Aglet contends that the decision clearly intended to use its recommendation for an uncollectible factor of 0.00267 rather than 0.00337 as used to produce the tables supporting the decision.

PG&E responds by claiming that AL 1972-E is a compliance filing and as such, the data used in the filing is the same as found in the decision.

AL 1972-E is supported by Appendices B and C of D.00-02-046 and therefore in compliance with the decision. Aglet's Director James Weil has subsequently filed for rehearing of D.00-02-046. The Application for rehearing will be resolved by further order of the Commission. Until then, PG&E's rates are approved subject to refund insofar as they depend on uncollectible factors. Aglet's protest on this issue is denied without prejudice.

Electric Supply Cost Memorandum Account

PG&E proposes to establish an Electric Supply Cost Memorandum Account (ESCMA) to track the expenses associated with the electric portion of the Gas & Electric Supply UCC. Aglet protests the use of this memorandum account claiming it would be interim relief that the Commission has not authorized. PG&E argues that this memorandum account is not intended to propose a recovery mechanism. Rather, it is merely to record the Commission-approved revenue requirement for the electric portion of the Gas & Electric Supply UCC.

We find nowhere in the language to the tariff sheet that the establishment of the ESCMA implies a mechanism to recover the revenue requirement associated with the electric portion of the Gas & Electric Supply UCC. Rather, it is a memorandum account which merely tracks the expenses for possible later recovery pending approval by the Commission. Aglet's protest is denied.

There are two other issues regarding the ESCMA. The first deals with the effective date of the memorandum account. PG&E requests the effective date of AL 1972-E to be March 1, 2000. AL 1972-E is primarily to establish revised tariff sheets pursuant to D.00-02-046 and D.99-06-058. The Commission allowed in D.00-02-046 that the "revised tariff sheets shall become effective on filing, subject to a finding of compliance by the Energy Division."² Therefore, the tariffs and associated preliminary sheets shall become effective March 1, 2000, as authorized by the D.0-02-046.

However, the effective date of March 1, 2000, applies only to the rates included in the tariff sheets. In it's Advice Letter, PG&E additionally proposed to establish an Electric Supply Cost Memorandum Account. Nowhere in D.00-02-046 did the Commission authorize the establishment of a memorandum account. Notwithstanding Aglet's protest that the ESCMA is akin to interim relief, as the memorandum account is merely to track on a forward going basis the electric portion of the Gas & Electric Supply UCC, we grant PG&E's proposal to establish the ESCMA. But it is Commission policy that memorandum accounts proposed in advice letters become effective on the date the resolution is adopted. Resolution E-3606 (August 5, 1999) reinforced long-standing Commission policy that memorandum accounts become effective as of the date that the Commission adopts the resolution unless the Commission had previously authorized an earlier effective date. The Commission stated in Resolution E-3606, Findings #7 that "the [memorandum account] should only become effective upon adoption of this Resolution consistent with the Commission's policies concerning prospective ratemaking." The ESCMA should become effective on the date this resolution becomes adopted.

The second issue regards PG&E's proposed language in Preliminary Statement Part BT, 5b which makes a "one-time entry [to the ESCMA] equal to the adopted Electric Supply Revenue Requirement, net of franchise fees and uncollectibles, for the period January 1, 1999, to the implementation date of the final 1999 GRC decision." Again, we look to Resolution E-3606 for a synthesis of the Commission's policy in allowing utilities to post previously expensed funds to a newly established memorandum account. In the Southern California Water Co. Headquarters case, D.92-03-094 (March 31, 1992) the Commission stated that

"it is a well established tenet of the Commission that ratemaking is done on a prospective basis. The Commission's practice is not to authorize increased utility rates to account for previously incurred expenses, unless, before the utility incurs those expenses, the Commission has authorized the utility to book those expenses into a memorandum or balancing account for possible future recovery. This practice is consistent with the rule against retroactive ratemaking." (Emphasis in original)

We refer to Resolution E-3606 for a lengthier list of subsequent decisions that continue to follow the Commission's policy against retroactive ratemaking as outlined in the Southern California Water case.

The Commission granted interim relief in D.98-12-078 pending the final GRC decision. In adopting PG&E's proposal for interim relief, the Commission allowed that beginning January 1, 1999, and continuing until the GRC decision on revenue requirements is issued, PG&E would record each month to the Transitional Revenue Account (TRA) one-twelfth of the distribution, Public Purpose Programs, and nuclear decommissioning separated revenue requirements described in the comparison exhibit submitted on October 30, 1998. The electric distribution revenue requirement as presented in the comparison exhibit included, among other things, the electric portion of the Gas & Electric Supply UCC. However, while PG&E had been allowed to track the Gas & Electric Supply UCC as part of its overall revenue requirement, the Commission's intent was not for future recovery. Rather, the interim opinion was to be no more than a mechanism to ultimately reflect what the Commission would have decided had the final GRC decision been issued on December 31, 1998. The Commission stated that

"...our intent in approving interim relief at this time is to provide reasonable assurance that only the revenue requirements eventually found to be justified, just, and reasonable after consideration of the full record will be recovered from ratepayers. ..." (Interim Opinion, D.98-12-078, slip opinion, p. 17)

The Commission further emphasized the intent of the interim relief in the final GRC decision when it ordered PG&E to

"...make one-time adjustments, with interest, to its transition revenue account, the other electric accounts, and all gas balancing accounts in which it has recorded its proposed revenue increases in this proceeding on an interim basis pursuant to Decision (D.) 98-12-078. These adjustments shall reflect the difference, including interest, between the interim electric and gas revenue requirement amounts that have been recorded between January 1, 1999 and the effective date of the revised tariff sheets, and the amounts that would have been recorded had a final decision in this proceeding been issued by December 31, 1998." (D.00-02-046, slip opinion, p. 541)

Ultimately the Commission allowed that it would "...entertain proposals by PG&E for recovery of these costs on whose behalf they are performed."³ In allowing the utility to propose mechanisms to recover these costs, the Commission intended to allow cost recovery only on a going forward basis. The Commission further emphasized in D.00-02-046 that while it did not determine the appropriate mechanism for such recovery, whether it be a rate surcharge or adder for bundled service customers, its decision is "...consistent with our policy, which we articulated in D.97-08-056 (mimeo., at p. 8), to avoid the allocation of costs of competitive or potentially competitive services to monopoly functions, and more specifically, to avoid the allocation of generation costs to distribution customers." (D.00-02-046, slip opinion, p. 110) PG&E's proposal to transfer the adopted amount accrued in the TRA for the electric portion of the Gas & Electric Supply UCC to the electric Preliminary Statement Part BT is denied. Further, as the language in this advice letter regarding the ESCMA is not a proposal to recover these costs on a going forward basis, PG&E must make a showing in its next Revenue Adjustment Proceeding, or by separate application to demonstrate the reasonableness and necessity of recovering the proposed expenditures.

The memorandum account should become effective on the date this resolution becomes effective and PG&E will not make any one-time transfers of money from the TRA to the ESCMA. PG&E shall remove 5b from its proposed Preliminary Statement Part BT.

2 2. D.00-02-046, p. 541, Ordering Paragraph 1a.

3 3. D.00-02-046, slip opinion, p. 111