Background
In Decision (D.) 02-10-062, the Commission established the Energy Resource Recovery Account (ERRA) balancing account - the power procurement balancing account required by Pub. Util. Code § 454.5(d)(3). Pursuant to D.02-10-062 and D.02-12-074, the purpose of the ERRA is to provide recovery of San Diego Gas & Electric Company's (SDG&E) energy procurement costs, including expenses associated with fuel and purchased power, utility retained generation, California Independent System Operator related costs, and costs associated with the residual net short procurement requirements to serve SDG&E's bundled service customers.1
As set forth in D.02-10-062, the balance of the ERRA was not to exceed 5% of the electrical utility's actual recorded generation revenues for the prior calendar year, excluding revenues collected for the California Department of Water Resources (CDWR.)2 Decision 02-10-062 established a trigger mechanism designed to avoid the 5% threshold point that requires SDG&E to file an expedited application for approval to adjust its rates 60 days from when the ERRA balance reaches an under-collection or over-collection of 4% and is projected to exceed the 5% trigger.
The purpose of the Transition Cost Balancing Account (TCBA) is to accrue all ongoing Competitive Transition Charge (CTC) revenues and recover all ongoing CTC-eligible generation-related costs. Pursuant to D.02-12-074 and D02-11-022, payments to Qualifying Facilities (QFs) that are above the market benchmark proxy are charged to the TCBA. Eligible ongoing CTC expenses reflect the difference between the market proxy and the contract price of costs associated with the Portland General Electric and other QF contracts.3
In D.06-07-030 (as modified by D.07-01-030), we adopted the total portfolio methodology and market benchmark for determining the above-market costs associated with the utility/CDWR total portfolio for deferring departing load charges, and replaced the CDWR Power Charge Component with the Power Charge Indifference Adjustment (PCIA). The purpose of the total portfolio methodology is to reasonably ensure that bundled customers are indifferent with respect to departing load. Rather than focus on each individual resource cost, the total portfolio method recognizes that bundled customers are served from the entire portfolio of commodity resources and that when load departs the utility may, in general, offset a portion of the costs of departing load through additional market sales. Although the ERRA forecast filing directly addresses only SDG&E's fuel and purchased power costs, the calculation of PCIA and associated revenues must take place in the ERRA forecast proceeding.
On October 1, 2009, SDG&E submitted its 2010 ERRA Forecast Application. As originally filed, SDG&E's application sought approval of (1) a 2010 ERRA forecast revenue requirement of $849 million (including franchise fees and uncollectibles); (2) a 2010 CTC revenue requirement of approximately $26 million; and (3) a new 2010 market benchmark price. The 2010 ERRA and CTC forecasts were $25.7 million and $18.4 million lower (respectively) than the 2009 forecasts. On November 5, 2009, the Division of Ratepayer Advocates (DRA) filed a protest to SDG&E's application. Rather than take issue with a particular aspect of SDG&E's application, DRA's protest noted that it required additional information to conduct a thorough review of the application.4 After further discovery and the opportunity to meet and confer, the parties resolved all outstanding issues and agreed that hearings would not be unnecessary.
Subsequent to the filing of its application, SDG&E received updated market proxy price data from the California Public Utilities Commission's Energy Division (Energy Division) for the period October 1 through October 31, 2009. SDG&E used this data to update its 2010 ERRA forecast, cost estimates and exhibits on December 18, 2009. This update resulted in a revised 2010 ERRA forecast of $827.956 million; $20.913 million lower than the $848.869 million ERRA forecast set forth in its application and exhibits. The update also resulted in a revised 2010 CTC market proxy price of $58.54/MWh. This decrease in the market proxy price has a direct impact on ERRA expenses because only the costs up to the market proxy price on CTC-qualified contracts are recorded in the ERRA. Hence, SDG&E increased its 2009 CTC revenue requirement forecast (by $20.913 million which corresponds to the reduction in its 2009 ERRA forecast) to $46.908 million instead of the approximately $26 million used in its original application and exhibits.
1 We also established an update process for fuel and purchased power forecasts and the ERRA mechanism.
2 See D.02-10-062 at 62.
3 Expenses eligible for CTC recovery are defined by Assembly Bill 1890.
4 A prehearing conference (PHC) was held on January 5, 2010 to address these and scheduling issues.
