2. Background

2.1. Historical

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 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 San Diego Gas & Electric Company's (SDG&E's) bundled electric service customers.¹

The ERRA regulatory process includes: (1) an annual forecast proceeding to adopt a forecast of the utility's electric procurement cost revenue requirement and electricity sales for the upcoming year, and (2) an annual compliance proceeding to review the utility's compliance in the preceding year regarding energy resource contract administration, least cost dispatch, fuel procurement, and the ERRA balancing account.

As set forth in D.02-10-062, the balance of the ERRA is not to exceed 5% of the electric utility's actual recorded generation revenues for the prior calendar year, excluding revenues collected for the California Department of Water Resources (DWR).² Decision 02-10-062 also established a trigger calculation 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 D.02-11-022, payments to Qualifying Facilities (QF) 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 costs associated with the Portland General Electric and QF contracts.

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/DWR total portfolio for deferring departing load charges, and we replaced the DWR Power Charge Component with the Power Charge Indifference Adjustment (PCIA). The PCIA applies to departing load customers that are responsible for a share of the DWR power contracts or new generation resource commitments. The PCIA is intended to ensure that the departing load customers pay their share of the above-market portion of the DWR contract or new generation resource costs, and that bundled customers remain indifferent to customer departures.

The purpose of the total portfolio methodology also 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.

2.2. Procedural

On October 1, 2010, SDG&E filed Application (A.) 10-10-001, its Application of San Diego Gas & Electric Company (U902E) for Adoption of its 2011 Energy Resource Recovery Account Revenue Requirement and Competitive Transition Charge Revenue Requirement Forecasts (Application).

On October 14, 2010, Resolution ALJ-176-3262 preliminarily determined that this proceeding was ratesetting and that hearings would not be necessary. On November 5, 2010, the Division of Ratepayer Advocates (DRA) filed a protest, to which SDG&E responded on November 15, 2010.

On December 6, 2010, we held a prehearing conference in San Francisco to establish the service list for the proceeding, discuss the scope of the proceeding, and develop a procedural timetable for the management of the proceeding. Party status was granted to the DRA and the Alliance for Retail Energy Markets (AREM). On December 23, 2010, the then-assigned Commissioner, Nancy Ryan, issued her Assigned Commissioner's Scoping Memo and Ruling (Scoping Memo), which set the scope of this proceeding, and set a schedule that included hearings. The scope of this proceeding was limited to determining: 1) Whether SDG&E's proposed request for approval of its 2011 forecast of ERRA revenue requirement, CTC revenue requirement, PCIA, and market benchmark price, are in compliance with existing applicable Commission decisions, rules, and regulations, and should be adopted; 2) Whether SDG&E should be authorized to modify its current trigger calculation by offsetting an ERRA over/under-collection by a Non-Fuel Generation Balancing Account (NGBA) over/under-collection when determining the monthly ERRA trigger balance; and 3) Whether SDG&E's request for recovery of costs associated with the equity rebalancing associated with the Otay Mesa Power Purchase Agreement (PPA) should be authorized.

On January 14, 2011, SDG&E filed its amended application, which presented amended ERRA and CTC revenue requirements based on an estimated benchmark price.

On February 15, SDG&E, DRA, and AREM requested, via email, that the schedule be revised. The assigned Administrative Law Judge (ALJ) granted the parties' request via email on the same day.

On February 18, 2011, both DRA and AREM served testimony in the current proceeding. On February 24, 2011, SDG&E filed an expedited motion to strike the served testimony of AREM (Motion), arguing that AREM's testimony was outside the scope of the current proceeding. In its testimony, AREM recommended that the current PCIA values be retained until the Commission acts in Rulemaking (R.) 07-05-025 as to whether the PCIA calculation methodology should be changed. The assigned ALJ granted SDG&E's Motion in her ruling dated February 25, 2011.

On March 22, 2011, SDG&E requested, via email, that evidentiary hearings be taken off the calendar, to which DRA agreed. The assigned ALJ granted SDG&E's request via email on March 24, 2011.

DRA requested, via email, a one-day delay in the filing of both the Opening and Reply Briefs, which the assigned ALJ granted on April 19, 2011. SDG&E and DRA each filed Opening Briefs on April 20, 2011. DRA filed its reply brief on May 2, 2011 and SDG&E filed its Reply Brief on May 4, 2011.

We confirm the assigned ALJ's rulings dated February 15, February 25, March 22, and April 19, 2011 herein.

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.