3. Allocation of the Revised 2012 Revenue Requirement Determination
3.1. Background
The Commission's obligation is to calculate, revise, and impose the Bond Charge and Power Charges on the customers of the three electric utilities. This obligation is contained in the Rate Agreement that was adopted by the Commission in D.02-02-051, and Water Code §§ 80110 and 80134. We perform these calculations using the allocation methodology that we adopted in D.05-06-060, as modified by D.08-11-056, the results of which appear in Appendix A of this decision.
The revised 2012 revenue requirement determination updated the information contained in the August 4, 2011 submission by incorporating DWR's preliminary actual operating results through September 30, 2011 and projected operating results through the end of 2011. In addition, the revised determination used: 1) Updated actual Electric Power Fund and Bond Account operating results through September 30, 2011; 2) Updated natural gas price forecasts and related assumptions; 3) Updated projections of direct access and bundled load volumes in PG&E's service territory based on updated information provided by PG&E; and 5) Updated debt service cost projections after an August 2011 refunding transaction.
According to DWR, the revised 2012 revenue requirement determination results in a total decrease of $8 million as compared to the original determination that was submitted on August 4, 2011, which is entirely comprised of a decrease in DWR's Bond Charge Revenue Requirement. As a result of the revisions, the Department plans to return $94 million more to customers than planned in the August 4, 2011 filing. The increased return of excess amounts is attributable to the net effects of an $11 million decrease in contract costs due to a decrease in the gas price forecast for the remainder of 2011 and 2012, and an $83 million increase to the forecasted ending 2011 cash balances from the August 4, 2011 filing forecast, as power costs continue to be below projections.
DWR's revised 2012 revenue requirement determination contains the information needed to recover the revenue requirement from the utilities' customers for calendar year 2012. The revised 2012 revenue requirement determination is based on the assumptions contained in Section D of DWR's revised determination. DWR considered a number of assumptions, including retail customer load, power supply, natural gas prices, and administrative and general expenses, as well as other considerations affecting DWR's revenues and expenses.
3.2. Negative Revenue Requirement
PG&E requests that the method for determining and returning the negative revenue requirement authorized in D.10-12-006 be reaffirmed for it in the current proceeding. The method used by DWR to allocate negative revenue requirement to PG&E consisted of the following: 1) Daily power charges collected are sent to DWR from PG&E per the normal Operating Agreement procedures for megawatt hour's delivered from DWR contracts; and 2) DWR then transfers 1/12 (monthly amount) of the gross negative amount (due to excess amounts) allocated to PG&E's customers. The funds returned to PG&E are flowed through to ratepayers once a year via its Energy Resource Recovery Account. As this method worked effectively in 2011, we adopt it herein, for use by DWR to allocate negative revenue requirement to PG&E for the year 2012.
SCE requests that the Commission allow DWR and each of the IOUs to develop a plan for returning those monies for the benefit of customers. Subsequently, DWR and SCE came to an agreement regarding SCE's method for returning the negative revenue requirement to its ratepayers, similar to that authorized for PG&E last year.7 Since SCE's allocated contracts will have expired, resulting in no power charges transferred from SCE to DWR for power sold in 2012, DWR will institute a monthly payment of SCE's negative revenue requirement to SCE, effective January 1, 2012. SCE will then return the negative revenue requirement on a per-kilowatt hour basis as a line item on each bundled customer's bill and through the Cost Responsibility Surcharge for direct access, community choice aggregator and departing load customers. Since this is similar to the method successfully used by DWR and PG&E in the past, and DWR and SCE agree to this method, we adopt DWR's method to allocate negative revenue requirement to SCE for the year 2012.
Based on these calculations, DWR will return approximately $354 million to PG&E customers and approximately $497 million to SCE customers in 2012 (Appendix A). This results in a reduction to the Power Charges allocated to PG&E's electric customers of $252 million and a reduction to the Power Charges allocated to SCE's customers of $441 million.
DWR will also allocate approximately $32 million of negative revenue requirement to SDG&E customers. Even with the return of $32 million to SDG&E customers, these customers will still pay Power Charges of $74 million in 2012.
3.3. Bond Charges
DWR requests that the Commission calculate, revise and impose the Bond Charge on the three utilities so as to satisfy the Rate Covenant in Article V of the Rate Agreement between DWR and the Commission. The Bond Charge is designed to recover DWR's costs associated with its bond financing activities from the utilities' customers.
DWR's revised 2012 revenue requirement determination states that its 2011 revenue requirement for bond-related costs is $852 million. DWR's modeling in support of its revised determination indicates that it will receive the required $852 million if the Commission sets the Bond Charge at $0.00513 per kilowatt-hour (kWh). We adopt DWR's requested 2012 Bond Charge, and the Bond Charge rate of $0.00513 per kWh shall be allocated to the electric customers of PG&E, SCE, and SDG&E.
3.4. Power Charges
DWR requests that the Commission calculate, revise and impose Power Charges on the three utilities. The Power Charges are designed to provide the funds necessary to satisfy DWR's revised 2012 revenue requirement determination for the cost of electric power sold to the utilities' customers.
DWR's revised determination states that its 2012 revenue requirement for the Power Charge is $71 million.8 We adopt DWR's requested 2012 Power Charge, and the Power Charges shall be calculated and allocated to the customers of PG&E and SDG&E as shown in Appendix A of this decision. The Power Charges allocated to the customers of PG&E and SDG&E are $0.08475 and $0.04083 per kWh, respectively.
7 Opening Comments of SCE at 1-3.
8 In 2012, DWR is forecast to collect approximately $15 million from PG&E's customers, $31 million from SCE customers, and $24 million from SDG&E's customers. The $31 million being collected from SCE customers results from receipt of lagged payments made by SCE customers for SCE assigned contracts that expired during 2011.
