4. Discussion

We have reviewed the application, Exhibits 1 and 2 and the explanations provided, and conclude that the requested RPS-related costs booked into Bear Valley Electric's RPSMA (shown below) are reasonable, incremental, and should be recovered in rates. Furthermore, as provided for under Public Utilities Code Section 399.13(g), costs associated with A.10-07-012 seeking approval of the BioEnergy Solutions contract and A.10-06-003 seeking approval of the LACSD contract are deemed reasonable and shall be recovered in rates.³ A.10-07-012 was approved by Decision (D.) 11-06-023, and A.10-06-003 was approved by
D.11-06-030. The approved costs are:

Bear Valley Electric Service RPS-Related Costs

(September 1, 2007-March 31, 2011)

Line	Category	September 2007- December 2007	2008	2009	2010	January 2011-March 2011	Total
1	RPS Compliance Reports	$3,130	$10,690	$24,150	$59,716	$23,855	$121,451
2	General RPS Matters	$7,634	$25,141	$8,441	$7,496	$9,774	$58,486
3	RPS Research	$0	$578	$36,651	$23,006	$0	$60,235
4	RPS Regulatory Filings	$1,880	$6,286	$1,553	$173	$0	$9,891
5	Resource Planning Modeling	$4,240	$300	$908	$1,125	$0	$6,573
6	Renewables Requests for Proposals (RFP)	$13,245	$5,018	$45	$3,330	$4,100	$25,7384
7	Potential RPS Resources/ Projects	$0	$10,001	$7,042	$3,725	$1,350	$22,118
8	BioEnergy Contract Costs	$0	$6,062	$56,354	$53,229	$5,185	$120,830
9	BioEnergy Application Costs	$0	$0	$41,623	$256,892	$41,245	$339,759
10	LACSD Contract Costs	$0	$0	$36,370	$24,175	$31,405	$91,950
11	LACSD Application Costs	$0	$0	$38,130	$150,307	$3,203	$191,640
12	Response to Auditor Questions	$0	$0	$855	$5,682	$305	$6,842
13	In Line Hydro Project Costs	$54,408	$73,573	$4,394	$330	$0	$132,704
14	RECs Issues Costs	$5,810	$6,199	$5,313	$39,301	$4,401	$61,024
15	Sub-Total	$90,347	$143,847	$261,829	$628,486	$124,822	$1,249,330
16	Interest						$6,536
17	Grand Total						$1,225,866

We further find that Bear Valley Electric's methodology for calculating interest costs is reasonable and Bear Valley Electric should recover $6,535 in interest costs recorded in the RPSMA for the period of September 1, 2007 through March 31, 2011. Finally, we find that Bear Valley Electric should recover interest accrued through the effective date of this decision calculated according to the methodology adopted in its RPSMA.

Bear Valley Electric requests that the $1,255,866 of incremental, legal and outside costs associated with performing RPS-related tasks booked into the RPSMA, including accumulated interest, for the period September 1, 2007 through March 31, 2011, plus the interest accrued through the effective date of this decision be recovered through a per kWh surcharge, amortized over one year. While we acknowledge that the additional surcharge on Bear Valley Electric customer bills is significant, representing an approximate 3.09% increase over current rates, nothing in the record before us suggests that we should approve a different cost recovery methodology or timeframe. Furthermore, pursuant to Rule 3.2(c) and 3.2(d) of the Commission's Rule of Practice and Procedure, Bear Valley Electric properly notified customers of the proposed rate increase. Therefore, Bear Valley Electric is authorized to recover the above-discussed RPS-related costs and interest through a per kWh surcharge, amortized over one year. Bear Valley Electric must file a Tier 1 advice letter within 30 days of the effective date of this decision implementing the surcharge in rates.

Finally, Bear Valley Electric requests that any over- or under-collection of the Commission's authorization for recovery of RPS-related costs per this application be booked into the Base Rate Revenue Adjustment Mechanism. According to the testimony of Witness Morse in Exhibit 2 at 3, "this will protect customers if there is an over-collection of revenues and protect [Bear Valley Electric] if there is an under-collection of revenues. If [Bear Valley Electric] is not granted authorization to transfer funds to the [Base Rate Revenue Adjustment Mechanism], any under- or over-collection of revenues would needlessly stay unamortized and would collect interest in the RPSMA for many years." We agree with Morse's conclusions and authorize Bear Valley Electric to transfer any over- or under-collection of revenues associated with the recovery of RPS-related costs and interest for the period September 1, 2007-March 31, 2011, plus interest costs accrued to the effective date of this decision to the Base Rate Revenue Adjustment Mechanism.

³ Public Utilities Code Section 399.13(g) states: "Procurement and administrative costs associated with long-term contracts entered into by an electrical corporation for eligible renewable energy resources pursuant to this article and approved by the commission shall be deemed reasonable per se, and shall be recovered in rates."

⁴ In Table 7 of A.11-06-002, the yearly costs presented associated with the four renewable RFPs do not equal a total of $25,738 (the total in Table 7); however, in
Exhibit 1, Volume 1 Bear Valley Electric presents different numbers that do total $25,738. We assume that Bear Valley Electric made an error in its application and use the numbers presented in Table 1 of Exhibit 1, Volume 1 in our analysis.