4. Discussion
As we explain below, SDG&E's application, as amended, should be approved.
With regards to our review of ERRA trigger applications, our latitude and range of discretion are proscribed by Pub. Util. Code § 454.5(d)(3); this is reflected in the review process that we established in D.02-10-062. In short, we must confirm the accuracy of SDG&E's estimated balances and confirm that those estimates meet the trigger thresholds within the timeframes established by law. Nevertheless, in such instances as this one, where a rate increase is required to recover an undercollected revenue requirement, a step-by-step review of the request will be to the benefit of SDG&E, its ratepayers, and the protestants.
First, we briefly review the chain of events that led SDG&E to seek relief. With respect to the timeframes imposed by D.02-10-062, SDG&E stated that its recorded February 29, 2012, ERRA balance was a $43.233 million undercollection, or 4.24% of the 2010 electric commodity revenues, excluding CDWR, thus exceeding the 4% trigger point. Next SDG&E states that, as required by statute, it analyzed whether this undercollection would self-correct below the 4% trigger point within 120 days (i.e., by June 28, 2012) and determined that, based on SDG&E's most accurate forecast and assumptions around revenue implementations, sales forecasts, and costs of power, SDG&E did not project that its ERRA balance would self-correct below the 4% trigger point. Accordingly, pursuant to Pub. Util. Code § 454.5(d)(3) and D.02-10-062, SDG&E was required to file this expedited application addressing the disposition of the undercollected ERRA balance.
The shortened timeframes imposed by statues, combined with the uncertainties generally inherent in energy forecasting, create challenges for all parties in an ERRA trigger review process. As noted above, UCAN and DRA protested SDG&E's April 9, 2012, application. UCAN identified a "limited set of concerns," namely, (1) why SDG&E's ERRA account is undercollected during a time of historically low natural gas price levels; (2) the extent to which the current outage at SONGS is contributing to the undercollection; and (3) steps that SDG&E can, but has not taken, to reduce the undercollection below the trigger. UCAN suggested a period of expedited discovery, followed by a PHC once discovery was completed and all issues fully understood. DRA protested the application because it claimed that (1) SDG&E's proposed schedule did not allow for intervenor testimony and hearings, and is therefore unreasonable; (2) SDG&E's requested undercollection recovery of $52.638 million was unsupported; and (3) based on SDG&E forecasts, it is conceivable that the estimated revenue undercollection may self-correct by the end of 2012, which would render any revenue and rate adjustment unnecessary. However, DRA also stated that it was conceivable that if SDG&E adequately responded to DRA data requests and DRA was fully satisfied with such responses, there may not be a need for DRA testimony or hearings.
In its April 27, 2012 response to UCAN and DRA, SDG&E states that (1) the Commission has mandated that trigger applications are to be expedited and ruled upon within 60 days of filing; (2) SDG&E's proposed schedule complies with the 60-day mandate; (3) without approval of a trigger rate adjustment, there will be no self-correction by year-end; and (4) SDG&E's trigger application is sufficiently supported. Nevertheless, SDG&E did state it was open to further discovery designed to verify the fact that it is in a trigger situation and that based on this situation, a rate adjustment is reasonable. SDG&E also observed that any schedule adopted in this proceeding should comply with the Commission's mandate for a decision within 60 days of filing, which would allow for coordination with the expected July 1, 2012 implementation of the 2012 ERRA forecast and "improve the likelihood that the overall ERRA balance will self-correct by year-end."
Based on discussions between SDG&E and the protestants at the May 22, 2012 workshop and the May 30 PHC, SDG&E filed and served its amendment on June 6, 2012. Therefore, this decision should issue within 60 days of SDG&E's amendment. Allowing time to hold a workshop to address the questions raised in the protests of UCAN and DRA was important in light of the bill increases projected by SDG&E. Indeed, creating an opportunity for SDG&E to work collaboratively with UCAN and DRA to resolve their questions appeared to have been worthwhile, not only because both parties are now not protesting SDG&E's amended application, but also because SDG&E had the opportunity to gather several additional months of recorded data and refine its forecasts of expenses and revenues, thereby lowering its forecast undercollection in its amended application filing on June 6, 2012.
Turning to the June 6, 2012 "Amendment to Expedited Trigger Application," SDG&E now seeks approval to collect a projected $49.9 million ERRA undercollection as of June 30, 2012. This is approximately $3 million less than what was requested in the original application. SDG&E also seeks approval to implement the proposed rate increase over a 12-month amortization period, beginning no later than September 1, 2012.
The lower amount reflects several adjustments made by SDG&E to reflect its discussions with UCAN and DRA. SDG&E included two additional months of recorded data (now extending through April 2012 rather than February 2012), and for the May and June forecasts, SDG&E also agreed to use the New York Mercantile Exchange gas prices known as of the day of the PHC or May 30, 2012. By making these changes, SDG&E lowered its projected undercollection as of June 30, 2012, to $49.9 million. SDG&E's revised forecast also provides a revised projection over the remainder of 2012.5 That projection shows that although SDG&E's ERRA balance undercollection is forecast to drop below 4% in November 2012, it is forecast to exceed 4% again in December 2012. Thus, it is useful to observe that self-correction appears unlikely without our action today, even beyond the relatively short timeframes imposed on our review process by D.02-10-062.
SDG&E's amended application and supporting testimony meets the requirements of Pub. Util. Code § 454.5(d)(3) and D.02-10-062. We therefore approve SDG&E's request to recover the $49.9 million ERRA balance undercollection over a 12-month period beginning no later than September 1, 2012.
5 See Amendment to Prepared Direct Testimony of Gregory D. Shimansky, Redacted Public Version, Attachment A.
