VI. Assignment of Proceeding
Commissioner Wood is the assigned Commissioner and ALJ Wong is the assigned Administrative Law Judge in this proceeding.
1. AB 265 was part of the legislative effort to stabilize electric rates during the height of the energy crisis.
2. AB 265 was signed into law on September 6, 2000 as an urgency statute.
3. Section 332.1(b) provides for the establishment of a rate ceiling of 6.5 cents per kWh for SDG&E's smaller customers.
4. AB 265 authorized the Commission to establish an accounting procedure to track and recover the unrecovered difference between the rate ceiling and actual rates.
5. Section 332.1(c) requires that the accounting procedure utilize revenues associated with the sales of energy from utility-owned or managed generation assets to offset an undercollection, if an undercollection occurs.
6. At the time SDG&E entered into the intermediate term contracts SDG&E was prohibited from entering into power purchase contracts for the benefit of its customers that covered the period of time the mandatory bid/buy from the PX was in effect.
7. SDG&E's use of the intermediate term contracts for the period January through March 1998, due to the inability of the PX to initiate operation until April 1998, did not reflect an intent by SDG&E to permanently dedicate the intermediate term contracts to public utility use; rather it reflected SDG&E's intent to avoid the purchase of more expensive power from the market at that time which would have reduced SDG&E's ability to recover shareholder stranded costs.
8. The only legislative history in the record pertinent to AB 265 supported by both oral and documentary evidence is the testimony of Mr. Schavrien addressing his presentation to the legislature which identified the generation assets of SDG&E subject to the offset provision of §332.1(c) and did not include the intermediate term contracts; Mr. Schavrien's written presentation was attached to his rebuttal testimony.
9. ORA has consistently not objected to SDG&E's accounting in its TCBA for the intermediate term contracts, either when the entries for those contracts were backed out of the TCBA or subsequent TCBA reports that did not include those contracts; the Commission has approved all SDG&E TCBA accounting for the contracts.
10. The rate ceiling required by AB 265 was established in D.00-09-040 for SDG&E's residential, small commercial, and lighting customers.
11. The rate ceiling was made retroactive to June 1, 2000, and is to remain in place through December 31, 2002.
12. Section 332.1(b) allows the Commission to extend the rate ceiling through December 2003, and to adjust the ceiling rate.
13. AB X1 43 imposed a mandatory frozen rate of 6.5 cents per kWh on non-AB 265 customers, which was implemented by the Commission in D.01-05-060.
14. D.01-05-060 authorized SDG&E to establish a memorandum account to record the revenues and revenue shortfalls associated with this frozen rate.
15. The AB 265 undercollection was recorded in the ERCRSA, which was subsequently renamed the ERSA.
16. In D.01-11-029, as a result of a settlement, the AB 265 undercollection was reduced by $100 million.
17. D.01-01-061 directed the utilities to use their URG to serve existing customers at cost-based rates.
18. SDG&E filed an application for rehearing of D.01-01-061 seeking clarification that the URG requirement did not apply to the intermediate term contracts.
19. SDG&E's application for rehearing of D.01-01-061 was denied in D.01-05-035, and SDG&E was ordered to comply with the URG requirement by making the appropriate accounting adjustments to the intermediate term contracts.
20. On June 5, 2001, SDG&E filed its Writ Petition with the Court of Appeal regarding D.01-01-061 and D.01-05-035.
21. SDG&E subsequently filed a federal lawsuit against the Commission alleging, among other things, that D.01-01-061 and D.01-05-035 constitute an unconstitutional taking.
22. SDG&E's request for an AB 265 surcharge was filed in A.01-01-044, and the surcharge amount was subsequently revised to .00349 cents per kWh.
23. DWR, SDG&E, and Sempra signed a MOU to settle numerous outstanding issues, which required several implementing decisions to be issued by the Commission.
24. If all the implementing decisions provided for in the MOU were issued, the AB 265 undercollection would be eliminated without the need for the proposed surcharge.
25. Although some of the implementing decisions were adopted by the Commission, the Commission rejected that portion of the MOU which would have settled the Writ Petition.
26. Evidentiary hearings were held on June 24, 2002 through July 2, 2002, and the matter was submitted on August 7, 2002.
27. SDG&E filed Advice Letter 1405-E on May 10, 2002 seeking approval to return to AB X1 43 customers the $168 million overcollection in the TCBA as of March 31, 2002, including accrued interest.
28. In response to Advice Letter 1405-E, on November 7, 2002, the Commission issued Resolution E-3781 allocating the $168 million to SDG&E's large commercial customers.
29. On June 14, 2002, SDG&E proposed to the Commissioners that the federal litigation regarding the intermediate term contracts be settled.
30. Comments on the proposed settlement of the federal litigation were solicited in an assigned Commissioner's ruling dated June 18, 2002.
31. The public had an opportunity to comment on the surcharge and the proposed settlement of the federal litigation at two public participation hearings that were held in the San Diego area in August 2002.
32. The ERSA keeps track of the AB 265 undercollection.
33. The applicable portion of the CTC revenues and other overcollections recorded in the TCBA are used to partially offset the AB 265 undercollection in the ERSA.
34. As a result of D.01-01-061, SDG&E's URG costs were included in the PECA.
35. SDG&E's URG costs are currently recovered through the PECA from the residual revenues from the Schedule EECC rates after disbursements are made to DWR for the power it procures for SDG&E's retail customers.
36. In late 1996 and early 1997, SDG&E entered into the intermediate term contracts with Illinova, LG&E, and PacifiCorp.
37. The AB 265 undercollection on March 31, 2002 and May 31, 2002, were $338 million and $324.7 million, respectively.
38. SDG&E forecasts that the AB 265 undercollection, as of December 31, 2002, will be approximately $222 million.
39. If the Commission lacked the authority to order SDG&E to sell the intermediate term contracts at cost to customers from February through December 2001, SDG&E asserts that the forecast of the undercollection would be artificially low.
40. SDG&E's witness provided testimony at the hearings regarding the composition of the $168 million overcollection for AB X1 43 customers.
41. The $168 million overcollection only includes the AB X1 43 customers' 30% share ($23 million) of the $77 million resulting from the adjustment of the intermediate term contract revenues as required by D.01-05-035.
42. SDG&E requests that the surcharge be imposed on all AB 265 customers for a period of two years, and that the CTC rate recovery continue for that period.
43. The offset provision of AB 265 appears in § 332.1(c) and states that the "accounting procedure shall utilize revenues associated with sales of energy from utility-owned or managed generation assets to offset an undercollection, if undercollection occurs."
44. The arguments and the evidence over whether the intermediate term contracts are shareholder assets, or assets dedicated to the use of utility customers, are conflicting.
45. The discussion of SDG&E's taking argument in D.01-05-035 is relevant to SDG&E's arguments in this proceeding.
46. The net revenues generated from the intermediate term contracts for the period from February 1, 2000 through December 31, 2001 have already been accounted for as directed by the Commission.
47. The net revenues from the intermediate term contracts for the period from June 1, 2000 through January 31, 2001 amount to $130 million plus interest.
48. Although AB 265 was signed into law on September 6, 2000, the rate ceiling was made retroactive to June 1, 2000.
49. Since SDG&E's advice letter has been approved, AB X1 43 customers receive a $168 million credit, whereas AB 265 customers face an undercollection of $222 million.
50. Although SDG&E has nominally retained, to date, $197 million in profits from the intermediate term contracts, SDG&E has effectively foregone $100 million of these profits in connection with its settlement with ORA in Commission proceeding A.00-10-008.
51. The settlement in A.00-10-008 was approved by the Commission in D.01-11-029.
52. The Commission's adoption of SDG&E's June 14, 2002 proposed settlement will have the effect of reducing the AB 265 undercollection by an additional $24 million.
53. AB 265 customers should be protected from further rate increases, and the adoption by the Commission of SDG&E's proposed settlement will move us affirmatively toward the achievement of that objective.
54. The AB 265 customers' share of the expected $120 million true-up adjustment by DWR could be applied to reduce the AB 265 undercollection.
55. There are viable options to reduce the AB 265 undercollection through means other than imposing a surcharge on customers' rates that should be pursued.
1. The Commission has the authority to supervise and regulate every public utility, and may do all things that are necessary and convenient in the exercise of such power and jurisdiction.
2. The Commission's ratemaking authority includes determining just and reasonable rates.
3. The Commission, and not the utility, has the authority to determine the appropriate accounting of assets, costs, and revenues for ratemaking purposes.
4. The Commission takes judicial notice that there is pending litigation in both state and federal courts initiated by SDG&E addressing the validity of Commission decisions D.01-01-061 and D.01-05-035 that would be resolved based on the Commission's adoption of SDG&E's proposed settlement of June 14, 2002.
5. There are persuasive arguments on both sides of the question of whether the intermediate term contracts should properly be treated as ratepayer or shareholder assets.
6. It is the intent of SDG&E that governs whether the intermediate term contracts have been dedicated to public utility use; dedication can never be presumed, there must be unequivocal intention to dedicate.
7. Unequivocal intention to dedicate the intermediate term contracts to public utility use has not been shown in this proceeding.
8. The state and federal constitutions prohibit the Commission from forcing a utility to dedicate private property to public use without just compensation.
9. The Commission has the duty to interpret AB 265 in a manner that is consistent with state and federal constitutional proscriptions and which bears a reasonable relation to the statutory purpose.
10. The adoption by the Commission of the proposed settlement of the federal litigation that SDG&E offered on June 14, 2002 provides a just and reasonable basis for us to resolve the issues surrounding the intermediate term contracts.
11. The record evidence in this proceeding supports a conclusion that the terms of the June 14, 2002 proposed settlement agreement are reasonable, prudent and in the public interest.
12. The adoption by the Commission of the June 14, 2002 proposed settlement is consistent with state law, including P.U. Code §§ 332.1 and 454.
13. Because SDG&E has already booked a substantial portion of the profits from the intermediate term contracts to offset the AB 265 undercollection and has booked another significant portion of said profits to credit the TCBA for large commercial and industrial customers, it would work a substantial hardship on all SDG&E customers if SDG&E were to prevail on the merits in the federal litigation.
14. The costs and risk of further litigation in the federal lawsuit are not in the public interest and a settlement of the dispute surrounding the intermediate term contracts and their impact on the AB 265 undercollection is in the mutual interests of the Commission and SDG&E, in the interest of SDG&E's ratepayers, and in the public interest.
15. The allocation to ratepayers of the $175 million that SDG&E has already booked to the benefit of ratepayers pursuant to Commission Decisions D.01-01-061 and D.01-05-035, plus the additional $24 million that SDG&E will book to the benefit of ratepayers pursuant to the proposed settlement, and the allocation to SDG&E's shareholders of the $173 million in profits from the contracts that SDG&E has nominally retained, represent a fair and reasonable apportionment of the litigation risk that the Commission and SDG&E respectively bear in the federal litigation.
16. This decision does not revisit the decisions that the Commission made in D.01-01-061 and D.01-05-061 with respect to the intermediate term contracts.
17. Because the June 14, 2002 proposed settlement was offered to settle existing litigation between SDG&E and the Commission, it is not necessary for the Commission to observe the procedural requirements of Rule 51 of the Commission's Rules of Practice and Procedure in order to approve this settlement.
18. Notwithstanding the foregoing, the parties to this proceeding were provided several opportunities to comment on the proposed settlement agreement: in written comments, via direct testimony during the hearings in this proceedings, via cross-examination of SDG&E witnesses, in two public participation hearings, and in their closing briefs.
HENRY M. DUQUE GEOFFREY F. BROWN MICHAEL R. PEEVEY Commissioners I will file a dissent. /s/ LORETTA M. LYNCH President I will file a dissent. /s/ CARL W. WOOD Commissioner ;YU`*ۂNM(ZP]ʱƠ"O
