6. Should the Commission Approve the Proposed Revisions to the Service Schedules?
SCE seeks to eliminate the discretionary/non-discretionary categorization of fees, and proposes to price all services according to SCE costs. We address this request first because the disposition of the request to eliminate the discretionary/non-discretionary categorization of fees issue underlies our disposition of SCE's other requests to establish new service fees and to revise or eliminate existing service fees.
SCE states that it originally established separate rate schedules for discretionary and non-discretionary services because each category received different regulatory treatment.82 SCE explains that, prior to D.04-07-022, the costs and revenues associated with discretionary services were subject to the Direct Access Discretionary Service Cost Memorandum Account (DADSCMA), a one-way memorandum account.83
SCE states that D.04-07-022 adopted cost of service treatment for the costs and revenues associated with non-discretionary and discretionary service fees, and eliminated memorandum account treatment for costs associated with non-discretionary services.84 SCE contends that, since D.04-07-022 adopted the same cost of service treatment for both categories, SCE no longer needs to separately track the costs and revenues associated with discretionary and non-discretionary services, and, therefore, the discretionary/non-discretionary nomenclature is no longer necessary.85
No other party commented on SCE's request to eliminate the discretionary and non-discretionary service fee categories.
Discussion
The Commission's efforts leading to retail competition for electricity and the DA program were designed to achieve customer choice and more effective competition in the electric industry.86 The Commission considered, for example, competition in metering and billing as a means to achieve effective competition in DA. D.97-05-039 authorized ESPs to offer billing, metering, and related services, and ordered UDCs to provide three billing options to competing ESPs.87
D.97-10-087 determined that the originally used term "competitive services" should be replaced by the term "discretionary services" because the customer has the right (e.g., discretion) to choose a service provider.88 The Commission also determined that the term "non-competitive services" should be changed to "non-discretionary services" because customers do not have a choice when services are available only through the UDC.
D.97-10-087 permitted UDCs to charge fees for discretionary services but not for non-discretionary services.89 D.97-10-087 authorized UDCs to track the costs for non-discretionary services in a memorandum account pending a Commission decision regarding the appropriateness of such costs and possible recovery.90 However, there is no evidence in the record to indicate that SCE ever established a memorandum account specifically for the purpose of tracking the ongoing costs of non-discretionary services, as authorized by D.97-10-087 and required by SCE's Rule 22 tariff, Section B.14.b.
The Commission permitted the costs associated with the development of a DASR processing system and other direct access start-up costs to be given § 376 treatment, if those costs met the conditions and requirements of that section, or be recovered in non-recurring charges imposed on ESPs for establishing the ability to provide direct access. If recovered through non-recurring charges imposed on ESPs, only those non-recurring costs that vary with the number of ESPs could be recovered in fees for non-discretionary services.
D.99-09-064 approved a settlement of issues related to industry restructuring implementation costs pursuant to § 376, including recovery of certain DA implementation costs. However, D.99-09-064 did not address the issue of fees for non- discretionary DASR processing or fees for discretionary services because PG&E, SCE, and SDG&E had filed applications to address such fees.91 D.99-09-064 determined that only those costs incurred to accommodate implementation of the Independent System Operator, Power Exchange, and direct access through December 31, 1998 could receive § 376 treatment, and that costs incurred after 1998 or the costs of operating these programs on an ongoing basis were not eligible for § 376 treatment.92
D.97-10-087 distinguished discretionary DA services from non-discretionary services, first, as a way to identify the services for which a customer could choose between an ESP or a UDC to provide, but also in its treatment of how costs and revenues for discretionary and non-discretionary services would be recovered.
In compliance with D.97-10-087, SCE established Schedule ESP-SF and Schedule CC-SF, which were approved by the Energy Division and became effective January 4, 1998.93 Schedules ESP-SF and CC-SF, did not distinguish between discretionary and non-discretionary services.
In October 1998, SCE established Schedule ESP-NDSF (Energy Service Providers - Non-Discretionary Service Fees) via Advice Letter (AL) 1338-E to charge fees for certain billing services that are required to support ESP consolidated billing authorized by D.98-09-070.94 Shortly thereafter, SCE filed AL 1343-E to, among other things, rename Schedules ESP-SF and CC-SF to Schedule ESP-DSF (Energy Service Providers - Discretionary Service Fees) and Schedule CC-DSF (Customer Choice - Discretionary Service Fees), respectively.95 SCE renamed its DA tariffs "to more accurately reflect the nature of these services (discretionary) in accordance with D.97-10-087."96
Subsequently, in A.99-06-040, SCE sought to change the terms "discretionary" and "non-discretionary," and at that time proposed different procedures for addressing the fees in the different DA service fee categories.97 A.99-06-040 asked to rename "discretionary services" to "competitive services" and "non-discretionary services" to "regulated services," contending that SCE's proposed terminology most accurately describes customers' options and the Commission's role in the new market.
Among other things, A.99-06-040 requested that the Commission rely on the market to set prices for what SCE proposed to call "competitive services," and that SCE be permitted to price its competitive services freely in response to the market. A.99-06-040 also requested that SCE be allowed to use the advice letter process for setting and modifying fees for its competitive/discretionary services.98 Thus, SCE's reasoning for renaming the DA tariffs was based largely on its view of the role the Commission should play in approving changes for different categories of DA services in the competitive electric market.
Unlike in A.99-06-040, which was dismissed by D.03-01-072, SCE now explains that because, in its opinion, D.04-07-022 eliminated memorandum account treatment for costs associated with non-discretionary services, SCE no longer needs to separately track the costs and revenues associated with each category. That is, SCE's current reasoning for eliminating the discretionary and non-discretionary categories is based on its memorandum account tracking needs, and the fact, according to SCE, that it no longer needs to separately track discretionary and non-discretionary costs and revenues. SCE does not explain why it has now abandoned the reasoning it put forth in A.99-06-040.
Separate tariff schedules for discretionary and non-discretionary services help to reduce ambiguity and potential customer confusion as to which DA services are available from alternate providers. As SCE states in AL 1343-E when it established separate discretionary and non-discretionary tariffs, it renamed the tariffs to more accurately reflect the nature of DA services.
SCE's reasoning in this Application for eliminating the discretionary and non-discretionary categories is inconsistent with the reasoning it put forth in A.99-06-040 for changing the names of these categories. SCE's present reasoning is also inconsistent with that put forth in AL 1343-E when it established separate discretionary and non-discretionary tariffs. SCE's differing explanations for changing or eliminating the categorization of discretionary and non-discretionary DA services in this Application, A.99-06-040, and AL 1343-E, underscore the need to consider this issue for all UDC tariffs in a wider forum, as anticipated by D.97-10-087.99
A.99-06-040 requested that the Commission eliminate the requirement that interim fees for competitive/discretionary services be subject to refund, and to eliminate memorandum account treatment (i.e., that the DADSCMA be closed).100 A.99-06-040 also requested that the Commission authorize establishment of fees for regulated/non-discretionary services. However, D.03-01-072 dismissed A.99-06-040. Because D.03-01-072 dismissed A.99-06-040, SCE was not authorized to eliminate the subject-to-refund requirement for interim discretionary fees, close the DADSCMA, or to begin charging service fees for non-discretionary services as requested in A.99-06-040. Nevertheless, SCE filed AL 1808-E to eliminate the DADSCMA. Although AL 1808-E was approved to eliminate the DADSCMA for discretionary services, no authority was granted to eliminate memorandum account treatment for non-discretionary services.101
In this Application, SCE explains that, because (in its opinion) D.04-07-022 eliminated memorandum account treatment for costs associated with both discretionary and non-discretionary services, there is no memorandum accounting reason why both categories of services can not be offered through the same tariff schedule. We disagree.
The DA tariffs adopted by D.97-10-087 provide that, during the interim period between the start of DA and a Commission decision approving specific fees for non-discretionary services, the UDC will charge the net incremental costs associated with providing non-discretionary services to a memorandum account pending the Commission's decision regarding service fees.102 This provision is also in SCE's currently effective Rule 22 tariff.103
The Commission has not issued a decision approving specific fees for non-discretionary services. Therefore, SCE is currently required to charge the net incremental costs associated with providing non-discretionary services to a memorandum account. Thus, SCE continues to have an accounting reason for distinguishing between discretionary and non-discretionary services.
Importantly, the Commission has a continuing interest in differentiating discretionary and non-discretionary services, because the Commission has established a policy in favor of competition.104 SCE may, in its opinion, no longer have a need to separately track costs and revenues for discretionary and non-discretionary services. Nevertheless, the distinction between discretionary and non-discretionary services remains important.
The Commission has decided that, where there is customer choice, there may be greater incentive for technological innovation, greater opportunity for providing value-added services, and a greater likelihood that competitive forces will help keep prices low.105 The Commission has also found that non-discretionary services are those services for which the Commission determines that there are insufficient providers to ensure customer choice.106 Thus, the Commission has an interest in ensuring that all customers can readily identify which DA services they have a choice in obtaining from alternate providers.
We believe that SCE should still ensure that it and its customers can distinguish discretionary from non-discretionary services. Offering discretionary and non-discretionary services through separate tariffs provides substantial clarity to ESPs, DA customers and others with respect to customer choice. That is, for example, while an ESP can choose not to use SCE's consolidated billing or metering services, the ESP has no choice but to use SCE's Service Establishment and DASR services, without which ESPs and end-use customers cannot participate in DA in SCE's territory. Thus, ESP and DA customers need to know the difference between discretionary and non-discretionary services, and that information should be available in SCE's tariffs.
The record in this proceeding shows that substantial confusion can occur in distinguishing between discretionary and non-discretionary services, even by the utility offering the services. For example, SCE's written testimony confuses discretionary with non-discretionary services in its citation of D.97-10-087.107 Also, during evidentiary hearings, SCE's witness, a manager who has worked on DA implementation activities since 1997, confused discretionary with non-discretionary services six different times.108 Thus, there is substantial likelihood of confusion about the kinds of services for which ESPs and DA customers have a choice if the discretionary and non-discretionary categories in SCE's tariffs are eliminated.
Another example of potential confusion between discretionary and non-discretionary services is SCE's testimony stating that in A.04-12-004, "TURN proposed in SCE's 2006 GRC that all Service Fees (for all DA customers) be increased by 25%,"109 and SCE's reference to "the 25% across-the-board increase in Service Fees currently in effect ... ."110 SCE's representations concerning the increase in DA service fees authorized by D.06-05-016 are incorrect.
D.06-05-016 adopted "TURN's proposed inflation adjustment to reflect a 25% increase in discretionary DA service fees ... ."111 D.06-05-016 did not authorize an increase in non-discretionary DA service fees. Only in its briefs did SCE correctly state that the 25% increase approved in D.06-05-016 only applied to discretionary DA service fees.112
If SCE is confused about the category of services for which customers have a choice, customers will undoubtedly also be confused. Minimizing customer confusion will help further the Commission's goals for a competitive electric industry. Separate discretionary and non-discretionary DA service tariffs should help reduce confusion about which DA services customers have choice in obtaining from alternate providers.
Another reason for maintaining separate tariff schedules at this time is the UDCs' continuing desire and repeated requests to use the advice letter process to make changes to discretionary or any DA service fees.113 However, the Anticipated Proceeding to revisit the issue of advice letter treatment for the UDCs' DA tariffs has not yet commenced. If, in the Anticipated Proceeding, the Commission approves different procedures for obtaining approval to revise fees for discretionary and non-discretionary services, SCE could possibly be required to maintain separate discretionary and non-discretionary DA service tariffs. Thus, it is not reasonable to approve SCE's request at this time to eliminate from its tariffs the discretionary/non-discretionary categorization of services. Therefore, SCE's request to eliminate the discretionary/non-discretionary categorization of DA service fees should be denied.
82 Exh. SCE-1, p. 9. Opening Brief, p. 17.
83 SCE established the DADSCMA via Advice Letter 1264-E, which was approved by the Energy Division with an effective date of January 1, 1998.
84 SCE Opening Brief, p. 17.
85 Id.
86 See D.95-12-063, as modified by D.96-01-009.
87 OP 1. (72 CPUC2d, 439.)
88 D.97-10-087, Footnote 11 (76 CPUC2d, 377).
89 D.98-09-070 authorized UDCs to charge fees for certain non-discretionary services required to support ESP consolidated billing services, and Resolution E-3582 approved fees for those services on January 20, 1999. However, no other fees have been approved for non-discretionary DA services.
90 OP 8 authorizes UDCs to book the incremental costs of providing non-discretionary services to a memorandum account.
The UDCs were also authorized to file an advice letter to set up additional memorandum subaccounts to track the costs of providing non-discretionary services pending further Commission action. SCE previously tracked costs for non-discretionary services in its Industry Restructuring Memorandum Account. This memorandum account was discontinued by Advice Letter (AL) 1927-E, which became effective on 4/14/06 without a resolution. In allowing SCE to discontinue the Industry Restructuring Memorandum Account (IRMA) for reasons related to the termination of § 376 recovery, the Commission did not override its prior determination in D.97-10-087 that the non-discretionary service costs should be recovered, if at all, through a memorandum account and not through rates established prior to the Anticipated Proceeding.
91 2 CPUC3d, Footnote 6, 427.
92 COL 21 (2 CPUC3d, 412).
93 SCE AL 1268-E, filed November 25, 1997, and subsequently modified by AL 1268-E-A and AL 1268-E-B.
94 SCE AL 1338-E, as modified, was approved by Resolution E-3582 on January 20, 1999, and the filed tariffs became effective upon the Energy Division finding them in compliance with Resolution E-3582. These tariffs were subsequently modified pursuant to Resolution E-3582.
95 SCE AL 1343-E, filed October 19, 1998, became effective on December 31, 1999, with the approval of the Energy Division.
96 SCE AL 1343-E, p. 3.
97 A.99-06-040, p. 3.
98 A.99-06-040, pp. 3-5.
99 D.97-10-087 states, "With respect to the rate schedules for non-discretionary services, or the elements of the rate schedules which apply to non-discretionary services, those will be examined in a proceeding to be determined." (76 CPUC2d, 308.)
100 A.99-06-040, SCE-1, p. 52.
101 AL 1808-E was approved by Resolution E-3895, effective January 27, 2005.
102 See D.97-10-087, Appendix A, Section B.14.b.
103 See SCE Schedule Rule 22, Sheet 27752-E.
104 See D.95-12-063.
105 D.97-05-039, FOF 5.
106 D.97-10-087, FOF 22.
107 Exh. SCE-1, Footnote 25, p. 10. SCE eventually corrected this error in its Opening Brief (Footnote 90, p. 18).
108 TR 40:17-26, 43:3-6, 43:13-17, 64:16-28, 65:1-2, 65:4-8. On September 17, 2007, SCE requested changes to the EH transcript where, according to SCE, the witness inadvertently switched the terms "discretionary" and "non-discretionary." SCE's request to change the transcript to reflect the witness's intended testimony was denied by the ALJ ruling of September 27, 2007.
109 SCE-1, p. 6. Emphasis added.
110 SCE-2, p. 1. Emphasis added.
111 D.06-05-016, p. 110. Emphasis added. See, also, FOF 66.
112 SCE Opening Brief, p. 2, SCE Reply Brief, p. 12.
113 See D.97-10-087, Footnote 16. (76 CPUC2d, 377.) See, also, A.99-06-040.
