4. Superseding the Prior Decisions

There is a benefit to consolidating in this one decision the authority to issue debt for balancing accounts and procurement-related collateral where that authority has evolved and expanded over time in several decisions. We, therefore, review the elements of any authority granted to Edison in the prior series of related decisions: D.00-10-040, D.01-01-021, D.02-01-061, D.05-11-013, and D.06-11-012. We either specifically affirm that authority herein, or terminate that authority and thereby supersede those decisions.

All of these five prior orders are superseded by this decision, which sets a new limit of $2 billion, allows use of the proceeds for ongoing regulatory balancing accounts and procurement-related collateral costs, allows for securitization, and grants an exemption from the competitive bidding rule. This authority is subject to reporting requirements established by General Order 24-B, except as these requirements are modified herein.

4.1. D.00-10-040

In D.00-10-040, the Commission authorized Edison an emergency increase of $1.3 billion, from $700 million to $2 billion, in borrowing authority. The increase in the authorized level of balancing account financing could only be used by Edison to finance the purchase of wholesale electric power for delivery to its retail customers. This was the first decision in the midst of the 2000 - 2001 wholesale energy market collapse following the restructure of the electric industry. We find, based on the authority we grant today, that D.00-10-040 no longer applies and need not be cited as authority to finance Edison's regulatory balancing accounts.

4.2. D.01-01-021

In D.01-01-021, the Commission authorized Edison to issue $3.5 billion of additional debt (for a total authority of $5.5 billion) to finance the purchase of wholesale power for delivery to retail customers. The decision also granted authority under § 851 to issue debt secured by (i) a mortgage on Edison's property, and (ii) Edison's accounts receivable. And finally, the decision granted Edison an exemption to issue debt on a negotiated basis instead of through competitive bids: (i) debt issues in excess of $200 million; and (ii) variable-rate debt.

This was a second decision rendered in the midst of the 2000-2001 wholesale energy market collapse in California and gave Edison authority to borrow to procure very high-cost energy. Thus, in both D.01-01-021 and D.00-10-040, the very high debt authority increase was for energy procurement costs rather than regulatory balancing accounts generally. The authority granted in D.01-01-021 was to lapse six months after Edison eliminated the undercollection in its Transition Revenue Account (TRA).

We therefore find, based on the authority we grant today, that D.01-01-021 no longer applies and need not be cited as authority to finance Edison's regulatory balancing accounts.

4.3. D.02-01-061

In D.02-01-061, the Commission authorized Edison to issue $3.5 billion of debt to finance the Procurement-Related Obligations Account (PROACT). The decision also granted authority under § 851 to issue debt secured by (i) a mortgage on Edison's property, and (ii) Edison's accounts receivable. And finally, the decision granted Edison an exemption to issue debt on a negotiated basis instead of through competitive bids: (i) debt issues in excess of $200 million; and (ii) variable-rate debt. D.02-01-061 also reduced the borrowing limit from $5.5 billion to $3.5 billion and refunded some fees associated with unused borrowing authority.

The PROACT was a ratemaking device resulting from a settlement which avoided Edison's near-bankruptcy in the aftermath of electric restructuring. As the wholesale electricity market collapse continued, Edison faced bankruptcy and there were rapid changes in the cost recovery procedures which superseded the TRA and the other various provisions and mechanisms introduced to implement Assembly Bill 1890. One provision of the bill, a freeze of retail rates, led to an extreme liquidity crisis for the utilities. Thus, in D.01-01-021 and D.02-01-061, the Commission authorized huge, but limited-term, increases in borrowing authority. The high levels of borrowing authorized were necessary to finance Edison's regulatory balancing accounts in effect at that time.

All of the prior orders are superseded by today's decision, which sets a new limit of $2 billion, allows for securitization, and allows an exemption from the competitive bidding rule. We therefore find, based on the authority we grant herein, that D.02-01-061 no longer applies and need not be cited as authority to finance Edison's regulatory balancing accounts.

4.4. D.05-11-013

In D.05-11-013, the Commission authorized Edison to issue up to $700 million of debt to finance regulatory balancing accounts, which reduced Edison's authority to the level prior to the wholesale electricity market collapse. The decision also granted authority under § 851 to issue debt secured by (i) a mortgage on Edison's property, and (ii) Edison's accounts receivable. And finally, the decision granted Edison an exemption to issue debt on a negotiated basis instead of through competitive bids: (i) debt issues in excess of $200 million; and (ii) variable-rate debt.

In D.05-11-013, the Commission determined that the PROACT balance was no longer an issue and Edison could safely revert to an authorized debt level of $700 million:

After sufficient recovery of the PROACT balance Edison's authority to issue debt to finance its PROACT regulatory balancing account reverted to the $ 700 million authorized in D.95-11-065 for regulatory balancing accounts generally. (Conclusion of Law 3.)

We discuss and adopt the latter two items, secured debt and competitive bidding, again in this decision, and we therefore find, based on the authority we grant today, that D.05-11-013 no longer applies and need not be cited as authority to finance Edison's regulatory balancing accounts.

4.5. D.06-11-012

In the most recent decision, D.06-11-061, the Commission increased the authority by $850 million to $1.55 billion ($700 million + $850 million), allowed for the use of the proceeds for procurement-related collateral costs, assessed the appropriate fee, and continued securitization authority and competitive bidding exemptions, but made no other specific order. We find, based on the authority we grant today, that D.06-11-012 no longer applies and need not be cited as authority finance Edison's regulatory balancing accounts.