4. Comments on the Draft Decision
A draft decision was mailed for comment on June 15, 2001. At that time, the draft decision included a proposed resolution of SCE's Petition for Modification in which it requests authorization to temporarily suspend payment of the Power Exchange (PX) credit to ESPs, as well as our implementation of AB 1X. At this time, we will not resolve issues regarding payment of PX credits raised in the comments and by SCE's petition.1 However, it is imperative that we now address the direct access issue. We therefore bifurcate this proceeding and will address SCE's petition in the next phase.
The need to implement the Legislature's directive is underscored by recent events. In May of this year, we enacted a dramatic rate increase for PG&E and SCE, affecting customers in all classes. The utilities have issued bills reflecting
these new rates. In addition, we take official notice of DWR's recent report on the nature of its contractual commitments, suggesting that bundled electric customers will face high energy costs over the next few years. At the same time, increased conservation efforts and new generation, coupled with the Federal Energy Regulatory Commission's recent action to expand wholesale price mitigation across the Western region, offer some hope that average electric spot market prices will be lower over the next year than they were during the last.
Under these circumstances, customers might be tempted to switch from utility bundled service to electric service providers in order to avoid some of the impact of higher rates and take advantage of lower spot market prices. It is not in the public interest to permit such behavior. All ratepayers benefit from the State's actions to ensure reliable electricity service and, therefore, all ratepayers should contribute to the effort to pay down the unprecedented debt incurred by the State to help weather the energy crisis.
A revised draft decision was mailed for further comment on August 27, 2001.2 In the cover letter attached to the August 27 draft decision, the Chief Administrative Law Judge asked parties to comment on (1) whether AB 1X suspends the entire direct access program, including all transactions under the program, (2) how the Commission can comply with AB 1X if it exempts written contracts for direct access executed before July 1, 2001 from the suspension, and (3) whether July 1, 2001 is an appropriate date for the suspension.
In their responses to the Chief ALJ's first and second questions, many parties refer to Section 80110 of AB 1X where it states that, "...the right of retail end use customers ... to acquire service from other providers shall be suspended ... " (Emphasis added.) They believe that "to acquire," indicates that suspension applies to prospective, new direct access service and is not intended to suspend the entire program. Parties also question the legality of prohibiting current direct access customers from renewing existing contracts and agreements. In this decision, we only order the suspension of direct access as of the effective date of this decision and we reserve for a future decision how, if at all, we should effect contracts executed or agreements entered into before the effective date of this decision.
The Chief ALJ's third question raises concerns by numerous parties regarding suspension of direct access effective July 1, 2001. In particular, some parties have questioned the legality of retroactive suspension. However, if we were to wait until we fully analyzed all comments before issuing a decision on any aspect of the suspension of direct access, we would likely be faced with the argument that suspension should be deferred until the date of this later decision.
Some parties also have questioned the need to suspend direct access at this time. They argue that the threat of rolling blackouts has become remote, the wholesale price of electricity has decreased significantly, and, therefore, an emergency no longer exists. We disagree. While we have seen relief with respect to certain conditions, we cannot at this time declare that the risks to California electricity consumers have been eliminated, nor can we be lulled into a sense of complacency. As discussed above, repayment of the State's General Fund will be accomplished through the issuance of DWR Power Supply Revenue bonds at investment grade. A stable customer base is required to ensure a continuous revenue stream to repay the revenue bonds. Furthermore, as explained above, now is the time to prevent customers from switching from utility bundled service to electric service providers in order to shift to others some of the impact of higher rates. Given these considerations, it would not be in the public interest for the Commission to delay action to suspend direct access service beyond this time.
Accordingly, we issue this interim order in which we suspend the right to enter into new contracts or agreements for direct access effective today. This decision prohibits the execution of any new contracts for direct access service, or the entering into, or verification of, any new arrangements for direct access service pursuant to Public Utilities Code Sections 366 or 366.5, after the effective date of this order.3 All other pending issues concerning direct access contracts or agreements executed before today remains under consideration by the Commission and will be resolved in a subsequent decision. In other words, effective today, no new contracts or agreements for direct access service may be signed; the effect to be given to contracts executed or agreements entered into before the effective date of this order, including renewals of such contracts or agreements, will be addressed in a subsequent decision. We put all those concerned about these matters on notice that we may modify this order to include the suspension of all direct access contracts executed or agreements entered into on or after July 1, 2001. Parties' comments regarding retroactive suspension, including the July 1, 2001 date, will be addressed by a subsequent decision.
We direct on the utilities not to accept any direct access service requests (DASRs) for any contracts executed or agreements entered into after the effective date of this decision. Steps that the utilities might take to ensure compliance with this order may include obtaining from each energy service provider a list of relevant identifying information for those customers that have entered into timely contracts, but for whom DASRs have not been submitted. We direct the utilities to revise any information disseminated to customers that describes direct access to explain that direct access service has been suspended. The utilities should submit these revisions to the Public Advisor's office and the Energy Division for review. Within 14 days of the effective date of this decision, each utility should inform the Director of the Energy Division of the steps it has taken to comply with this order.
Several groups filed petitions to intervene in order to file comments submitted with their petitions. Because we believe no party will be prejudiced, we grant these petitions to intervene. AReM/WPTF's emergency motion to file supplemental comments is granted. ACWA and AReM/WPTF filed motions on September 18, 2001 to postpone the Commission's consideration of the suspension of the right to acquire direct access service. They believe that new information from the State Treasurer and the California Senate's Concurrent Resolution No. 46 indicate that there is no need to suspend direct access at this time. Again, we are concerned that delaying the suspension of direct access service would allow customers who switch to direct access to shift the burden of higher rates to customers who continue to receive utility bundled service. Therefore, we deny the motions of ACWA and AReM/WPTF.
