V. Discussion

A. Summary

The sole issue presented here is whether PG&E and Edison are entitled to recover reasonably incurred costs or refund overcollections during their respective rate freeze periods. We conclude they are entitled to recover or refund such costs in light of the return to cost-of-service rates for the utilities' generation-related costs pursuant to AB 6X. The enactment of AB 6X has superseded AB 1890, its rate freeze and its market-based rates for the utilities' sales from their generation plants. Under cost-of-service rates, the utilities are not at risk for these reasonably incurred costs recorded in authorized balancing and memorandum accounts and may collect undercollections or refund overcollections.

B. Right to Recover "During-the-Freeze" Costs in Balancing and Memorandum Accounts

In D.04-01-026, the Commission decided that the rate freeze ended as of January 18, 2001.²¹ The reason the Commission decided that the rate freeze ended was because AB 6X went into effect on January 18, 2001, and ended the transition of utility generation from regulated to unregulated status. Thus, there were no longer any uneconomic costs (i.e., "costs for generation-related assets and obligations...that may become uneconomic as a result of a competitive market..." § 367), because AB 6X provided for the Commission's regulation of the rates of the utilities such that they could recover generation-related costs as part of their cost of service and were not left to market-based rates for recovery. See D.04-01-026, mimeo. at 12-13.

In Southern California Edison Co. v. Peevey, 31 Cal. 4^th at 793, the California Supreme Court held that AB 6X "constituted a major retrenchment from the competitive price-reduction approach of Assembly Bill 1890, reemphasizing instead PUC's duty and authority to guarantee that the electric utilities would have the capacity and financial viability to provide power to California consumers." In this regard, the Court agreed with the Commission that by restoring the Commission's cost-of-service ratemaking over the utilities' generation-related costs, AB 6X had largely eliminated the category of "uneconomic" generating asset costs, which were at risk under AB 1890. Id. at 795. Consequently, the rate freeze and risks under AB 1890 are no longer relevant to the issues at hand in light of the enactment of AB 6X.

C. Different Treatment of Memorandum and Balancing Accounts-Scope of Review

The assigned ALJ observed-and the parties did not dispute-that memorandum and balancing accounts have different regulatory status. As the ALJ stated:

[B]alancing accounts have an associated expectation of recovery, they have been, so to speak, pre-authorized by the Commission, and it's the amounts that are reviewed for reasonableness; memorandum accounts, in contrast, are accounts wherein amounts are booked for tracking purposes and the utilities then later ask for recovery. Recovery is not a given. Does anyone else have a different understanding of balancing and memorandum accounts? (No response.)²²

Because of this distinction, the Commission must still rule on the recoverability of any of the memorandum accounts PG&E and Edison included in these applications. We find (or have found in other decisions discussed elsewhere as subsequent events) that these memorandum accounts contained costs incurred for reasonable purposes necessary to provide retail electric service at the time.

D. Interest Rate on Refunded Amounts

PG&E and Edison propose that in the event of refunds with interest to ratepayers, the interest rate should be a short-term rate tied to the rate for three-month commercial paper. Neither ORA nor Aglet address the appropriateness of this rate; they simply object to any account transfers prior to a reasonableness review. The utilities' interest proposal is entirely consistent with our treatment of all balancing and memorandum accounts regardless of the rate freeze or other distractions to the timely adjudication of a pending issue before the Commission.