VI. The Failure of the AB 1890 Industry Restructuring Affects the Recovery Mechanism

A. PG&E

A March 3, 2005 Ruling23 required PG&E to comment on the specific impacts of several specific events that transpired in the five years since A.00-03-038 was originally filed. The Ruling noted that:

(1) PG&E has emerged from Chapter 11 bankruptcy proceedings;24

(2) PG&E filed Advice Letter (AL) 2510-G/2460-E for authority to revise electric and gas tariffs and establish various balancing and memorandum accounts to implement the Modified Settlement Agreement (MSA) adopted by D.03-12-03525 and in compliance with D.04-02-062;26

(3) The Advice Letter was approved by Resolution E-3862, dated April 1, 2004 eliminating numerous accounts27 including seven accounts included in this application.

(4) Resolution E-3862, dated April 1, 2004, approved with modifications PG&E's proposed tariff revisions, its request to establish various Revenue Adjustment Mechanisms (RAM) balancing accounts, to modify certain regulatory accounts, and withdraw several electric regulatory accounts that are no longer applicable or needed; and (5) at least one other account, the Electric Restructuring Costs Account, was addressed in D.04-12-017.28

PG&E was directed to explain the impact of Resolution E-3862 and D.04-12-017, or any other regulatory decision or actions that may have altered the status of A.00-03-038 since parties filed briefs.

PG&E filed a timely response to the Ruling on April 1, 2005 and asserted that "subsequent events have completely mooted PG&E's A.00-03-038. Therefore, PG&E requests that the application be dismissed as moot."29 We will close PG&E's application because there are no pending actions required here except to affirm the action taken by PG&E pursuant to Resolution E-3862.

1. Active PG&E Accounts

The 11 active accounts are:

We agree with PG&E that these accounts (1-11) are still active and as such, do not require action in this proceeding at this time.

2. PG&E Accounts Eliminated by Resolution E-3862

Five accounts, as cited in the March 3, 2005 Ruling, were eliminated by Resolution E-3862:

PG&E filed Advice Letter 2510/G and 2460-E on December 31, 2003. On March 1, 2004 it filed a supplement, Advice Letter 2460-E-A. The first two advice letters were filed to implement the ratemaking provisions of the settlement agreement adopted in D.03-12-035. The supplement was in compliance with D.04-02-062. The adopted settlement agreement was the bankruptcy-solution proposed by the Commission staff, PG&E and PG&E Corp., the parent company of PG&E. We agree with PG&E that these five accounts (12-16) are no longer subject to review in A.00-03-038.

3. PG&E Inactive Accounts

Two accounts (17 and 18) are inactive, one was authorized for elimination but has not yet been eliminated, and the other was never authorized.

PG&E indicated that while it had requested authority for this account in Advice Letter 1972-E, in response to D.00-02-046, it withdrew the request in Advice Letter 1972-E-A and therefore it has never been authorized even though PG&E included it for transfer in A.00-03-038.

4. PG&E Accounts Eliminated by Other Decisions

Five accounts have been eliminated in other Commission decisions while A.00-03-038 was pending:

We agree with PG&E that these decisions have mooted PG&E's request in A.00-03-038 and these five accounts (19-23) are no longer subject to review in A.00-03-038.

5. Close PG&E's A.00-03-037

PG&E did not file a motion in this proceeding to withdraw the application. In the April 1, 2005 response PG&E states that there are no longer any accounts that require current action by the Commission and therefore the application should be deemed moot. We agree: all accounts have been properly addressed by the Commission to either eliminate the accounts or to authorize the continued operation of the eleven accounts listed above. We will therefore close PG&E's A.00-03-037.

B. Edison

In the same March 3, 2005 Ruling discussed above, Edison was required to comment on the specific impacts of several specific events that transpired in the five years since A.00-03-047 was originally filed. The Ruling cited:

(1) On October 2, 2001, Edison entered into a Settlement Agreement with the Commission in Case No. 00-12056-RSWL (Mcx). On October 5, 2001, the Settlement Agreement was approved by the United States (U.S) District Court.

(2) As a consequence of the Settlement Agreement, Edison filed AL 1586-E on November 14, 2001 to establish the Procurement Related Obligations Account (PROACT) and the associated ratemaking structure to be effective on September 1, 2001. The Settlement Agreement defined PROACT as "the Account for Recovery of Procurement Related Obligations established pursuant to Section 2.1(a)."

(3) On January 23, 2002, the Commission adopted Resolution E-3765 and granted "SCE's (Edison's) request with several modifications in order to avoid judging other issues pending in proceedings before the Commission, and to ensure adherence to the language of the Settlement." Resolution E-3765 cited A.00-03-047 several times and, in particular, noted that many of the accounts addressed in the AL were already the subject of A.00-03-047. Edison was directed to address the status of all pending accounts, include up-dated account balances, an up-date of the proposed ratemaking treatment for any recoverable account balances, and finally, include any other pertinent information concerning A.00 03-047. Edison was also directed to explain the impact of any other regulatory decision or action that may have altered the status of A.00-03-047 since parties filed briefs.

Edison responded to the Ruling on March 18, 2005, and indicated that it had filed an up-date after the settlement between the Commission and Edison was approved by the court.31 By a Ruling dated April 9, 2002, the assigned ALJ admitted three exhibits including Ex. 8, Prepared Testimony of Chris C. Dominski Pursuant to Commission Resolution E-3765(Late-Filed Exhibit). Edison stated the net overcollection of $55.745 million in its various accounts, as reflected in Appendix B of its Ex. 8, was included in the calculation of Recoverable Cost in the September 2001 balance of its PROACT account. Since the overcollection had already been credited to its ratepayers, Edison did not update the account balances in its response to the March 3, 2005 ALJ Ruling.

1. Edison's Late-Filed Exhibit

After these applications were filed, Edison closed its TRA and TCBA accounts as a result of the previously noted settlement adopted by the Court in Edison v Lynch, et al.32 In short, the Settlement ended the electric industry restructuring transition accounting system that relied upon the TRA and TCBA process as detailed herein. On February 19, 2002, Edison filed a motion for leave to file an additional exhibit after the submittal of A.00-03-047. This decision grants the motion.

Edison proposed to directly substitute the new post-settlement accounting mechanisms for the TRA and TCBA, which had been litigated in the proceeding. Because the solution we adopt does not rely upon the TRA or TCBA for either PG&E or Edison, the foregoing discussion of parties' positions, and the rationale for the adopted solution, do not need to be expanded to address in detail the proposed substitution as filed by Edison. We have found the costs to be recoverable. Edison has already disposed of the balances at issue in this proceeding (with the exception of two of these accounts), the only remaining issues are to determine which accounts should be eliminated and where recovery of the remaining two account balances should take place.

2. Edison Accounts to be Eliminated

Edison proposes in Ex-8 to eliminate the following six accounts,33 all of which have a zero balance:

It is reasonable to eliminate these six (1-6) unnecessary accounts that have a zero balance, and therefore there is no ratepayer impact to consider.

There are two other accounts (7-8), with sub-accounts, which Edison proposes to eliminate because of other Commission authority.

7. Secondary Land Use Revenue Memorandum Account

Resolution E-376534 authorized the transfer of the balance in this account to the Performance Based Ratemaking Exclusions Distribution Adjustment Mechanism (PBR EDAM). Edison has already transferred the balance and now proposes elimination of the account.

This memorandum account has six sub-accounts. Beginning with the September 1, 2001 balances, Edison proposes to transfer several sub-accounts to new accounts established as a result of D.99-10-057,35 which authorized the framework for Post Transition Ratemaking, and Resolution E-3765 which implement PROACT.

Edison has returned the outstanding balance in two sub-accounts to ratepayers by transferring the balance to the PBR EDAM and then to the PROACT and now proposes to eliminate them.

Edison has transferred two other sub-accounts to the Nuclear Decommissioning Adjustment Mechanism (NDAM) Balancing Account, which was authorized by Resolution E-3756:

We agree with Edison that it is a reasonable outcome for these sub-accounts to be transferred to the NDAM where they can be addressed in our ongoing oversight of that mechanism.

Edison has transferred one sub-account to the Public Purpose Programs Adjustment Mechanism (PPPAM) Balancing Account, which was authorized by Resolution E-3756:

Finally, Edison proposes to eliminate one sub-account that was never used:

One other account is now unnecessary and Edison has already transferred it to the PBR EDAM as well:

This account is redundant because its purpose, to track revenues received from third-parties that used Edison facilities for fiber optic cable space, has been replaced by the Gross Revenue Sharing Mechanism adopted in D.99-09-070.

3. Edison Accounts to be Retained

Edison proposes in Ex. 8 that many accounts should simply remain open and the ongoing balances and activities will be addressed in a wide array of regular Commission proceedings.36

Distribution-Related Accounts, which will flow through the PBR EDAM mechanism, in compliance with Post-Transition ratemaking authorized in D.99-10-05737:

Public Purpose Program-Related Accounts, which will flow through the Public Purpose Programs Adjustment Mechanism (PPPAM), except for the CARE account, which no longer requires modification here.38

There are eight Generation-Related Accounts that Edison now proposes should be "transferred to an appropriate ratemaking account after Commission review in an appropriate ratemaking proceeding such as the Annual Transition Cost Proceeding (ATCP)".39 The balances in the following four accounts have been reviewed by the Commission in an ATCP while this proceeding (A.03-10-022 and D.05-01-054) was pending and therefore no further action is required and these accounts can be eliminated.

The balances in the following two accounts have been reviewed by the Commission in a recent general rate case, (A.02-05-004 and D.04-07-022) and were subsequently eliminated while this proceeding was pending; therefore, no further action is required:

The three remaining generation-related accounts have zero balances:

We will direct Edison to include those accounts with future recoverable/refundable balances in its Energy Resource recovery Account (ERRA) that was established pursuant to D.02-10-062. The Commission directed in D.04-01-0048 and D.04-03-023 that the recorded operations of the ERRA for the described record period is to be reviewed by the Commission in an annual ERRA application to ensure that the entries made in the ERRA are stated correctly and are consistent with Commission decisions.

4. Other Accounts

Edison proposed (Ex. 8) to transfer the balance in the Block Forward Market Memorandum Account40 to the Settlement Rates Balancing Account, which was for the settlement discussed elsewhere, and is now closed. Block Forwards were energy purchases in the now-defunct California Power Exchange. Therefore the most appropriate active account to address these costs is the previously discussed ERRA. We will direct Edison to transfer the Block Forward Market Memorandum Account balance to this active account, where it can be reviewed as a part of the next annual review of the ERRA.

Edison's Kramer-Victor Account has already been closed by D.00-06-054.41

The Catastrophic Event Memorandum Account is an ongoing mechanism activated when there is a declared state or federal disaster to allow a utility to recover the reasonable costs to promptly restore service. This account should remain open and is subject to specific applications, e.g., Edison's currently pending A.04-12-003.

Edison proposes to transfer the balance in the Optional Pricing Adjustment Clause Balancing Account to the previously discussed PBR EDAM. The balance in this account was included in the net overcollection returned to ratepayers through the PROACT, there is no need for further action with regard to this account here, and the account should remain open.

Edison and others shared the costs for an audit of transactions with the California Power Exchange. Edison proposed (Ex. 8) to transfer this account to the now closed Settlement Rates Balancing Account. Again, the ERRA is the most appropriate active account. We will direct Edison to transfer the PX Credit Audit Memorandum Account balance to this active account, where it can be reviewed as a part of the next annual review of the ERRA.

The Commission addressed this account in D.03-08-062, dated August 21, 2003 in another proceeding; A.01-02-030, filed February 28, 2001.42 No further action is required.

C. Subsequent Events - Other Parties' Positions

Neither ORA nor Aglet filed a response to the March 3, 2005 Ruling. We therefore have no up-date of their opinions subsequent to filing briefs on October 23, 2000. No party responded to Edison's February 2002 Late-Filed Exhibit.

23 ALJ Long's Ruling Calling for Further Comments by Applicants and Other Interested Parties. 24 United States Bankruptcy Court for the Northern District of California Case No. 01-30923 DM, (Bankruptcy Court). 25 D.12-035 dated December 18, 2003 in Investigation (I.) 02-04-026 Filed April 22, 2002. Order Instituting Investigation into the ratemaking implications for Pacific Gas and Electric Company (PG&E) pursuant to the Commission's Alternative Plan of Reorganization under Chapter 11 of the Bankruptcy Code for PG&E, in the United States Bankruptcy Court, Northern District of California, San Francisco Division, In re Pacific Gas and Electric Company, Case No. 01-30923 DM. 26 D.04-02-062 dated February 26, 2004 in I.02-04-026. This decision adopted a Rate Design Settlement which implemented an overall rate reduction of about $799 million.

27 These were:

28 D.04-12-017 dated December 2, 2004 in A.00-07-013 filed July 11, 2000. Application of Pacific Gas and Electric Company for Review and Recovery of Costs Recorded in the Electric Restructuring Costs Account (ERCA) for 1999 and Forecast for 2000 and 2001. 29 Response, p. 2. 30 Pg. 2, April 1, 2005 Response by PG&E. 31 February 19, 2002, Petition of Southern California Edison Company (U-338-E) to set aside submission of proceeding, for leave to file additional exhibit, and for entry of exhibit into the evidentiary record; Declaration of Chris C. Dominski. See, March 18, 2005, Comments of Southern California Edison Company (U-338-E) on the Ruling of Administrative Law Judge Long. 32 See footnote 14. 33 Ex. 8, pp. 7-10. 34 Resolution E-3765 was adopted on January 23, 2002, addressing Advice Letter 1586-E, filed on November 14, 2001 to establish the Procurement Related Obligations Account (PROACT) and associated ratemaking structure. 35 D.99-10-057, dated October 21, 1999, in A.99-01-034, filed on January 15, 1999 by Edison, as well as PG&E's A.99-01-016 and SDG&E's A.99-01-019. 36 Ex. 8, pp. 16 ff. 37 Ex. 8, p. 17, at footnote 41. 38 Ex. 8, p. 22. 39 Ex. 8, p. 24. 40 $0.626 million undercollected as of February 28, 2005. 41 Although the Kramer Victor Memorandum Account was included in the application, it was promptly dealt with in D.00-06-054 and is moot. It would otherwise be one of 36 accounts in Edison's application. The ordering paragraphs address the outstanding 35 accounts at issue in A. 00-03-047. 42 Edison's response to the March 3 2005 Ruling was wrong; there were several significant events subsequent to late-filed Ex. 8, including the closure of the Settlement Rates Balancing Account, the filing of A.01-02-030 and its decision, D. 03-08-062.

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