ALJ/DUG/tcg * DRAFT Agenda ID #4864

Ratesetting

9/8/05 Item 9

Decision DRAFT DECISION OF ALJ LONG (Mailed 8/9/2005)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application Of Pacific Gas And Electric Company For Current Cost Recovery During The Rate Freeze Period. (U 39 E)	Application 00-03-038 (Filed March 20, 2000)
Application Of Southern California Edison Company Requesting Modification Of Its Transition Revenue Account (TRA) And Transition Cost Balancing Account (TCBA) Mechanisms To Allow For The Transfer And Recovery Of Costs And Return Of Revenues Recorded In Various Previously-Authorized Regulatory Accounts During The Rate Freeze Period, And Related Relief.	Application 00-03-047 (Filed March 22, 2000)

(See Appendix A for List of Appearances.)

OPINION RESOLVING RATE FREEZE ERA BALANCING ACCOUNTS AND MEMORANDUM ACCOUNTS FOR PACIFIC GAS AND ELECTRIC COMPANY AND SOUTHERN CALIFORNIA EDISON COMPANY

TABLE OF CONTENTS

Title Page

OPINION 2

I. Summary 2

II. Background 3

III. Affected Accounts 5

A. PG&E Accounts 5

B. Edison Accounts 5

IV. Positions of the Parties - Briefs 6

A. PG&E and Edison 6

B. ORA 8

C. Aglet Consumer Alliance 10

V. Discussion 12

A. Summary 12

B. Right to Recover "During-the-Freeze" Costs in Balancing and
Memorandum Accounts 13

C. Different Treatment of Memorandum and Balancing
Accounts-Scope of Review 14

D. Interest Rate on Refunded Amounts 14

VI. The Failure of the AB 1890 Industry Restructuring Affects the
Recovery Mechanism 15

A. PG&E 15

1. Active PG&E Accounts 17

2. PG&E Accounts Eliminated by Resolution E-3862 17

3. PG&E Inactive Accounts 18

4. PG&E Accounts Eliminated by Other Decisions 18

5. Close PG&E's A.00-03-037 19

B. Edison 19

1. Edison's Late-Filed Exhibit 21

2. Edison Accounts to be Eliminated 22

3. Edison Accounts to be Retained 24

4. Other Accounts 26

C. Subsequent Events - Other Parties' Positions 28

VII. Conclusion 28

VIII. Comments on Draft Decision 29

IX. Assignment of Proceeding 29

Findings of Fact 29

Conclusions of Law 30

ORDER 31

Appendix A

O P I N I O N

I. Summary

This decision resolves the requests of Pacific Gas and Electric Company (PG&E) and Southern California Edison Company (Edison) to recover reasonable costs that were incurred during the rate freeze period under Assembly Bill (AB) 1890.¹ When AB 1890 was enacted, the vision of the electric industry was for a competitive market structure for electric generation where the electric utility companies were primarily distribution companies. When these applications were filed during the rate freeze, the California Power Exchange (PX) appeared to be operating efficiently, and the competitive monthly wholesale price of energy was about three cents a kilowatt-hour (kWh). However, during the period from the summer of 2000 through the spring of 2001, California experienced an energy crisis in which the wholesale price of electric power skyrocketed. By March of 2001, it was about 25 cents/kWh.² Resolution of these applications has been delayed by the crisis in the wholesale markets that irrevocably altered the vision of AB 1890.

In its First Extraordinary Session in January, 2000, the Legislature responded to the crisis by, among other things, adopting AB 6X.³ AB 6X effectively cancelled the AB 1890 transition of utility generation from regulated to unregulated status, and instead continued Commission regulation of utility-owned assets.

By this order, we find that rate recovery of the costs in the balancing and memorandum accounts at issue in the present proceedings are consistent with AB 6X, decisions of the California Supreme Court, and the Commission addressing AB 6X. For PG&E the majority of the accounts have been dealt with in other proceedings. For Edison, all of the balances recorded in the accounts originally at issue in this proceeding, except for two, were disposed of (1) when Edison credited a net overcollection from the accounts of $55.745 million to its ratepayers as of September 1, 2001 pursuant to Resolution E-3765, or (2) after review in other Commission proceedings. Even though all but two of Edison's account balances have been disposed of, we will nevertheless discuss Edison's proposed disposition of its accounts here.

³ Assembly Bill No. 6 (Stats. 2001, First Extraordinary Session, Ch. 2).