6. Other RAP Issues

As mentioned above, there was no dispute between PG&E and ORA concerning any of the other issues in this proceeding. PG&E presented testimony on each issue, and ORA responded with testimony on most issues. In addition, the presiding officer asked extensive questions on this testimony in order to insure the development of a full factual record on each issue. We describe each of these issues, the resolution proposed, and the reasons for adopting the proposed resolution.

Eliminate Balancing and Memorandum Accounts

PG&E proposed the elimination of one balancing and eleven memorandum accounts. PG&E provides both general and specific rationales for these actions. In general, PG&E notes "these accounts are not longer accumulating costs, either because costs are not longer being incurred or because the Commission has subsequently ordered that the costs be recorded in different accounts."³³ Specifically, PG&E documents the Commission actions that eliminate the need for each account.

In response, ORA points out that "PG&E has approximately sixty balancing and memorandum accounts."³⁴ ORA states that it does not object to the elimination of the accounts as proposed by PG&E.

There is no controversy on any of these actions. The table below lists the name of each account and the reason for its elimination.

It is reasonable to eliminate these accounts, and we authorize PG&E to do so.

NAME OF ACCOUNT	JUSTIFICATION FOR ELIMINATION
Energy Efficiency California Energy Commission (CEC) Memorandum Account	As of December 31, 2000, PG&E fulfilled its obligation and completed transfer of all funds to CEC.
Demand Side Management (DSM) Tax Change Memorandum Account	Account established in case the IRS changed tax treatment of DSM expenditures. No change has occurred since 1994. Account not needed.
Industry Restructuring Memorandum Account - Six Remaining Subaccounts: 1) Environment Impact Report Costs; 2) Direct Access Implementation Costs; 3) ISO/PX and Other Wholesale Interface Costs Subaccount; 4) Hourly-Interval Meter Installation and Reading Costs; 5) UDC Billing System Modification Costs; 6) Customer Information Release Systems Cost	Subaccounts established to record implementation costs of restructuring. Funds recovered through 1998. New memorandum account established in 1999. Therefore, accounts have zero balances and are not used.
Divestiture Bonus Return on Equity Memorandum Account	Track revenue requirement differential associated with bonus rate of return for the divesting of fossil plants. Current balance zero; program no longer applicable. Account not needed.
Electric Low-Income Direct Assistance Memorandum Account (ELIMA)	Low-income assistance funds included in base revenues since 1999. Prior ELIMA balances transferred to TRA in 1999. Result: zero balance and unused account.
Research, Development and Demonstration (RD&D) One-Way Balancing Account	Account to track difference between RD&D expenses and authorized revenues prior to 1999. Refunds made. Account not needed.
Workforce Reduction Revenue Mechanism Memorandum Account	Account records difference between authorized and recorded revenue requirements associated with net savings from 1993 Workforce Management Program. In 2001, Commission authorized recovery of balances and ordered account closed. No balance. Account not needed.

PG&E's Ratemaking and Revenue Adjustments are Reasonable

As part of the RAP proceeding, the Commission identifies and reviews in a single place all revenue requirement and rate changes approved or currently pending before us. In this RAP, PG&E requests Commission approval of its 2001 and 2002 unbundled revenue requirements, as well as how PG&E's revenue requirements will be consolidated and then unbundled into separate categories for the purposes of setting unbundled rate components shown on customer bills.

PG&E provides illustrative unbundled revenue requirements for 2001 and 2002. PG&E shows a 2001 revenue requirement of $7,210,819,000, consisting of $4,141,698,000 for generation, $33,181,000 for nuclear decommissioning, $429,091,000 for transmission, $2,406,017,000 for distribution, and $200,832,000 for public purpose programs.³⁵ Similarly, PG&E shows a 2002 revenue requirement of $10,486,902,000, consisting of $7,373,103,000 for generation, $33,181,000 for nuclear decommissioning costs, $2,436,026,000 for distribution, $200,833,000 for public purpose programs, and $423,766,000 for transmission.³⁶ PG&E requests Commission approval of these 2001 and 2002 "consolidated illustrative revenue requirements."³⁷ PG&E further states that it "will update the 2002 revenue requirement at the time a final decision is adopted in this proceeding to reflect final Commission-adopted and FERC-adopted revenue requirements changes in the pending applications listed . . ."³⁸ Finally, PG&E "also proposed to update its revenue requirement with the most recent balancing and memorandum account balances at the time of the final RAP decision in this proceeding is issued."³⁹

ORA testifies that the information provided by PG&E "was developed using the existing methodologies authorized in earlier Commission decisions."⁴⁰

Our review of this information convinces us of the accuracy of PG&E's entries, and we grant PG&E's request that we accept the 2001 and 2002 illustrative revenue requirements as reasonable, subject to the adjustments required to reflect the outcome of pending state and federal proceedings.

PG&E's Sales and Billings Forecasts for 2002 are Reasonable

Historically, the RAP provides an electric sales and billings forecast. PG&E's testimony provides forecasts for the years 2001 and 2002. PG&E includes the year 2001 for continuity purposes and a year 2002 forecast.

With the continuation of a rate freeze, the electric sales and billings forecast has no readily foreseeable impacts on customers. As the ALJ's cross-examination of PG&E's witness makes clear:

Q . . . What happens now that you have this forecast on the record? What changes for the customer?

A. I don't believe anything, at this point in time. . . .⁴¹

And:

Q. So what we do then is we adopt a rate forecast, but we don't use it in any way effecting the revenue requirements for the TCBA or the TRA or this proceeding at all?

A. I believe that is true. . . .⁴²

Thus, it is clear that this forecast is not a critical regulatory issue.

ORA's testimony notes that it finds PG&E's forecasts of customers and electric sales for 2002 reasonable "as they follow methodologies adopted by the Commission in D.99-06-058, D.01-01-019, D.01-10-067, and D.99-06-058."⁴³

We concur that PG&E's forecasts are reasonable.

PG&E's Revenue Allocation and Rate Design are Reasonable

PG&E testifies that it uses Commission-authorized methodologies to allocate revenues and design rates. First, PG&E calculates the revenues that forecast sales and current prices will produce. Second, PG&E allocated its revenue requirements to the different customer classes and functions. Third, it examines discrepancies between revenues yielded by current rates and specific revenue requirements. Finally, since a rate freeze remains in effect, PG&E "seeks to make the simplest changes possible to revise rates to reflect the new functional revenue requirements and comply with AB 1890."⁴⁴ Since under the rate freeze, generation rates are set "residually," for every change in a rate, an offsetting change is made to generation rates to keep the customer's rate frozen.

In this particular proceeding, PG&E increases the rates for public policy program and nuclear decommissioning rate elements, and offsets these increases with decreases in the generation rates. This causes the effective customer rates to remain unchanged.

With rare exceptions, such as a customer who pays only nuclear decommissioning and public purpose program rate components, there are no foreseeable consequences for customers from the rate design that we are considering. Cross-examination makes this clear:

Q. What I was trying to elicit is: what real world outcome is affected by action on this particular thing? And can you think of any?

A. In the rate freeze, nothing. After the rate freeze, perhaps . . . But as far as what actually impacts the total rate, that's more - that's up to the Commission. I really can't say what would happen after the rate freeze.⁴⁵

Once again, the adoption of a rate design proposal may prove helpful for future regulatory proceedings, but has almost no anticipated customer impacts now or in the near future.⁴⁶

ORA's review of PG&E's revenue allocation and rate design finds that it comports with the Commission's adopted methodologies.

We conclude that PG&E's revenue allocation and rate design are reasonable and authorize their adoption.

PG&E's Schedule PX Price Calculations are Reasonable

Since the issue of determining the post-PX direct access credit was moved to A.98-07-003, there remains for this proceeding only to review the price calculations for Schedule PX. The schedule PX price forms the basis for what PG&E charges customers for bundled electric services. Since there is a rate freeze in effect, however, the total rate charged to the customer remains unchanged. The Schedule PX price, however, becomes critical for determining the contribution, whether positive or negative, to the CTC. For direct access customers, this calculation determines a PX credit that applies to their bills.

ORA does not dispute PG&E's calculation of the PX price or the PX credit.

Our review indicates that PG&E has applied the complicated methodologies used to create a PX Schedule Price and PX credit in a reasonable way. We conclude that PG&E's PX price and PX credit are both reasonable.

Amounts in Electric Vehicle Balancing Account are Reasonable

The EVBA records expenses associated with Commission-mandated utility programs to provide information about safe, efficient, reliable and cost-effective recharging or fueling and operation of electric and natural gas-powered vehicles. Additionally, the National Energy Policy Act of 1992 requires PG&E to purchase alternate fuel vehicles. These expenses are recorded into this account.

PG&E seeks to have the balances in the EVBA deemed reasonable to receive authorization to transfer these balances to the TRA. For the record period July 1, 1999 to April 30, 2001, PG&E recorded $1.48 million in the EVBA.

ORA recommends that "the Commission find PG&E's EV expenditure during the record period reasonable."⁴⁷ ORA notes that the expenditures of PG&E "have remained below the authorized amount in each program category."⁴⁸ Finally, ORA notes that its "review of PG&E's documentation finds the expenditures related to EV programs are within the approved budget and that the implementation of the EV programs are in accordance with guidelines set forth in D.95-11-035."⁴⁹

Our review indicates that PG&E's expenditures related to EV programs are reasonable and that the Commission should authorize PG&E to transfer the $1.48 million recorded in the EVBA through April 30, 2001 to the TRA for recovery.

Entries to the Schedule E-BID Memorandum Account (E-BIDMA) and Power Exchange Block Forward Market Memorandum Account (PX BFMMA)

E-BIDMA Balances are Reasonable

The E-Bid Memorandum Account (E-BIDMA) contains costs associated with a demand responsiveness program in effect during the year 2000. This program allows PG&E to make payments to bundled customers in exchange for voluntary reductions in their energy usage when the PX day-ahead price was equal to or greater than $250 per megawatt hour.

The balance in the E-BIDMA as of April 30, 2001, including interest (less $32,500 of sign-up fees collected from participating customers) is $934,700. PG&E requests "the Commission find that PG&E's start-up administrative costs for the E-BID program are reasonable and prudent, and that the net cost of $934.7 thousand to implement the program was actually spent and fully recoverable in the EPSBA."⁵⁰

ORA notes that the actual costs of the program fall below the estimated start-up costs of $1.5 million. ORA further states that the net expenses of $934,700 "were found to be reasonable."⁵¹

We find that the start-up and administrative costs of the E-Bid program are reasonable and prudent, and that the net cost of $934,700 thousand to implement the program were spent and should be recovered in the Electric Procurement Surcharge Balancing Account (EPSBA).

PX BFMMA Costs are Reasonable

The costs recorded in the PX BFMMA account include, but are not limited to: credit and collateral costs including surety bond fees, cash collateral account financing costs, other fees associated with credit and collateral costs, and other costs directly resulting from PX requirements to participate in the Block Forward Market incurred by PG&E and which are not billed to PG&E by the PX or ISO.

During the period under review, PG&E recorded to the BFMMA actual costs paid to secure and maintain two bonds needed for PG&E to meet credit and collateral requirements in the BFM. The total costs of these two bonds as of April 30, 2001 is $92,582. PG&E requests "the Commission review and approve for full recovery in the EPSBA the $92,582 balance of the BFMMA, costs incurred by PG&E to participate in block forward markets that are not billed to PG&E by the PX and ISO."⁵²

ORA notes that the costs associated with the BFMMA are "reasonable."⁵³

We find that for the record period July 1999 through April 2001, PG&E reasonably incurred and recorded $92,582 in the BFMMA. And approve for full recovery in the EPSBA the $92,582 balance of the BFMMA.

PG&E's Entries to the TRA During the Record Period July 1, 1999 through April 30, 2001 are Reasonable

In addition to the specific entries to the TRA discussed above, this proceeding reviews a host of routine entries into the TRA. In general, the TRA is designed to facilitate the determination of the residual or "headroom" revenues available for transfer to the TCBA to offset uneconomic generation costs.⁵⁴ The TRA is credited with total electric revenue, from which is subtracted transmission revenue, distribution, public purpose, and nuclear decommissioning revenue requirements, Fixed Transition revenue, Commission approved obligations consisting of Power Exchange (PX) charges, Independent System Operator (ISO) charges, restructuring implementation costs for the Consumer Education Program (CEP) and the Electric Education Trust (EET), incentives paid customer under PG&E's Price Responsive Load Program (discussed above), and Diablo Canyon Incremental Cost Incentive Price (ICIP) cost, exclusion items, including the independent safety committee fees, Department of Energy decommissioning and decontamination expenses, and special assessments.

The TRA is also credited with imputed revenues to reflect the shareholder participation portion of discounts or credits. The TRA is also credited with Revenue Cycle Services credits given to customers provided by entities other than PG&E.

If the TRA monthly balance is a credit, the balance equals the residual revenue requirement available to transfer to the TCBA to offset uneconomic generation costs. If the TRA balance is a debit, the debit balance, including interest, remains in the TRA and is carried over to the following month pursuant to Commission orders.

In this RAP, in addition to the issues identified previously, PG&E requests that the Commission "review and verify the TRA entries for the 22-month record period from July 1, 1999, through April 30, 2001 . . ."⁵⁵ PG&E notes that these entries are the same as "PG&E presented in its 1998 and 1999 Revenue Adjustment Proceedings (RAP) . . ."⁵⁶ with some noted exceptions due to Commission decisions implemented during the record period. These exceptions include restructuring implementation costs,⁵⁷ PX block forward market programs,⁵⁸ bilateral contract purchases,⁵⁹ implementation of the 1998 General Rate Case⁶⁰ and 1998⁶¹ and 1999⁶² RAP decisions, the 2000 cost of capital,⁶³ the 2001 Attrition Rate adjustment,⁶⁴ the Catastrophic Event Memorandum Account costs,⁶⁵ transmission revenue from tariffs authorized by FERC and transmission-related reliability services revenue under FERC jurisdiction, and Department of Energy/Western Area Power Administration Contract Scheduling Coordinator Costs. Finally, pursuant to D.01-01-018, the Emergency Procurement Surcharge Balancing Account (EPSBA) was established, and beginning January 1, 2001, any unrecovered monthly balances in the EPSBA are transferred to the TRA. For the period under our review, the TRA commenced with an end of month balance of $0 for July 1999 and concluded with an end of month balance of $9,475,615,000 as of April 2001. (Ex. 4.) Many more billions passed through the account. Power purchases alone totaled $14.6 billion.

ORA reviewed PG&E's showing, conducted discovery, and produced a report that either approved or did not dispute PG&E's requests, with the single exception of the special contracts and rate design window (which was discussed in the first section of this decision), either approves or fails to dispute PG&E's other requests. In particular, ORA notes that it reviewed monthly reports and:

"verified that PG&E made the necessary corrections and/or adjustments to their respective TRA. ORA concludes that PG&E recorded costs for recovery through the TRA in a manner consistent with Commission decisions and resolutions, and in compliance with subsequent decisions when recording costs associated with new program in the TRA."⁶⁶

Based on our examination of the evidence in this proceeding, we find that PG&E has met its burden of proving that its entries are reasonable and that it has followed Commission-approved procedures in making entries into these accounts.