7. Comments on Proposed Decision
The proposed decision of ALJ Sullivan was mailed to the parties in accordance with § 311(d) of the Pub. Util. Code and Rule 77.1 of the Rules of Practice and Procedure. Opening comments were filed on July 29, 2002. There were no reply comments.
PG&E notes that in prior RAP decisions, "the Commission has required the utilities to file their next RAP applications some period of time after a final decision has been issued in the current proceeding."67 PG&E requests that we do so in this proceeding and suggests that the Commission "authorize it to file its next RAP application only after the Commission has approved the advice letters PG&E has filed to implement Commission decisions 01-03-082 and 02-04-016."68
Since D. 01-03-082 and D. 02-04-016 establish new accounting rules and several new balancing and memorandum accounts that will have an impact on the TRA, we conclude that it is most efficient and accurate for the review of PG&E's regulatory accounts following the implementation of these Commission directives. We therefore grant PG&E's request.
1. The Commission established the RAP as a proceeding in which it would: (1) consolidate revenue requirement adjustments; authorize recovery of preceding year's revenue requirements; adjust authorized revenue requirements for current calendar year; verify and adjust as appropriate the headroom calculation from the TRA; and authorize headroom credit to the TCBA; (2) streamline other balancing accounts and implement ratemaking mechanisms for the end of the transition period; and (3) review revenue allocation and rate design.
2. In D.90-12-128, Conclusion of Law 5 states: "[t]he adopted marginal cost in effect at the time should be used to determine reasonable floor revenues" for special contracts.
3. In D.97-03-017, a General Rate Case decision for PG&E, the Commission ordered that:
"1. The marginal costs for electric service by Pacific Gas and Electric Company (PG&E) as set forth in Appendix B to this order are adopted only for the limited purposes of: (1) payments to qualifying facilities (through capacity allocation factors and the capacity value); (2) evaluation of demand-side management cost-effectiveness, and (3) price floors for discounted special contracts." [emphasis added.] (1997 Cal. PUC LEXIS, *70.)
4. No party requested that this proceeding include the issue of determining a new marginal cost methodology for special contracts.
5. No party to this proceeding has asked for modification or rehearing of D.97-03-017 and D.90-12-128, and the Commission has not modified either decision.
6. Reviewing the methodology for setting marginal costs for evaluating special contracts was not included within the scope of this proceeding, and this ruling was not appealed.
7. A floor price for a contract, when multiplied by the customer's specific usage data, yields the floor revenues, which is the minimum amount that the utility must recover under contract.
8. The CTM equals the difference between the revenues produced by a contract and the floor revenues.
9. D.90-12-128 states that "[i]t would be unreasonable for a utility to enter into a contract that can reasonably be foreseen as not providing a preferable CTM" (Conclusion of Law 9) and if contracts generate a negative CTM, the utility's shareholders must fund that difference (Conclusion of Law 10).
10. Shareholders fund any negative CTM through a credit entry to line 8 of the TRA, which is called Shareholder Participation credits.
11. During the period under our review, PG&E administered seven special electric contracts between PG&E and Mills Hospital, Peninsula Hospital, Sequoia Hospital, Semitropic Water Storage District, Avenal State Prison, Genentech, Inc. and Exxon.
12. The marginal costs in effect during 1999 and 2000 for PG&E are those adopted in D.97-03-017.
13. PG&E used the marginal costs in effect during 1999 and 2000 to calculate the floor revenues and determine the CTM for its special electric and rate design window contracts during that time frame.
14. PG&E escalated the marginal costs adopted in D.97-03-017 to 1999 and 2000 dollars by applying escalation factors supplied by an economic consultant that is often relied upon in Commission proceedings. Such an escalation is consistent with Commission practice and tightens the standards for reasonableness that the contracts must meet.
15. With the exception of Sequoia Hospital in 1999 and Peninsula Hospital in 1999 and 2000, all of PG&E's special electric and rate design window contracts generated positive CTM. During 1999, contract revenues for Sequoia were $10,666 below the floor revenues required for that contract and contract revenues for Peninsula were $11,986 below the floor revenues for that contract. In 2000, the contract revenues from Peninsula were $10,513 below the floor revenues required for that contract.
16. PG&E's CTM calculations for its contracts are reasonable.
17. It is therefore reasonable that PG&E shareholders provide a credit of $33,166 to ratepayers.
18. The total discounts provided to PG&E customers under all special electric and rate design window contracts during 1999 and 2000 - the difference between what these customers paid and what they would have paid if they were charged the frozen, full tariffed rate - was approximately $1.7 million.
19. FERC has found the PX prices during the period of this review to be unreasonable.
20. The price prevailing in PX markets is not the marginal cost of electricity.
21. ORA's proposal to require PG&E to recalculate the floor revenues and CTM for the 1999 and 2000 CTM of its special electric and rate design window contracts substituting the average annual PX price for the adopted energy and generation capacity marginal costs is inconsistent with Commission decisions setting marginal cost and determining the methodology for calculating floor revenues and CTM.
22. There is no legal basis for using unreasonable PX prices to determine the reasonableness of special contracts.
23. It is reasonable to eliminate the one balancing and eleven memorandum accounts as described herein because they no longer serve a regulatory purpose.
24. It is reasonable to accept the 2001 and 2002 illustrative revenue requirements, subject to adjustments to reflect the outcome of pending state and federal proceedings because they use existing methodologies authorized by the Commission.
25. PG&E's sales and billing forecasts are reasonable, but, with the rate freeze in force, PG&E sales and billing forecasts have no impact on customers.
26. PG&E's allocation of revenues to different customer classes is consistent with Commission-adopted methodologies.
27. PG&E uses Commission-adopted methodologies to design its rates.
28. With a rate freeze in place, increases in any rate element are offset by decreases in other rate elements.
29. PG&E's allocation of revenues and rate design changes no customer rates.
30. PG&E's revenue allocation and rate design are reasonable because they follow Commission adopted methodologies.
31. PG&E's calculation of the PX Schedule Price and PX credit are reasonable.
32. PG&E's expenditures ($1.48 million) recorded in the EVBA for the record period are reasonable.
33. The balance of $934,700 in the E-BIDMA account as of April 30, 2001 is reasonable.
34. The balance of $92,582 in the PX BFMMA is reasonable.
35. During the record period, PG&E's balance in the TRA grew from $0 to $9,475,615,000. Power purchases totaling more than $14.6 billion were booked through this account.
36. PG&E followed Commission-approved procedures in making entries into these accounts by documentating each entry and linking its adjustments to Commission and FERC decisions.
37. PG&E's entries into the TRA during this period are reasonable.
1. PG&E performed the floor revenue and CTM calculations associated with its special electric contracts as required by D.90-12-128 and D.97-03-017. These calculations should be adopted.
2. PG&E's CTM calculation and proposed shareholder credits are consistent with Commission decisions and should be adopted.
3. The uncontested issues discussed in Section 7 and described in the Findings of Facts are consistent with Commission-authorized procedures. The entries and adjustments described in Section 7 should be authorized and adopted.
4. ORA's proposal to alter the marginal cost methodology used to calculate CTM is inconsistent with D.90-12-128 and D.97-03-017.
5. PG&E's motion to strike ORA's testimony concerning its proposed marginal cost methodology should be denied.
IT IS ORDERED that:
1. Pacific Gas and Electric Company's (PG&E) Contribution to Margin (CTM) calculation and proposed shareholder credits are adopted and PG&E is authorized to make these entries into the Transition Revenue Account (TRA) account.
2. The resolutions of uncontested issues discussed in Section 7 are adopted and PG&E is authorized to make entries into the TRA and Transition Cost Balancing Account accounts as requested.
3. PG&E is authorized to eliminate the one balancing and eleven memorandum accounts identified herein.
4. PG&E `s entries into the TRA as discussed in this decision are hereby verified.
5. PG&E's ratemaking and revenue adjustments for its illustrative 2001 and 2002 unbundled revenue requirements and unbundled rate components are approved.
6. PG&E's sales and billing forecasts are approved as reasonable.
7. PG&E's revenue allocation and rate design are approved as reasonable.
8. PG&E's schedule PX Calculations and PX credit are approved as reasonable.
9. PG&E is authorized to transfer the $1.48 million in the Electric Vehicle Balancing Account as of April 30, 2001 to the TRA for recovery.
10. PG&E is authorized to transfer the $934,700 in the E-BID Memorandum Account as of April 30, 2001 to the TRA for recovery.
11. PG&E is authorized to transfer the $92,582 in the Block Forward Market Memorandum Account of April 30, 2001 to the TRA for recovery.
12. PG&E's other entries into the TRA as discussed herein are authorized.
13. Within 30 days after the effective date of this order, PG&E shall file tariffs implementing the provisions authorized in this decision.
14. PG&E's motion to strike Office of Ratepayer's Advocates testimony concerning an alternate marginal cost methodology is denied.
15. Within 90 days after Commission approval of PG&E advice letter 2240-E, PG&E shall file its next RAP application.
16. Application 01-06-003 is closed.
This order is effective today.
Dated __________________, at San Francisco, California.
67 PG&E, Opening Comments on Proposed Decision, p. 2. 68 Ibid., p. 3.
