Assignment of Proceedings

Loretta M. Lynch and Geoffrey F. Brown are the Assigned Commissioners and Peter Allen is the assigned Administrative Law Judge in these proceedings.

Findings of Fact

1. Among the allocation methodologies proposed in this proceeding, ORA's proposed allocation methodology is both consistent with recent Commission decisions and provides the fairest allocation of DWR's 2003 revenue requirement.

2. ORA's proposed allocation methodology should be modified to reflect differences in line loss among the utilities to avoid cross-subsidies.

3. Using revenues from off-system sales to directly offset the revenue requirement of the dispatching utility provides a better incentive for economic dispatch than would pooling of revenues from off-system sales.

4. Allocation of DWR's revenue requirement should take into consideration direct access customers subject to the Cost Responsibility Surcharge (CRS) set in R.02-01-011.

5. Consideration of direct access customers subject to the Cost Responsibility Surcharge (CRS) set in R.02-01-011 requires the results of a "Direct Access-In" modeling run from DWR's consultant.

6. A "Direct Access-In" modeling run was not available in time to become part of the evidentiary record in this proceeding.

7. D.02-09-053 required that revenues from sales of excess energy should be allocated pro rata between DWR and the utilities.

8. DWR's August 16 Determination does not reflect the treatment of revenues from sales of surplus energy adopted in D.02-09-053.

9. Crediting of revenues from the sale of excess energy to the customers of the utility involved in the transaction provides the proper incentives for utilities to maximize the revenues from sales of surplus energy.

10. Utilities are not required to obtain ancillary services through DWR.

11. Utilities differ in their potential need for DWR to provide ancillary services in 2003.

12. DWR's August 16 determination does not reflect differences between utilities relating to DWR provision of ancillary services.

13. DWR's August 16 Determination was based upon a modeling run known as PROSYM 36.

14. PROSYM 36 does not reflect the treatment of excess energy sales revenue adopted in D.02-09-053.

15. PROSYM 36 does not contain the most recent data and assumptions.

16. The output of the modeling run known as PROSYM 37 was presented too late in the proceeding to allow all parties a reasonable opportunity to evaluate and address its contents and impacts.

17. A supplemental determination from DWR that provides the necessary additional information would allow the Commission to improve the accuracy and equity of its allocation of DWR's 2003 revenue requirement.

18. Significant changes in the procedures for making remittance payments to DWR are not necessary.

19. PG&E's proposal to alter the procedures for remittance payments to DWR is a significant change to current practices and is opposed by DWR.

20. The evidentiary record does not contain accurate information about the volume of direct access sales that will be subject to the surcharge ordered in D.02-11-022.

21. Actual data for DWR's revenue requirement for the year 2002 will not be available until 2003.

22. With DWR's agreement, ALJ Allen deferred all issues relating to the true-up of DWR's 2001-2002 revenue requirement until 2003.

23. D.02-08-071 authorized PG&E and SCE to enter into power contracts using the credit backing of DWR, but did not authorize SDG&E to do so.

Conclusions of Law

1. ORA's proposed methodology, with the modifications described above, should be adopted.

2. A "Direct Access-In" modeling run should be utilized for allocation when it becomes available, consistent with due process.

3. Until a "Direct Access-In" modeling run becomes available, a modeling run without "Direct Access-In" should be utilized.

4. Revenues from sales of excess energy should offset the portion of the DWR revenue requirement allocated to the customers of the dispatching utility.

5. DWR's August 16 Determination, October 23 Memorandum, and the Rate Agreement preclude the Commission from allocating to a utility the actual costs that DWR incurs for providing ancillary services to that utility.

6. The use of PROSYM 37 at this time would not be consistent with due process.

7. The use of PROSYM 36 at this time does not present due process issues.

8. A supplemental determination from DWR, as described above, could remedy the due process problems of using an updated modeling run.

9. All parties should have equal opportunity to provide input to DWR's supplemental determination, and should be subject to the same deadline.

10. Utilities should generally maintain their current processes for remitting funds to DWR.

11. Changes to current remittance practices should be limited to those necessitated by Commission decisions subsequent to D.02-02-052.

12. Each utility should remit DWR's share of surplus sales revenue directly to DWR on an actual incurred-cost basis.

13. The Rate Agreement bars the utilities from remitting variable costs and ancillary services costs directly to DWR on an actual incurred-cost basis.

14. Calculation of the power charge should use DWR retail sales adjusted to reflect the protocol for off-system sales adopted in D.02-09-053.

15. It is reasonable to defer until 2003 all issues relating to the true-up of DWR's 2001-2002 revenue requirement.

16. Any 2003 DWR revenue requirement pertaining to power contracts entered into by DWR between August 22, 2002 and January 1, 2003 (pursuant to D.02-08-071) should be allocated to the utility entering the particular contract.

17. SCE's recommendation that it be authorized to use the "Catch-Up" surcharge revenues to offset the increase in DWR revenue requirements is reasonable.

18. This decision construes, applies, implements, and interprets the provision of AB 1X (Chapter 4 of the Statues of 2001-02 First Extraordinary Session). Therefore, Pub. Util. Code § 1731 (c) (applications for rehearing are due within 10 days after the date of issuance of the order or decision) and Pub. Util. Code § 1768 (procedures applicable to judicial review) are applicable.

ORDER

IT IS ORDERED that:

1. Department of Water Resources' (DWR's) 2003 revenue requirement is to be allocated according to the allocation methodology proposed by Office of Ratepayer Advocates (ORA), as modified and described above, and as set forth in Appendix A.

2. Based on the adopted allocation methodology, DWR's total 2003 revenue requirement is allocated to the utilities as follows:

3. Revenues from excess sales are to be accounted for as described above.

4. DWR's forecast ancillary services costs are to be allocated on the same basis as fixed costs until an improved allocation method is approved by the Commission.

5. No later than December 30, 2002, parties may submit information and assumptions for DWR's use in a supplemental determination. If parties do so, they shall also file such information and assumptions at the Commission's Docket Office and serve them on all parties to this proceeding.

6. DWR is encouraged to promptly submit a supplemental determination, as described above.

7. Each utility shall remit DWR's share of surplus sales revenue directly to DWR on an actual incurred-cost basis.

8. Calculation of the power charge shall use DWR retail sales adjusted to reflect the protocol for off-system sales adopted in D.02-09-053, as described above.

9. The respective servicing agreement or Commission order for each utility should be modified to the extent necessary to be consistent with the approaches described above.

10. Any true-up of DWR's 2001-2002 revenue requirement is deferred until actual data for 2002 is available, consistent with the ruling of Administrative Law Judge (ALJ) Allen.

11. Any 2003 DWR revenue requirement pertaining to power contracts entered into by DWR between August 22, 2002 and January 1, 2003 (pursuant to D.02-08-071) shall be allocated to the utility entering the relevant contract.

12. SCE shall use the "Catch-Up" surcharge revenues to offset the increase in DWR revenue requirements as directed in the body of this decision.

13. The Commission or Assigned Commissioner or Administrative Law Judge shall issue further orders or rulings as needed regarding the process and schedule of future phases of this proceeding.

14. The Commission or ALJ shall issue further orders or rulings as needed regarding the process and schedule of future phases of this proceeding.

APPENDIX A

Appendix A

Allocation Methodology for 2003 DWR Rev. Req.

Note: Values may not sum to total due to rounding

*For URG supplied energy, ORA referenced line Total Generation from "DWR DWR Run37 CA IOU Production Costs with Contracts Reallocated.xls." Since this reference does not include bilateral contracts, Energy Division recalculated URG supplied energy by adding together Retained Generation, Bilaterals, and QFs from "DWR Run36 CA IOU Production Costs interim with CALP DWRN4-5 A.xls."

2) Allocate adjusted DWR Rev Req. ($4.564 million) to each IOU according to their share of DWR pre-DA supplied energy.

END OF APPENDIX A

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