VI. Assignment of Proceeding
Commissioner Carl Wood is the Assigned Commissioner and ALJ John Wong is the assigned Administrative Law Judge in this proceeding.
1. AB 265 was part of the legislative effort to stabilize electric rates during the height of the energy crisis.
2. AB 265 was signed into law on September 6, 2000 as an urgency statute.
3. Section 332.1(b) provides for the establishment of a rate ceiling of 6.5 cents per kWh for SDG&E's smaller customers.
4. AB 265 authorized the Commission to establish an accounting procedure to track and recover the unrecovered difference between the rate ceiling and actual rates.
5. Section 332.1(c) requires that the accounting procedure utilize revenues associated with the sales of energy from utility-owned or managed generation assets to offset an undercollection, if an undercollection occurs.
6. The rate ceiling required by AB 265 was established in D.00-09-040 for SDG&E's residential, small commercial, and lighting customers.
7. The rate ceiling was made retroactive to June 1, 2000, and is to remain in place through December 31, 2002.
8. Section 332.1(b) allows the Commission to extend the rate ceiling through December 2003, and to adjust the ceiling rate.
9. AB X1 43 imposed a mandatory frozen rate of 6.5 cents per kWh on non-AB 265 customers, which was implemented by the Commission in D.01-05-060.
10. D.01-05-060 authorized SDG&E to establish a memorandum account to record the revenues and revenue shortfalls associated with this frozen rate.
11. The AB 265 undercollection was recorded in the ERCRSA, which was subsequently renamed the ERSA.
12. In D.01-11-029, as a result of a settlement, the AB 265 undercollection was reduced by $100 million.
13. D.01-01-061 directed the utilities to use their URG to serve existing customers at cost-based rates.
14. SDG&E filed an application for rehearing of D.01-01-061 seeking clarification that the URG requirement did not apply to the intermediate term contracts.
15. SDG&E's application for rehearing of D.01-01-061 was denied in D.01-05-035, and SDG&E was ordered to comply with the URG requirement by making the appropriate accounting adjustments to the intermediate term contracts.
16. On June 5, 2001, SDG&E filed its Writ Petition with the Court of Appeal regarding D.01-01-061 and D.01-05-035.
17. SDG&E subsequently filed a federal lawsuit against the Commission alleging, among other things, that D.01-01-061 and D.01-05-035 constitute an unconstitutional taking.
18. SDG&E's request for an AB 265 surcharge was filed in A.01-01-044, and the surcharge amount was subsequently revised to .00349 cents per kWh.
19. DWR, SDG&E, and Sempra signed a MOU to settle numerous outstanding issues, which required several implementing decisions to be issued by the Commission.
20. If all the implementing decisions provided for in the MOU were issued, the AB 265 undercollection would be eliminated without the need for the proposed surcharge.
21. Although some of the implementing decisions were adopted by the Commission, the Commission rejected that portion of the MOU which would have settled the Writ Petition.
22. Evidentiary hearings were held on June 24, 2002 through July 2, 2002, and the matter was submitted on August 7, 2002.
23. SDG&E filed Advice Letter 1405-E on May 10, 2002 seeking approval to return to AB X1 43 customers the $168 million overcollection in the TCBA as of March 31, 2002, including accrued interest.
24. Advice Letter 1405-E is pending before the Commission in the form of a draft resolution and a draft alternate resolution.
25. On June 14, 2002, SDG&E proposed to the Commissioners that the federal litigation regarding the intermediate term contracts be settled.
26. Comments on the proposed settlement of the federal litigation were solicited in an assigned Commissioner's ruling dated June 18, 2002.
27. The proposed settlement of the federal litigation has not yet been acted upon.
28. The public had an opportunity to comment on the surcharge and the proposed settlement of the federal litigation at two public participation hearings that were held in the San Diego area in August 2002.
29. The ERSA keeps track of the AB 265 undercollection.
30. The applicable portion of the CTC revenues and other overcollections recorded in the TCBA are used to partially offset the AB 265 undercollection in the ERSA.
31. As a result of D.01-01-061, SDG&E's URG costs were included in the PECA.
32. SDG&E's URG costs are currently recovered through the PECA from the residual revenues from the Schedule EECC rates after disbursements are made to DWR for the power it procures for SDG&E's retail customers.
33. In late 1996 and early 1997, SDG&E entered into the intermediate term contracts with Illinova, LG&E, and PacifiCorp.
34. The AB 265 undercollection on March 31, 2002 and May 31, 2002, were $338 million and $324.7 million, respectively.
35. SDG&E forecasts that the AB 265 undercollection, as of December 31, 2002, will be approximately $222 million.
36. If the Commission lacked the authority to order SDG&E to sell the intermediate term contracts at cost to customers from February through December 2001, SDG&E asserts that the forecast of the undercollection would be artificially low.
37. The concern of this decision is on SDG&E's request for an AB 265 surcharge, and its relationship to the mandates set forth in AB 265.
38. SDG&E's witness provided testimony at the hearings regarding the composition of the $168 million overcollection for AB X1 43 customers.
39. The $168 million overcollection only includes the AB X1 43 customers' 30% share ($23 million) of the $77 million resulting from the adjustment of the intermediate term contract revenues as required by D.01-05-035.
40. SDG&E requests that the surcharge be imposed on all AB 265 customers for a period of two years, and that the CTC rate recovery continue for that period.
41. The offset provision of AB 265 appears in § 332.1(c) and states that the "accounting procedure shall utilize revenues associated with sales of energy from utility-owned or managed generation assets to offset an undercollection, if undercollection occurs."
42. The intermediate term contracts were owned, managed and controlled by SDG&E.
43. The arguments and the evidence over whether the intermediate term contracts are shareholder assets, or assets dedicated to the use of utility customers, are conflicting.
44. D.93-02-019 and D.95-12-018 required SDG&E to report any goods or services that SDG&E provided to any of its affiliated entities, and the sale or transfer of any tangible asset from SDG&E to an affiliated entity.
45. SDG&E's annual Affiliate Transaction Report for 1996 through 2000 failed to list or disclose the use by Enova Corporation or Sempra, SDG&E's parent companies, of the intermediate term contracts for hedging purposes.
46. Both D.01-01-061 and D.01-05-035 recognized that the requirement to use URG assets, including the intermediate term contracts, to serve existing customers at cost based rates was based on the emergency situation that existed at the time.
47. AB 265 does not list which utility-owned or managed generation assets should be subject to, or excluded from, the offset provision in § 332.1(c).
48. The discussion of SDG&E's taking argument in D.01-05-035 is relevant to SDG&E's arguments in this proceeding.
49. The net revenues generated from the intermediate term contracts for the period from February 1, 2001 through December 31, 2001 have already been accounted for as directed by the Commission.
50. The net revenues from the intermediate term contracts for the period from June 1, 2000 through January 31, 2001 amount to $130 million plus interest.
51. Although AB 265 was signed into law on September 6, 2000, the rate ceiling was made retroactive to June 1, 2000.
52. If SDG&E's advice letter is approved, AB X1 43 customers would receive a $168 million credit, whereas AB 265 customers face an undercollection of $222 million.
53. AB 265 customers should be protected from an additional surcharge, and the full use of the $130 million offset will achieve that objective.
54. SDG&E's forecasted undercollection of $222 million by the end of 2002 is premised on applying a projected year-end PECA overcollection to the AB 265 undercollection.
55. The AB 265 customers' share of the expected $120 million true-up adjustment by DWR could be applied to reduce the AB 265 undercollection.
56. The potential to reduce the AB 265 undercollection through means other than imposing a surcharge on customers' rates are viable options which should be pursued.
1. If the energy being sold from the generation assets are utility-owned or managed generation assets, then the revenues associated with such sales must be used to offset the AB 265 undercollection.
2. The operative words to examine in the offset provision are whether the utility "owns" or "manages" the generation asset.
3. The sale of energy from the intermediate term contracts by SDG&E triggered the application of the offset provision contained in § 332.1(c).
4. The Commission has the authority to supervise and regulate every public utility, and may do all things which are necessary and convenient in the exercise of such power and jurisdiction.
5. The Commission's ratemaking authority includes determining just and reasonable rates.
6. The Commission, and not the utility, has the authority to determine the appropriate accounting of assets, costs, and revenues for ratemaking purposes.
7. For the purpose of the offset provision in § 332.1(c), it does not make a difference whether the intermediate term contracts were characterized as shareholder assets, or assets used by the utility for the benefit of utility customers.
8. The phrase "utility-owned or managed generation assets" does not make a distinction between a generation asset that serves shareholder interests, and a generation asset that is used by the utility for the benefit of its utility customers.
9. Since § 332.1(c) only refers to "revenues associated with sales of energy from utility-owned or managed generation assets to offset an undercollection," all utility-owned or managed generation assets, including the intermediate term contracts, are subject to the offset provision.
10. The offset provision in § 332.1(c) applies to the net revenues associated with the sales of energy from the intermediate term contracts because SDG&E owned, managed and controlled those generation assets, and sold the energy from those contracts.
11. Since the offset provision in § 332.1(c) relates to the undercollection created by the rate ceiling, the eight-month period suggested by ORA should be used to determine the amount of revenues to offset against the undercollection.
12. The recommendation to decrease the $130 million offset to reflect the allocation of URG to all customer classes should not be adopted.
13. SDG&E should be directed to make the necessary accounting adjustments, in an advice letter filing, which uses the entire $130 million, plus interest, in net revenues from the sales of energy from the intermediate term contracts during the period from June 1, 2000 through January 31, 2001, as an offset against the AB 265 undercollection as required by § 332.1(c).
14. SDG&E's request that the AB 265 portion of the overcollection balance in the PECA as of December 31, 2002 be transferred to the TCBA should be granted.
15. The Commissioner assigned to this proceeding should coordinate with the Energy Division staff assigned to the other proceedings in which the $120 million true-up adjustment of DWR is being discussed, to determine whether $84 million of it can be used to reduce the AB 265 undercollection.
16. SDG&E's request for a surcharge of 0.00349 cents/kWh for a period of two years on its AB 265 customers should be denied.
17. SDG&E should be required to filed a quarterly report on the AB 265 undercollection and all offsetting adjustments.
18. The AB 265 rate ceiling should be allowed to expire on December 31, 2002.
IT IS ORDERED that:
1. Pursuant to the offset provision contained in Public Utilities Code § 332.1(c), San Diego Gas & Electric Company (SDG&E) shall make the necessary accounting adjustments in an advice letter filing, to use the entire $130 million, plus interest, in net revenues from the sales of energy from the intermediate term contracts during the period from June 1, 2000 through January 31, 2001, as an offset against the undercollection created by the rate ceiling imposed by Assembly Bill (AB) 265.
2. SDG&E shall file the advice letter required by Ordering Paragraph 1 within 20 days of the effective date of this decision. The advice letter shall be effective on filing, subject to Energy Division's determination that the advice letter is in compliance with this decision.
3. SDG&E's request that the AB 265 portion of the balance (70%) in the Purchased Electric Commodity Account as of December 31, 2002, be transferred to the Transition Cost Balancing Account and applied to the AB 265 undercollection is granted.
4. SDG&E's request for authorization to impose a surcharge of $0.00349 per kilowatt hour on AB 265 customers for a period of two years is denied.
5. SDG&E shall file a quarterly report in this docket, or in another docket as may be directed in a ruling, detailing the amount of the AB 265 undercollection and all offsetting adjustments to the undercollection.
6. The first quarterly report shall be filed on the first business day in January 2003, and shall continue on the first business day of each succeeding quarter until the AB 265 undercollection is eliminated.
7. The Commissioner assigned to this proceeding shall take steps to coordinate with the Energy Division staff assigned to the other proceedings in which the $120 million true-up adjustment is being discussed, to determine whether $84 million of that amount can be used to reduce the AB 265 undercollection.
This order is effective today.
Dated ______________________, at San Francisco, California.
