Assignment of Proceeding

Geoffrey F. Brown is the Assigned Commissioner and Robert Barnett is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. Pursuant to D.01-01-018 and D.01-05-064, the Commission imposed surcharges on the retail electric rates charged by SCE.

2. On or about October 1, 2001, the Commission and SCE entered into a settlement of the action entitled Southern California Edison Company v. Loretta Lynch et. al., Case No. 00-12056-RSWL (Mcx), pending in the United States District Court for the Central District of California.

3. The Court approved the federal settlement over the objections of TURN and entered the stipulated judgment. TURN's appeal of the federal settlement is pending and is not affected or prejudiced by its participation in the settlement of this application.

4. Pursuant to the federal settlement, SCE submitted Advice 1586-E, seeking Commission approval, among other things, to establish the PROACT and to apply the surplus of the revenue collected in retail rates, including surcharges, to the reduction of the agreed-upon PROACT balance. Resolution E-3765 approved Advice Letter 1586-E, with modifications.

5. The federal settlement contemplates SCE applying to the Commission to adjust its retail rates upon full recovery of PROACT balance.

6. On January 17, 2003, SCE filed this application proposing a mechanism for the determination that PROACT balance has been recovered; and providing a new revenue requirement, and a new rate design.

7. This application arises during the pendency of SCE's 2003 GRC, and during the pendency of several other proceedings bearing on SCE's retail rates, including but not limited to the Baseline OIR (R.01-05-047), the Direct Access Cost Responsibility Surcharge proceeding (R.02-01-011), the Demand Response OIR (R.02-06-001). Though these other proceedings are not concluded, resolution of this application, absent a settlement, would require the Commission to make assumptions about the outcome of those proceedings, or to provide in a decision on the application for the outcome of those proceedings to be implemented in post-PROACT rates. In the various rate scenarios produced in the course of attempts to negotiate a settlement, SCE and the other Settling Parties have had to do likewise.

8. Fully litigating this application would delay the effective date of the lowering of retail customer rates, perhaps by many months, to a date well beyond the date at which SCE has fully recovered its PROACT balance.

9. An interim implementation of post-PROACT rates to be modified after the application is processed would result in retail rate volatility, which is undesirable.

10. The Settling Parties have agreed upon new retail rates to be in effect from as early as July 1, 2003, for a period of 12 months subject to modification on a system average percentage change (SAPC) basis as the result of any intervening decision changing SCE's authorized revenue requirements. This settlement differs conceptually from the application in that it calls for SCE to make a forecast of the date of full PROACT recovery based upon the prior month's recorded PROACT balance and a forecast of the "Surplus" revenues for the current month, rather than waiting for the confirmation of actual recovery of that balance.

11. This forecast method may result in a small over- or undercollection in PROACT, and the Settlement Agreement provides that SCE shall transfer to the ERRA any unrecovered balance, after first applying any remaining balance in the Catch-Up Surcharge Revenue Memorandum Account to its recovery. Any such over- or under-collection will be returned to or recovered from customers over the following 12 months.

12. The Settlement Agreement provides that such transfer is not inconsistent with any provision of SCE's federal settlement, shall nevertheless constitute full recovery of PROACT for purposes of that federal settlement, and shall not operate to constrain or continue to constrain SCE as respects what would otherwise be its ability to rebalance its capital structure to levels authorized by the Commission.

13. The Settlement Agreement is intended only to provide for new retail customer rates for a 12-month period, subject to modification on an SAPC basis as the result of any intervening Commission decisions changing SCE's authorized revenue requirement, to be superseded after 12 months by the rates the Commission approves in Phase 2 of SCE's 2003 GRC. Assumptions made and issues disposed of are intended to be disposed of solely for purposes of settling the issues raised in the application. However, the Settlement Agreement resolves the current undercollected balance in SCE's Baseline Balancing Account; otherwise, the assumptions are not intended to affect any other pending proceeding.

14. The settled post-PROACT rates are based on a DA CRS shortfall as of December 31, 2003 of $325.6 million. If in R.02-01-011 the Commission adopts a different amount of DA CRS shortfall than $325.6 million, the difference in amount will be allocated to rate groups based on the methodology adopted in R.02-01-011 and will be prospectively reflected in rates in Phase 2 of SCE's 2003 GRC.

15. As of the date that the Settlement Agreement rate reductions go into effect, the undercollected balance of SCE's Baseline Balancing Account (BBA) will be amortized in rates over 12 months, no additional undercollection will prospectively accrue, and the account will be terminated at the end of the 12-month amortization period.

16. SCE held a properly noticed Settlement Conference pursuant to Rule 51(b) of the Commission's Rules of Practice and Procedure on April 17, 2003.

Conclusions of Law

1. The Commission encourages parties to settle otherwise contested matters.

2. The Commission has authority under Rule 51 of its Rules of Practice and Procedure to approve settlements entered into by fewer than all parties participating in a proceeding.

3. The Settlement Agreement is reasonable in light of the whole record, is consistent with law, and is in the public interest.

4. The transfer by SCE to its ERRA of any unrecovered PROACT balance resulting from its forecast of PROACT recovery should be deemed full recovery of PROACT balance for purposes of its federal settlement with SCE in SCE v. Lynch, Case No. 00-12056-RSWL (Mcx).

5. Approval of this Settlement Agreement resolves pending issues in R.01-05-047 regarding the disposition and allocation of SCE's Baseline Balancing Account, without establishing any precedent for either PG&E or SDG&E.

ORDER

IT IS ORDERED that:

1. The Settlement Agreement is approved.

2. The Settlement Agreement shall provide new retail customer rates for a 12-month period, subject to modification on an SAPC basis as the result of any intervening Commission decisions changing Southern California Edison Company (SCE's) authorized revenue requirement, to be superceded after 12 months by the rates the Commission approves in Phase 2 of SCE's 2003 general rate case (GRC).

3. The settled post-PROACT rates are based on a Direct Access Cost Responsibility (DA CRS) shortfall as of December 31, 2003 of $325.6 million. If in Rulemaking (R.) 02-01-011 the Commission adopts a different amount of DA CRS shortfall than $325.6 million, the difference in amount will be allocated to rate groups based on the methodology adopted in R.02-01-011 and will be prospectively reflected in rates in Phase 2 of SCE's 2003 GRC.

4. As of the date that the Settlement Agreement rate reductions go into effect, the undercollected balance of SCE's Baseline Balancing Account (BBA) shall be amortized in rates over 12 months, no additional undercollection will prospectively accrue, and the account will be terminated at the end of the 12-month amortization period.

5. The transfer by SCE to its Energy Resource Recovery Account of any unrecovered PROACT balance resulting from its forecast of PROACT recovery shall be deemed full recovery of PROACT balance for purposes of its federal settlement with SCE in SCE v. Lynch, Case No. 00-12056-RSWL (Mcx).

6. Approval of this Settlement Agreement resolves pending issues in R.01-05-047 regarding the disposition and allocation of SCE's BBA, without establishing any precedent for either Pacific Gas and Electric Company or San Diego Gas and Electric Company.

7. Within 10 days of the effective date of this order, SCE shall file an Advice Letter with revised tariff sheets to implement the authority granted in this decision. The revised tariff sheets shall become effective August 1, 2003, subject to a finding of compliance by the Energy Division, and shall comply with General Order 96-A. The revised tariff sheets shall apply to service rendered on or after their effective date.

8. SCE shall file an Advice Letter with the Energy Division, on 30-days notice, prior to eliminating accounts associated with PROACT. This filing shall not affect the effective date of the rates authorized by this decision.

9. This proceeding is closed.

This order is effective today.

Dated _____________________, at San Francisco, California.

10.

APPENDIX A

Estimated 2003 Post-Settlement Revenue Requirements
Revenue Requirement
Line						Effective					Bundled
No.	Rate Components					July '03					Service			DA
1.	SCE
2.	Distribution
3.		Base Distribution
4.		a.	Base - Distribution			2,194,967
5.		Other Commission-adopted Distribution
6.		a.	Base - Exclusions			131,828
7.		b.	RRB Memo-Related			(53,033)
8.		c.	Bill Limiter Memo Acct.			11,370
9.			Subtotal Other Commission-adopted Distribution			90,165
10.		Total - Distribution				2,285,132
11.	Generation
12.		Base Generation
13.		a.	Base - Generation			516,148					516,148			-
14.		b.	Base - SONGS			464,122					464,122			-
15.			Subtotal Base Generation			980,270					980,270			-
16.		Fuel and Purchased Power
17.		a.	ICIP Fuel			91,805					91,805			-
18.		b.	Fuel			167,670					167,670			-
19.		c.	SCE-Contract			2,265,504					2,265,504			-
20.		d.	Residual Net Short			73,012					73,012			-
21.			Subtotal Fuel and Purchased Power			2,597,991					2,597,991			-
22.		Other Commission-adopted Generation
23.		a.	PROACT Overcollection			(107,901)					(107,901)			-
24.		b.	Catchup Surcharge Overcollection			(3,996)					(3,996)			-
25.		c.	Baseline Bal. Acct.			105,930					105,930			-
26.		d.	DWR Franchise Fee Obligation			18,448					18,448			-
27.		e.	HPC			-					(112,073)			112,073
28.			Subtotal Other Commission-adopted Generation			12,481					(99,592)			112,073
29.		Total - Generation				3,590,742					3,478,669			112,073
30.	Nuclear Decommissioning					45,458
31.	Public Purpose Programs
32.		a.	PGC			174,775
33.		b.	Non-PGC			20,401
34.		c.	CARE Bal. Acct.			60,006
35.			Total PP Programs			255,181
36.	Transmission
37.		a.	Base Revenue			282,318
38.		b.	TRBAA			(42,291)
39.		c.	TACBA			21,545
40.		d.	RSBA			31,562
41.			Total Transmission			293,133
42.	Trust Transfer Amount (TTA)					315,951
43.	SCE Revenue Requirement					6,785,597					3,478,669			112,073
44.	DWR
45.		a.	Power Charge			1,932,146					1,710,161			221,985
46.		b.	Bond Charge			330,592					330,592			-
47.	DWR Revenue Requirement					2,262,738					2,040,753			221,985
48.	TOTAL Revenue Requirement					9,048,335					8,472,258			576,077

(END OF APPENDIX A)

APPENDIX B

************* APPEARANCE *************

Last updated on 22-APR-2003 by: SMJ

A0301019 LIST

Donald Brookhyser

ATTORNEY AT LAW

ALCANTAR & KAHL LLP

1300 S.W. 5TH AVENUE, SUITE 1750

PORTLAND OR 97201

(503) 402-9900

For: Midway Sunset Cogeneration Company

Michael Alcantar

ATTORNEY AT LAW

ALCANTAR & KAHL LLP

1300 SW FIFTH AVENUE, SUITE 1750

PORTLAND OR 97201

(503) 402-9900

For: CAC

Nora Sheriff

ATTORNEY AT LAW

ALCANTAR & KAHL LLP

120 MONTGOMERY STREET, SUITE 2200

SAN FRANCISCO CA 94104

(415) 421-4143

For: Sycamore Generation Company

Evelyn Kahl

ATTORNEY AT LAW

ALCANTAR & KAHL, LLP

120 MONTGOMERY STREET, SUITE 2200

SAN FRANCISCO CA 94104

(415) 421-4143

For: EPUC

Barbara R. Barkovich

BARKOVICH AND YAP, INC.

31 EUCALYPTUS LANE

SAN RAFAEL CA 94901

(415) 457-5537

For: California Large Energy Consumers

Association

Maurice Brubaker

BRUBAKER & ASSOCIATES, INC.

1215 FERN RIDGE PARKWAY, SUITE 208

ST. LOUIS MO 63141

(314) 275-7007

For: Brubaker & Associates, Inc.

Karen Norene Mills

ATTORNEY AT LAW

CALIFORNIA FARM BUREAU FEDERATION

2300 RIVER PLAZA DRIVE

SACRAMENTO CA 95833

(916) 561-5655

For: California Farm Bureau Federation

Jason Reiger

ATTORNEY AT LAW

CALIFORNIA PUBLIC UTILITIES COMMISSION

LEGAL DIVISION

505 VAN NESS AVENUE

SAN FRANCISCO CA 94102

(415) 355-5596

For: Office of Ratepayer Advocates

Norman J. Furuta

ATTORNEY AT LAW

DEPARTMENT OF THE NAVY

2001 JUNIPERO SERRA BLVD., SUITE 600

DALY CITY CA 94014-3890

(650) 746-7312

For: Federal Executive Agencies

Wendy Illingworth

ECONOMIC INSIGHTS

320 FEATHER LANE

SANTA CRUZ CA 95060

(831) 427-2163

For: California Farm Bureau Federation

James D. Squeri

ATTORNEY AT LAW

GOODIN MACBRIDE SQUERI RITCHIE & DAY LLP

505 SANSOME STREET, SUITE 900

SAN FRANCISCO CA 94111

(415) 392-7900

For: California Retailers Association

Dian M. Grueneich

ATTORNEY AT LAW

GRUENEICH RESOURCE ADVOCATES

582 MARKET STREET, SUITE 1020

SAN FRANCISCO CA 94104

(415) 834-2300

For: The University of California and the

California State University

Michael Mc Cormick

GRUENEICH RESOURCE ADVOCATES

582 MARKET STREET, SUITE 1020

SAN FRANCISCO CA 94104

(415) 834-2300

For: Community College League of California

William B. Marcus

JBS ENERGY, INC.

311 D STREET, SUITE A

WEST SACRAMENTO CA 95605

(916) 372-0534

For: JBS Energy, Inc.

(END OF APPENDIX B)