ALJ/RAB/avs DRAFT AGENDA ID #2264
Ratesetting
7/10/2003 H-12
Decision DRAFT DECISION OF ALJ BARNETT (Mailed 5/20/2003)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Southern California Edison Company (U 338-E) for Authority to Lower and Adjust Retail Electric Rates for All Customer Classes Upon Completion of Full Recovery of Procurement Related Obligations Account. |
Application 03-01-019 (Filed January 17, 2003) |
(Appearances are in Appendix B)
DECISION APPROVING A SETTLEMENT
LOWERING SOUTHERN CALIFORNIA EDISON'S
RETAIL ELECTRIC RATES BY $1.25 BILLION
TABLE OF CONTENTS
TITLE PAGE
DECISION APPROVING A SETTLEMENT LOWERING SOUTHERN CALIFORNIA EDISON'S RETAIL ELECTRIC RATES BY $1.25 BILLION 22
Categorization and Need for Hearings 55
I. Stipulated Post-PROACT Retail Rates 66
A. The Settlement Agreement is Supported by the Record 1111
B. The Settlement Agreement is Consistent with Law 1212
C. The Settlement Agreement is in the Public Interest 1212
Comments on the Settlement Agreement 1515
APPENDIX A
APPENDIX B
DECISION APPROVING A SETTLEMENT
LOWERING SOUTHERN CALIFORNIA EDISON'S
RETAIL ELECTRIC RATES BY $1.25 BILLION
In early 2001, the Commission authorized rate surcharges to address the financial upheaval resulting from the energy crisis of 2000-2001. (Decision (D.) 01-03-082 and D.01-05-064.) On October 5, 2001, the United States District Court approved a settlement between Southern California Edison (SCE) and the Commission that, among other things, established the Settlement Rates and new ratemaking mechanisms effective as of September 1, 2001 (the federal settlement).
On November 14, 2001, SCE filed Advice 1586-E to establish the Procurement Related Obligations Account (PROACT) and an associated ratemaking structure consistent with the federal settlement. On January 23, 2002, the Commission issued Resolution E-3765 approving, with modifications, the structure and operation of the PROACT. Under the Commission-approved PROACT ratemaking structure, the difference between SCE's revenues from Settlement Rates and SCE's Recoverable Costs (this difference is defined as Surplus) is determined on a monthly basis through the operation of the Settlement Rates Balancing Account (SRBA). The amount of Surplus determined in the SRBA is used during the Rate Repayment Period to recover the PROACT balance. In accordance with the federal settlement and Resolution E-3765, SCE established the PROACT on September 1, 2001, with an initial balance of $3.578 billion. The balance in the PROACT was $2.641 billion at December 31, 2001, and $686 million on November 30, 2002. SCE in its application projected that it could recover the remaining PROACT balance as early as July 2003, which would result in the termination of Settlement Rates; it now believes it may do so as early as June 2003.
SCE's federal settlement calls for the rate surcharges to be removed once the balance in SCE's PROACT has been fully recovered. In this application SCE seeks authority to lower its retail electric rates by approximately $1.25 billion upon full recovery of its PROACT balance. SCE seeks advance approval for post-PROACT rates in order that reduced rates may become effective as soon as possible once the PROACT balance has been recovered. In this application SCE estimated new rates would be effective September 1, 2003.
The application as filed proposed (1) a net change in revenues of zero for the domestic (residential) rate group overall, and an average 8% bill reduction for high-use residential customers, i.e., those in Tiers 4 and 5, through the elimination of those two tiers; and (2) lower rates for all other retail rate groups.
The Utility Reform Network (TURN) and the Office of Ratepayer Advocates (ORA) filed protests to the application. In February, 2003, the Assigned Administrative Law Judge (ALJ) directed to submit a different allocation of the reduction in SCE's generation revenue requirement. SCE submitted this additional evidence. TURN and other parties also submitted data requests to SCE, requesting that SCE make assumptions different from those in the application and show the resulting rate levels under those differing assumptions. SCE responded to those data requests. A prehearing conference (PHC) was held on March 21, 2003, at which additional rate scenarios were requested of SCE, which SCE has provided. A second PHC was held April 8, 2003.
This application arises during the pendency of SCE's 2003 General Rate Case (GRC) and during the pendency of several other proceedings bearing on SCE's retail rates, including but not limited to the Baseline Order Instituting Rulemaking (OIR) (R.01-05-047), the Direct Access Cost Responsibility Surcharge (DACRS) ODR (R.02-01-011) and the Demand Response OIR (R.02-06-001). As those proceedings are not concluded, resolution of this post-PROACT application, absent a settlement, would cause the Commission to make assumptions about the outcome of those proceedings.
It is apparent that fully litigating the application would delay the effective date for lowering retail customer rates, perhaps by many months, to a date well beyond the date at which SCE has fully recovered its PROACT balance. Alternatively, we could issue an interim decision to be modified after the application was heard on a complete record. All parties recognize that the implementation of interim rates to be modified at a later date would promote retail rate volatility, which is undesirable. Because of these concerns, the parties began settlement discussions which culminated in a duly noticed settlement conference on April 17, 2003, where the parties entered into a settlement agreement.
On April 23, 2003, SCE moved the Commission (1) to find reasonable and approve the Settlement Agreement attached to the motion, and (2) to shorten to 15 days the 30-day comment period otherwise provided for in Rule 51.4. SCE asks for approval of the settlement because rate reduction is in the public interest and the settlement reflects the concerted efforts of many participating parties. It says the Settlement Agreement is reasonable in light of the whole record, consistent with law, and in the public interest. SCE asks for shortening of the 30-day comment period in order to facilitate the Commission's issuance of a decision in time for lower rates to become effective as early as July 1, 2003. SCE believes no prejudice will result from this request because no party has spoken against the settlement or stated an intention to oppose it. As of the date it submitted the Settlement Agreement, SCE had received no written indication whatsoever that any party would oppose the Settlement Agreement.
In addition to removal of the surcharges, this settlement sets forth SCE's unbundled revenue requirements for 2003 - a total system average reduction of nearly 12.9% for bundled service customers - an allocation of those revenue requirements to various rate groups, and proposes a rate design to recover those revenue requirements.
The Settlement Agreement does the following.
1. Reduces rates by approximately $1.25 billion for the 12 months beginning July 1, 2003, if PROACT is projected in June to be fully recovered in June.
2. Establishes the process by which SCE will forecast when PROACT has been fully recovered;
3. Allocates SCE's estimated post-settlement revenue requirements to the various rate groups;
4. Proposes new rate levels and structures for those various rate groups;
5. Establishes a procedure to address the possibility of a forecasting error.
Categorization and Need for Hearings
In Resolution ALJ 176-3110, dated April 3, 2003, the Commission preliminary categorized this application as ratesetting, and preliminarily determined that hearings were necessary. No hearings were held. Given this developments, it is necessary to change the preliminary determination that hearings were required.
