V. The 10% Discount for Residential and
Small Commercial Customers

Section 368 of the Public Utilities Code, among other things, froze rates at their June 10, 1996 levels through no later than March 31, 2002, and provided an immediate 10% reduction of those rate levels for residential and small commercial customers. In 2001, Section 368.5⁷ of the Public Utilities Code was added, which states, in part, that, "[T]he commission may not subject those residential and small commercial customers to any rate increases or future rate obligations solely as a result of the termination of the 10% rate reduction." These references to rate levels implicitly refer to total bundled rate levels, since total rates paid by DA customers are unknown, fluctuate over time, and differ from customer to customer.

PG&E proposes a slightly different treatment of the 10% reduction than SCE proposes. PG&E currently provides the 10% reduction to DA residential and small commercial customers. PG&E argues that this 10% reduction is eliminated when bottoms-up billing is established because rates will not have been increased "solely as a result of the termination of the 10% rate reduction." SCE's current DA billing methodology, which it proposes to apply until Settlement Rates are no longer in effect, provides a 10% reduction to residential and small commercial DA customers. The Commission has directed SCE to maintain the 10% rate reduction for at least the duration of the Settlement Rates. Once the Settlement Rates disappear, however, and SCE moves to a bottoms-up calculation, the 10% rate discount for residential and small commercial DA customers may be eliminated.

To sum up: today both PG&E and SCE provide the 10% reduction to their DA residential and small commercial customers. This will continue for PG&E until it implements bottoms-up billing at which time it may be eliminated. For SCE the 10% reduction will continue for the duration of the Settlement Rates (which are expected to end by mid-2003). At that time SCE will implement bottoms-up billing and may eliminate the 10% reduction.

We agree with PG&E and SCE that upon implementation of bottoms-up billing a rate increase for DA customers will not result "solely as a result of the termination of the 10% rate reduction." It will result from going to bottoms-up billing.