XII. Comments on Alternate Decision
The alternate decision of President Peevey was mailed to the parties in accordance with Rule 77.6 of the Commission's Rules of Practice and Procedure. Comments were received on September 16, 2004 from the Settling Parties, SDG&E, ORA, and CLECA. DWR also submitted a memorandum. Reply comments were received on September 20 from the Settling Parties and SDG&E.
Several changes were made to the decision in response to comments. In particular, a correction was made to the mathematical ratio analysis used to derive the SDG&E percentage allocation of unavoidable costs. SDG&E, in its comments, correctly pointed out that the correct numbers should be based on the Comparison Exhibit. Thus, the calculations are modified in this decision to reflect a 10.3% allocation of unavoidable costs to SDG&E. We did not, however, eliminate the use of the upper bound of the "fairness metric" proposals, as suggested by SDG&E. Consistent with the rationale already articulated in this decision, it is appropriate to use an average of all of the proposals to derive a fair allocation to SDG&E.
In addition, in response to comments by the Settling Parties, we modify the effective date of the permanent allocation to be January 1, 2004, consistent with expectations of all parties and based on the original scoping of this matter in the proceeding.
Finally, we make a significant change to the percentage allocation to PG&E and SCE in this decision, due to calculation errors that were inadvertently included in the original version. While the text of the decision was correct in stating that we based the SCE and PG&E allocations on their agreement in the Proposed Settlement, the percentages originally included in the decision did not reflect that outcome. This has been corrected in the final version of the alternate decision, such that the allocation of unavoidable costs is 42.2% to PG&E and 47.5% to SCE.
1. Annual re-litigation of an allocation methodology to be applied to DWR's revenue requirement is neither efficient nor necessary.
2. DWR's supplemental revenue requirement determination was based on Prosym Run 45.
3. The Proposed Settlement's use of the costs-follows-contracts methodology is not equitable.
4. The Proposed Settlement relies upon a flawed forecast of future above-market costs.
5. The Proposed Settlement's use of historical forecasts of the net short positions of the three utilities as a basis for future cost allocation is too uncertain to be found equitable.
6. No party's litigation position proposed an equitable allocation methodology.
7. The pro rata allocation methodology adopted in D.02-12-045 was generally equitable, but the residual calculation approach used in that decision was flawed.
8. Several parties proposed fairness metrics for evaluating allocation methodologies.
9. Avoidable DWR contract costs were previously allocated in D.02-09-053.
10. The utilities proposed, and DWR agreed to, the implementation of utility specific balancing accounts.
1. A permanent allocation methodology for DWR's revenue requirement should be adopted.
2. The Proposed Settlement is inconsistent with D.02-12-045.
3. The Proposed Settlement is not equitable, and should not be approved.
4. The parties' fairness metrics provide an equitable basis for determining a permanent allocation of total costs. Those percentages should be adjusted to account for the fact that this decision is allocating unavoidable costs only.
5. The pro rata allocation methodology adopted in D.02-12-045 provides a reasonable starting point for a permanent allocation of total costs.
6. The residual calculation approach used in D.02-12-045 should be replaced with a separate calculation of fixed costs.
7. DWR should establish utility specific balancing accounts.
8. This decision construes, applies, implements, and interprets the provisions of Assembly Bill (AB) 1X (Chapter 4 of the Statutes of 2001-02 First Extraordinary Session).
ORDER
IT IS ORDERED that:
1. The allocation methodology adopted today for Department of Water Resources' (DWR) revenue requirement is permanent.
2. The Proposed Settlement is not adopted.
3. The allocation of variable costs previously adopted in Decision (D.) 02-09-053 remains unchanged.
4. The allocation of fixed costs of DWR's revenue requirement is: Pacific Gas and Electric Company - 42.2%, Southern California Edison Company - 47.5%, and San Diego Gas & Electric Company - 10.3%.
5. The utilities are directed to work with DWR to implement utility specific balancing accounts, as described above.
6. 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 to this decision.
7. Consistent with D.04-01-028, the allocation methodology adopted in this decision should be applied as of January 1, 2004 as in Appendix A.
This order is effective today.
Dated , at San Francisco, California.
APPENDIX A
IOU Cost Allocation Summary
