PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
E-1a
ENERGY DIVISION RESOLUTION E-3726
March 27, 2001
Resolution E-3726. San Diego Gas & Electric Company (SDG&E) filed an Interim Bill Stabilization Plan to implement D.00-08-037; Revisions to the Plan and Implementation of the Energy Rate Ceiling Retroactive Credit in Compliance with Assembly Bill 265 and D.00-09-040, and; proposes to apply similar plan to Direct Access (DA) Customers. SDG&E's Interim Bill Stabilization Plan implementing D.00-08-037 is approved; SDG&E's revisions to the Plan and implementation of the Energy Rate Ceiling Retroactive Credit to comply with AB 265 and D.00-09-040 are approved with modifications; SDG&E's proposal to apply the Plan to DA customers is approved with modifications.
By Advice Letters 1249-E filed August 28, 2000; 1254-E Filed on September 12, 2000; 1260-E/-E-A filed on October 2/Oct 30, 2000; and 1264-E/-E-A filed on October 19/December 6, 2000.
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SUMMARY
This Resolution approves with modifications, San Diego Gas & Electric Company's (SDG&E's) Advice Letters (ALs) 1254-E and 1260-E-A, which implement the expanded rate stabilization plan required by Assembly Bill (AB) 265 and adopted in Decision (D.) 00-09-040 for SDG&E's bundled service customers. It also approves with modifications, SDG&E's request to implement a similar rate stabilization plan for Direct Access (DA) customers as filed in AL 1264-E-A.1 We direct SDG&E to show deferred amounts including carrying charges on bundled customer bills and to show DA Plan benefit amounts including carrying charges on DA customer bills. We require this additional information on customer bills for equity reasons. Deferred charges and amounts carried for DA customers will be due from customers upon termination of SDG&E distribution service. We further direct SDG&E to only collect carrying charges on directly associated carried amounts. No customer will be liable for future recovery or carrying charges for monthly electricity bills fully paid.
SDG&E's AL 1249-E implemented a bill stabilization plan adopted in D.00-08-037. AL 1249-E was in effect for a short period of time until it was largely superceded by the rate stabilization plan required by AB 265. This Resolution also approves AL 1249-E, noting that the tariffs filed in that advice letter were subsequently revised in AL 1254-E.
BACKGROUND
Pursuant to D.99-05-051, SDG&E's rate freeze ended on July 1, 1999, about one year before the electric energy market experienced unprecedented price volatility and extraordinarily high rate levels. The end of frozen rates meant that SDG&E's customers' bills reflected actual electric energy prices. By the Summer of 2000, the increase in electricity prices caused SDG&E's customers' bills to double or triple in some cases. This prompted urgent action from the Legislature and the California Public Utilities Commission (Commission).
In August 2000, the Commission adopted a bill stabilization plan in D. 00-08-037, which established a $68 cap for the first 500 kWh for residential and $220 for the first 1,500 kWh for small commercial (<20 kW) customers. This cap was retroactive to June 1, 2000. SDG&E filed AL 1249-E, as directed in Ordering Paragraph (OP) 7 of D. 00-08-037, on August 28 to implement the plan adopted in that decision. By AL 1249-E, SDG&E also established the Interim Bill Stabilization Sub-Account within the Transition Cost Balancing Account (TCBA) to track the undercollected energy costs, including carrying costs and adjustments retroactive to June 1, 2000.
Assembly Bill (AB) 265, an urgency statute enacted by the Legislature, was signed into law on September 6, 2000. AB 265 added Section 332.1 to the Public Utilities (PU) Code2 requiring the Commission to establish a ceiling of 6.5 cents per kilowatt hour (kWh) specifically on the "energy component of electric bills for residential, small commercial, and street lighting customers of the San Diego Gas and Electric Company" (subsection b). The ceiling is retroactive to June 1, 2000, and shall be in effect through December 31, 2002, at a minimum. Section 332.1 also requires the Commission to establish an accounting procedure to track and recover reasonable and prudent costs of providing electric energy to retail customers unrecovered through retail bills due to the application of that ceiling. Any undercollection in this balancing account is to be offset with revenues associated with sales of energy from utility owned or managed generation assets.
PU Code Section 394 denies Commission authority over the rates of competitive Electric Service Providers (ESPs). AB 265 does not expand Commission authority over ESP rates. Section 332.1, added by AB 265, neither requires nor forbids the Commission to authorize SDG&E to apply the rate stabilization plan to the customers of ESPs.
Consistent with Code Section 332.1, the Commission approved an expanded rate stabilization plan in D. 00-09-040, issued on September 7, 2000, in I.00-08-002. This plan effectively requires SDG&E to defer the portion of its energy procurement charges in excess of 6.5 cents/kWh. Eventual recovery of the deferred charges is subject to reasonableness review. Like AB 265, D. 00-09-040 provides no direction to SDG&E for treatment of DA customers. The Commission has no authority over ESP rates or procurement practices. We can authorize SDG&E to defer its own charges to bundled energy customers but not to defer the electric energy charges of DA customers, as those charges belong to the ESPs that procure that energy.
However, The commission does have the authority under Section 701, to "regulate every public utility in the State and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction." If we deny SDG&E's proposed DA Plan, then customers in SDG&E's service territory that want to receive plan benefits will have no choice but to return to or remain with SDG&E bundled service. Therefore, it is necessary to extend rate stabilization benefits to DA customers in order to continue direct access as a viable option. Extending the provisions of AB 265 to DA customers amounts to authorizing SDG&E to offer loans to its DA customers, equivalent to the benefit these DA customers would receive as bundled customers. We will therefore exercise our authority to authorize these loans, which are necessary to the viability of the DA option.
SDG&E filed AL 1254-E in compliance with D.00-09-040 on September 12, 2000, to implement the 6.5 cent/kWh energy rate ceiling for residential, "small commercial" (below 100 kW demand) and lighting customers which take bundled service from SDG&E. Section 332.1 includes in its definition of "small commercial" customers (but does not limit its definition to) those accounts on rate Schedule A (which applies to customers with a maximum demand less than 20 kW) and all accounts on Schedule AL TOU "under 100 kW".
D.00-09-040 originally required SDG&E to withdraw AL 1249-E, and file another AL to implement that decision (i.e., AL 1254-E). However, since SDG&E had put AL 1249-E into effect pursuant to D.00-08-037 prior to issuance of D.00-09-040, SDG&E requested that the Commission modify D.00-09-040 to change the wording from "withdraw" AL 1249-E to "revise" 1249-E. In D.00-12-024, the Commission approved SDG&E's request.
AL 1254-E also renamed the sub-account previously established by AL 1249-E, the "Energy Rate Ceiling" Sub-Account. SDG&E began implementing AL 1254-E on October 2000 bills. By AL 1260-E filed October 2, 2000 and supplemental AL 1260-E-A filed October 30 (which replaces AL 1260-E), SDG&E initiated a credit reflecting the 6.5 cent/kWh energy rate ceiling retroactive to June 2000 for applicable customers which take bundled service. SDG&E began implementing these retroactive credits on November 2000 bills.
SDG&E filed AL 1264-E on October 19, 2000 requesting authority to apply the provisions of AB 265 and D.00-09-040 to DA customers. On December 6, SDG&E filed supplemental AL 1264-E-A, which replaces AL 1264-E. AL 1264-E-A revised language that SDG&E initially proposed in AL 1264-E to include on DA customers' bills regarding the rate stabilization plan. The supplement also clarifies how an informational letter to be issued to customers describing the DA Plan would be developed. SDG&E requests that AL 1264-E-A become effective as quickly as possible, so that DA customers may receive the relief it asserts is necessitated by AB 265 and D.00-09-040. SDG&E estimates that the billing system changes necessary to implement its proposed DA Plan would take 45 days to implement. SDG&E would begin applying the energy rate ceiling and retroactive credit on the first billing cycle after completion of billing system changes.
NOTICE
Notice of ALs 1249-E, AL 1254-E, 1260-E/-E-A, and 1264-E/-E-A was made by publication in the Commission's Daily Calendar. SDG&E states that a copy of the Advice Letter was mailed and distributed in accordance with Section III-G of General Order 96-A.
PROTESTS
No party protested AL 1249-E or AL 1260-E/-E-A. Enron had protested AL 1260-E-A, but later withdrew its protest.
AL 1254-E was protested by Tenderland Power Company (TPC), an ESP, on September 26, 2000. Scripps Institute (Scripps) filed a late-filed protest to AL 1254-E on November 9, 2000. Both TPC and Scripps protest SDG&E's stated intent in AL 1254-E to apply the 6.5 cent/kWh ceiling to DA customers . TPC states that AB 265 and D.00-09-040 should not be interpreted such that the rate stabilization plan applies to DA customers. On October 2, 2000, Utility.Com (an ESP) and the Alliance for Retail Markets (ARM)3 filed letters in support of SDG&E's statement in AL 1254-E that it intends to apply the energy rate ceiling to direct access customers.
TPC protested AL 1264-E on November 3 and 1264-E-A on December 21 along the lines of its protest to AL 1254-E.4 Scripps protest to AL 1254-E was probably intended for this AL. SDG&E filed its response to Scripps' protest in the context of AL 1264-E. We will accept Scripps' late-filed protest to AL 1254-E as a protest to AL 1264-E. It addresses issues raised by AL 1264-E/E-A. The protest period for AL 1264-E-A did not end until December 26, 2000. By letter dated December 14, 2000, Mr. Larry Cornett, a DA customer in SDG&E's service territory, protested AL 1264-E-A (the protest was received by the Commission and filed on December 18). Mr. Cornett, a customer of TPC, requests that the Commission deny SDG&E's request to apply the rate stabilization plan to all DA customers. Instead, Mr. Cornett states that the Commission should allow "customers of SDG&E and all DA customers the right to opt-out of AB 265."
ARM filed a letter on November 8, 2000 in support of AL 1264-E. Competitive Retail Energy for Consumers (CREC)5 filed letters on December 7 and 14, 2000 in support of AL 1264-E/E-A urging speedy resolution on the Commission's December 21st meeting or by shortening or eliminating comment periods. CREC states that its members are being deluged with calls from customers in the San Diego area that want to know their status in order to make reasonable energy choices.
Utility.Com filed comments on November 3, 2000 in support of AL 1264-E but requests that SDG&E amend its proposed language to describe that the electric energy charge (EE) adjustment is a Utility Distribution Company administered line item on the bill. Utility.Com also proposes that the language reflect that DA customers may calculate their effective price for electricity by adding the monthly EE charge adjustment to its ESP electric commodity charge.
The Commission's Office of Ratepayer Advocates (ORA) submitted a late-filed protest to AL 1264-E, on November 29, 2000, which reflected informal cooperative efforts between ORA and another party. ORA's protest expressed general support for SDG&E's DA Plan but suggested content and process improvements to SDG&E's plan for customer notification. We will accept ORA's protest since it prompted SDG&E to supplement AL 1264-E as discussed below.
Energy Division (ED) is aware that one ESP mailed a post card to its customers, urging them to ask the Commission to approve AL 1264-E. The Commission's Public Advisor's Office informed ED that as of noon on December 14, 2000, it had received 144 contacts supporting SDG&E's AL 1264-E ( 118 emails, 25 calls, 1 letter). ED and other Commission staff also received calls from several DA customers, some who support and others who oppose including DA customers in the rate stabilization plan.
SDG&E responded to TPC's protest of AL 1254-E on October 3 and to TPC's protest of AL 1264-E on November 9, 2000. SDG&E also filed a letter on October 25 objecting to TPC's October 10 rebuttal to SDG&E's response to TPC's protest of 1254-E. In its October 3 response, SDG&E states that the Commission's intent was to have SDG&E offer comparable rate ceiling benefits to DA customers. SDG&E states in its November 9 response that TPC's arguments are specious and its interpretation of AB 265 is wrong. SDG&E also points out that except for TPC, all ESPs that have either reviewed or helped develop AL 1264-E agree that DA customers should receive the benefits of the rate stabilization plan. SDG&E responded to TPC's protest of AL 1264-E-A on January 2, 2001. Noting that TPC's protest reaffirmed objections stated in its protests of ALs 1254-E and 1264-E, SDG&E referred to its responses to those protests and included them by reference.
SDG&E responded to the protest of Scripps, on November 16, 2000, acknowledging that Scripps, as a large customer, could have been able to bargain for and receive an advantageous rate. But SDG&E points out that 95% of SDG&E's DA customers are residential and small commercial and therefore do not have comparable bargaining power.
SDG&E filed AL 1264-E-A to address the concerns raised in ORA's November 29 late-filed protest to AL 1264, and Utility.com's November 3 letter of support. SDG&E also responded in support of CREC's letter on December 14.
SDG&E responded to Mr. Larry Cornett's Protest of AL 1264-E-A on December 21, pointing out that the Commission has yet to adopt a cost recovery mechanism. SDG&E moreover states that San Diego Union Tribune reported on December 19th that TPC told its 1500 customers it could no longer provide the cheap electricity it had previously promised and that it was therefore returning its customers to SDG&E, raising concern about the protection afforded by DA. Mr. Cornett informed ED that this situation did not cause him to withdraw his protest.
The following section includes a more detailed summary of the major issues raised in the protests and other contacts.
DISCUSSION
Our evaluation of SDG&E's proposals for implementing the rate stabilization plan must begin with an examination of AB 265 and D. 00-09-040. Both guiding documents provide clear direction for SDG&E's bundled customers, but lack guidance pertinent to DA customers. Because SDG&E has already implemented most aspects of the energy rate ceiling and the retroactive credit for bundled customers, this discussion will primarily focus on the DA Plan proposed in AL 1264-E-A. Finally, we will also direct SDG&E to make certain modifications to the plan it has proposed for bundled customers.
AB 265 Provides No Directive about DA Customers
Existing law regarding Commission authority over ESPs clearly specifies in Section 394(f): "Nothing in this part authorizes the commission to regulate the rates or terms and conditions of service offered by electric service providers." Therefore, AB 265 and Section 332.1 need to be examined carefully to determine how or if they apply to DA customers.
TPC notes in its September 26 protest that AB 265 refers only to SDG&E customers. TPC argues that a DA customer is no longer a customer of SDG&E. But ARM notes in its October 2 letter that AB 265 does not distinguish between DA and bundled customers, and all DA customers are SDG&E transmission and distribution customers.6
Both TPC and ARM present plausible arguments that lead to opposite conclusions about the DA Plan. We must therefore examine the context of the bill. Section 1 (a) of AB 265 seems to include both bundled and DA customers in stating that SDG&E customers are no longer protected by a rate freeze and are "subject to severe economic hardship because of unprecedented bill volatility and extraordinarily high rate levels." DA customers have been impacted by soaring energy rates since June, along with bundled customers. ESP offers have in practice been largely based on the power exchange price paid by bundled customers. However, rate freeze protection specifically avoided making DA energy prices equal to the energy rate paid by bundled customers; it worked by restricting utility distribution company (UDC) rate components, which are under Commission authority.
The "unprecedented bill volatility and extraordinarily high rate levels" referenced in AB 265 are attributable to energy procurement, not distribution or other rate components. The AB 265 ceiling specifically applies to the energy component of SDG&E's bill.
Section 332.1(b) directs the Commission to establish the 6.5 cent/kWh ceiling, retroactive to June 1, 2000, on the "energy component" of residential, small commercial, and streetlighting customers' electric bills. The energy component applies to bundled, not DA customers. The energy component on DA customers' bills is their ESPs' charges.
Section 332.1(c) requires the Commission to establish an accounting procedure to track and recover reasonable and prudent costs of providing electric energy to retail customers not recovered through retail bills due to the application of the ceiling. "Retail customers" clearly refers to those customers for whom SDG&E provides electric energy, i.e., bundled customers. Section 332.1 (g) directs the Commission to institute a proceeding to examine the prudence and reasonableness of SDG&E's "procurement of wholesale energy on behalf of its customers". The reference to "its customers" clearly applies to bundled customers for whom SDG&E procures energy.
Section 332.1(g) also raises an awkward question if the rate ceiling is extended to DA customers. The section states that if the Commission finds that SDG&E acted imprudently or unreasonably, it shall issue orders that it determines to be appropriate affecting the retail rates of SDG&E's customers, including, but not limited to, refunds. Any such disallowances would apply only to bundled service customers for whom SDG&E procured that energy. AB 265 neither directs nor forbids the Commission to include DA customers.
Finally, Section 6 of the legislation includes language broad enough that it could refer to bundled and DA customers alike, due to wholesale energy market failures. "The facts constituting the necessity are: In order to provide timely relief to ratepayers in the service territory of the San Diego Gas and Electric Company suffering from a rapid increase in retail energy rates due to spiraling wholesale energy costs, thereby endangering the public peace, health, and safety, it is necessary that this act take immediate effect."
Therefore, we conclude that: (1) AB 265 did not extend Commission authority over ESP rates; (2) AB 265 stops short of directing the Commission to implement the rate stabilization plan for DA customers; and (3) nothing in the legislation precludes the Commission, by virtue of its section 701 authority over the regulated distribution rates of SDG&E, from allowing SDG&E to offer loans to its DA customers equivalent to the benefit they would receive as bundled customers. These conclusions are consistent with the entry in the Assembly Daily Journal (ADJ), dated September 1, 20007 (at page 9077). ARM, in its November 8 letter cites one sentence from the ADJ to argue legislative intent to include DA customers in the rate stabilization plan: "It is the intent of this Legislature in enacting AB 265, that direct access customers not be discriminated against in implementation of the rate formula as established in AB 265." (p. 2-3). However, the ADJ further states that if DA customers in SDG&E's service territory are excluded from the rate cap in implementation of AB 265, then "such customers should not be assessed for the balancing account, unless they are included in the capped rate by subsequent action."
SDG&E, in its November 9 response to TPC's protest, states that Assemblymember Davis presumes the rate cap mechanism implemented by AB 265 will apply to DA customers, and if it does not, she indicates that DA customers should not be assessed for the balancing account. SDG&E thus concludes that the Commission does have the flexibility to include DA customers under the rate stabilization plan. SDG&E also states in its November 9 response that PG&E and SCE DA customers benefit from the same frozen rate as bundled customers (i.e., through the CTC charge/credit). SDG&E concludes that consistency would dictate similar treatment for its bundled and DA customers. SDG&E ignores the fact that the end of its rate freeze meant removing this link between bundled and DA customers.
We agree with Utility.com that the Legislature left it up to the Commission to decide whether to include DA customers in the AB 265 provisions. We believe we have this discretion because, as noted above, AB 265 does not prohibit us from authorizing SSDG&E to offer a similar plan to DA customers. Additionally, while Section 394(f) is explicit that we may not regulate the rates or terms and conditions offered by ESPs, the proposal we consider here amounts to a loan from SDG&E to its distribution customers. By our section 701 authority over SDG&E's distribution rates, the Commission may authorize SDG&E to offer a loan to its distribution customers. As long as the DA Plan allows customers to fully pay all electricity charges (not accept the loan), then the DA Plan does not dictate the rates, terms or conditions offered by ESPs. That is, as long as a DA customer receives a bill clearly specifying all charges and allowable benefits, SDG&E is not exercising undue control over ESP rates.
D. 00-09-040 Provides No Directives about DA Customers.
With this in mind, we next consider Commission guidance on this matter. In AL 1264-E-A, SDG&E states that the intent of the Commission for SDG&E to provide comparable rate stabilization benefits to DA customers is clear. We disagree. The words, "direct access" never appear in the decision. In summary, the decision states that, consistent with Assembly Bill (AB) 265, "the rate stabilization plan will ensure that SDG&E establishes a 6.5 cents/kWh for the energy component of electric bills for its residential, small commercial, and lighting customers." (D. 00-09-040 at p. 1). The language throughout the decision is no clearer than that.
We will not limit the so called, "rate ceiling" to SDG&E's bundled service customers. As discussed in the previous section, since ESP rates are competitive, approving SDG&E's DA Plan amounts to authorizing SDG&E to offer loans to its distribution customers. ESPs may offer deferral or loan programs or other options to help their customers manage energy costs. However, ESPs may not be in as favorable a position as SDG&E to do so. Therefore, we authorize SDG&E to implement such a plan on their behalf.
Granting the "rate ceiling" for small bundled customers and not small DA customers has undesirable impacts. The Commission recognized this potential in the bill stabilization decision that preceded AB 265, D. 00-08-037 and expressed its intent to consider extending the bill stabilization adopted at that time to DA customers: "In addition, we are concerned about the impact of an SDG&E specific bill stabilization plan on retail competition. Therefore, we will consider in our ongoing investigation the appropriateness of extending the bill stabilization plan retroactively to direct access customers." (D. 00-08-037 at p. 8). The same decision states in Conclusion of Law 5, "The Commission should further study the bill stabilization plan as to direct access customers." If D. 00-09-040 was the product of that further study, the decision never mentioned it. SDG&E's AL 1264-E/E-A has brought this matter before us; the competitive electric industry needs clarity. ARM in its November 8 letter, and CREC in its December 14 letter express DA customers need to know now whether they are covered by the AB 265 rate stabilization plan and the risks involved in signing up for fixed price products. In the interest of retail competition, we consider the merits of extending the AB 265 rate ceiling and retroactive credit to DA customers.
Evaluation of SDG&E's DA Plan
By AL 1264-E-A, SDG&E proposes to extend its 6.5 cents/kWh energy rate ceiling on both a going-forward and retroactive basis, to all DA residential, small commercial and lighting customers in the same way it did in ALs 1254-E and 1260-E-A for bundled customers. In this section, we will weigh the factors that form the basis for approving SDG&E's DA Plan with some modification.
Effects of the problematic wholesale electricity market are not limited to bundled customers. Utility.com in its October 2 letter, states that all residential and small commercial consumers in the San Diego region, whether they are bundled or DA customers, have been hurt by the high electricity prices this summer. Like SDG&E, ESPs have largely had to pass along the high costs of wholesale electricity to consumers, because ESPs serving small consumers (and their customers) are price takers. Utility.com also points out that procurement flexibility and increased efficiencies are not enough to offset wholesale electricity prices, and even with the discounts that some ESPs are able to offer, DA customers have paid significantly more for electric energy this year than they did last year.
The most convincing reason to adopt some form of SDG&E's DA Plan is to avoid having ESPs and their customers bear the brunt of wholesale electricity market failures. ARM argues in its October 2 letter that ratepayers may not have to pay back the entire balancing account undercollection. For example, the State could appropriate general funds through legislation to reduce the burden on San Diegans. Alternatively, FERC may refund costs of wholesale power under its current investigation. If either of these events come to pass, then it would be equitable for DA customers to share in the benefits of these events. We agree. But no such subsidy - from taxes or FERC approved refunds - has materialized.
The Commission might eventually disallow some of SDG&E's procurement costs as a result of reasonableness review. But if so, the disallowed costs would apply to customers for whom SDG&E has procured electricity, i.e., bundled customers. Moreover, the plan adopted by AB 265 is not a subsidy, but a deferral. The relevant consideration for a deferral or loan program is evenhanded recovery of deferred or carried amounts. Therefore, as discussed in later sections, SDG&E is directed to individually track all deferred or carried amounts for each of its distribution customers in applicable classes.
ESPs and their customers are divided on the question of applying the rate stabilization plan to DA customers. The DA Plan proposed by SDG&E has sparked notable public interest. ESPs and customers either argue for the same treatment as that applied to bundled customers, or object that DA customers will be burdened with future recovery.
SDG&E states in AL 1264-E-A that it believes it is acting in the best interests of all of its customers by structuring a plan that would neither favor nor disadvantage DA or bundled customers. However, DA customers may not believe that SDG&E is in the best position to act in their interests. In its November 9 protest, Scripps states that it began DA in 1998 and was not subject to the large fluctuations in electrical energy costs this past summer. It believes that receiving a credit for the difference between the 6.5 cent/kWh ceiling and the actual energy rate charges it would have incurred as a bundled customer makes no sense. Scripps did not pay excessive costs so it should not receive a credit, and be required to repay SDG&E a share of the revenue shortfall account with interest.
For DA small commercial, hospital, or school district customers which are satisfied with the energy price they pay to their ESP, the DA Plan may create a hardship. Institutions that budget annually for such expenses as electricity would be at a disadvantage when SDG&E goes to collect the potentially large recoverable amounts plus carrying charges. Such customers might actually be in a better position paying their ESP their manageable contract price with no future and unknown repercussions.
The protest of Mr. Cornett, a residential DA customer opposed to SDG&E's DA Plan may reflect other similar customers' opinions. He does not want to be forced to accept a "loan agreement" he did not want. Mr. Cornett explains that prior to the summer of 2000, he decided to maintain bundled service because alternative energy prices seemed to be the same as what SDG&E charged. However, around August 2000, he accepted an offer from TPC to lock in a reasonable energy price of 8 cents/kWh, guaranteed for one year commencing on October 1st, 2000. Applying the rate stabilization plan to bundled and DA customers alike, in the manner proposed by SDG&E, would eliminate obvious perverse incentives, but would not help customers like Mr. Cornett. Therefore, as explained in the following section, we will address the concerns expressed by TPC, Scripps, and other public contacts similar to Mr. Cornett, by modifying SDG&E's proposals for bundled and DA customers to require individual customer tracking.
Potentially anticompetitive impacts of extending AB 265 rate ceiling to DA customers can be mitigated with individual accounting.
We previously concluded that the Commission has the authority to authorize SDG&E to offer loans to DA customers based on benefits offered to bundled customer's. ORA suggests that the DA Plan is desirable because it renders customers indifferent to switching to alternative providers. Excluding DA customers from the AB 265 plan gives customers an immediate price incentive to select bundled service. The DA Plan, while not a subsidy, has appeal to customers strapped for cash. This is because as ORA notes, it will provide immediate rate relief under the energy rate ceiling to customers who would otherwise be subject to high electric bills when the market energy rate is above the level of the rate ceiling.
But SDG&E is to be allowed recovery of all reasonable procurement costs, and by extension, all amounts loaned to DA customers with carrying charges. The amount of those carrying charges is not known, or how they compare with other loans. The recovery amounts could become prohibitive if electric energy rates continue to soar.
No prohibition exists for an ESP to offer its own deferral program or other pricing options. However, SDG&E has a competitive advantage in its ability to carry deferrals or loans for its customers. Allowing SDG&E to offer loans to DA customers might be an important step in preserving the DA option while wholesale market failures are being resolved.
On the other hand, TPC makes another point in its November 3 protest that we can not ignore. That is, mandating the provisions of AB 265 for DA customers fosters an anticompetitive business environment within the SDG&E service territory, by attempting to fix the competitive retail price. TPC also states that it has no objection if other ESPs wish to join with SDG&E and offer "loans" to their customers. According to TPC, such arrangements between SDG&E and any customer of an ESP must be absolutely voluntary in nature. Otherwise this could potentially be anticompetitive and adverse to the intent of AB 1890 in promoting choice for California electric customers.
Concerns on both sides of the anticompetitive issue can be resolved by directing SDG&E to account for undercollected revenues in the TCBA sub-account on an individual customer-by-customer month-by-month basis, rather than in a "pooled" manner. ESPs will be able to compete at least to the extent they could before. Customers will not have to forgo the benefits of the rate ceiling to select DA service.
Since SDG&E is crediting individual bundled customer bills, SDG&E's billing system is capable of recording the amount of each customer's electric energy rate and retroactive rate ceiling credit adjustments (EERA and RRCA) on a monthly basis. Also, in its January 2 response to TPC's protest of AL 1264-E-A, SDG&E expresses support for individually tracking the benefits for future recovery. Requiring SDG&E to track the total credits for potential recovery on an individual basis and show such totals on customer bills is reasonable.
Individual accounting has other advantages, the major one being customer disclosure. Customers need accurate information about their potential future obligations to repay SDG&E's reasonable procurement costs. For this reason, we will direct SDG&E to display on bundled customer bills, the monthly EERA, and a separate line item showing net deferred amounts (i.e., a running total of the RRCA previously credited and total monthly EERA amounts credited in past months, net of any optional customer payments).8 We further direct SDG&E to provide the same line items for DA customer bills.
Customer Information Improvements
Utility.com in its November 3 comments on AL 1264-E, requests some billing language changes for DA customers in order to promote and improve consumer education. Utility.com requests that we direct SDG&E to amend its proposed language to describe that (1) the monthly Electric Energy Rate Adjustment is a UDC-administered line item and (2) a DA customer may calculate its effective price for electricity by adding the monthly Electric Energy Rate Adjustment to its ESP electricity commodity charge. SDG&E's portion of DA customer bills should clarify that whenever the Cal-PX monthly price of electricity commodity exceeds the 6.5 cents per kWh rate ceiling, a DA customer will receive a monthly Electric Energy Rate Adjustment based on this difference and that the monthly Electric Energy Rate Adjustment offsets the commodity electricity price charged by the ESP.
ORA's review process proposal will assist consumers. In its November 29 protest, ORA notes that when SDG&E proposed to convey information to its customers describing its Summer 1999 Rate Ceiling, Commission staff took an active role in reviewing the messages prior to their issuance. In this instance, ORA recommends the same level of Commission involvement. Specifically, ORA recommends that SDG&E be required to submit the text of the informational letter to the Commission and that the Energy Division, ORA and the Public Advisor review it to ensure that the message appropriately explains the EERA and RRCA and tells customers how credits may be handled. Although ORA's recommendation applies to SDG&E's DA Plan filed in AL 1264-E-A, we will extend that recommendation to the plan we adopt for bundled customers as well.
SDG&E shall file an advice letter showing customer bills with the information required by this Resolution. That advice letter shall also include a draft informational letter to be issued to all customers whose bills will be affected by this Resolution explaining the new information provided on bills. The informational letter shall be reviewed in the manner that ORA recommends (i.e., by Energy Division, ORA, and the Public Advisor).
Conclusion
DA customers by choice have elected to remove themselves from the jurisdiction of SDG&E with respect to procurement of electrical energy and therefore, from the explicit mandate of AB 265. While SDG&E is incorrect to interpret AB 265 and D. 00-09-040 as being applicable on a mandatory basis to DA customers of an ESP, good reasons exist to allow DA customers to receive the rate ceiling benefit.
Therefore, we modify the DA Plan proposed by SDG&E to require individual accounting of rate ceiling benefits received. DA customers that deem themselves burdened by the prospect of future recovery of deferred or loaned amounts may pay their total electricity bills. SDG&E may only collect carrying charges on directly associated amounts. This modification will mitigate the anticompetitive concerns both in terms of ESP rate fixing and SDG&E's capital advantage.
COMMENTS
Public necessity requires that the 30-day period for public review and comment established in Section 311(g) be reduced so that SDG&E's customers may make reasonable energy choices relating to matters described herein as soon as practicable. We have balanced the public interest in avoiding the possible harm to public welfare flowing from the delay in considering this resolution against the public interest in having the full 30-day period for review and comment as required by Rule 77.7(f)(9). We conclude that the former outweighs the latter. We conclude that failure to adopt a decision before the expiration of the 30-day review and comment period would cause significant harm to the public welfare. Accordingly, we reduce the comment period for this resolution.
FINDINGS
1. SDG&E filed AL 1249-E on August 28, 2000 to implement a bill stabilization plan adopted in D.00-08-037. AL 1249-E was largely superceded by the rate stabilization plan required by AB 265.
2. In AL 1249-E, SDG&E established a sub-account within the TCBA to track the undercollected energy costs, including carrying costs and adjustments retroactive to June 1, 2000.
3. AB 265 added Section 332.1 to the PU Code, requiring the Commission to establish a ceiling of 6.5 cents/kWh on the energy component of electric bills for SDG&E's residential, small commercial, and street lighting customers. The ceiling is retroactive to June 1, 2000, and shall be in effect through December 31, 2002, at a minimum.
4. Consistent with Section 332.1, the Commission approved an expanded rate stabilization plan in D.00-09-040.
5. In compliance with D.00-09-040, SDG&E filed AL 1254-E on September 12, 2000 to implement the 6.5 cent/kWh energy rate ceiling for residential, "small commercial" (below 100 kW demand) and lighting customers which take bundled service from SDG&E.
6. TPC and Scripps protested SDG&E's intent stated in AL 1254-E to apply the 6.5 cent/kWh energy rate ceiling to DA customers. Scripps' protest to AL 1254-E was late-filed.
7. Utility.com and ARM filed letters in support of SDG&E's statement in AL 1254-E that it intends to apply the energy rate ceiling to direct access customers.
8. SDG&E began implementing AL 1254-E on October 2000 bills.
9. By AL 1260-E filed October 2, 2000 and supplemental AL 1260-E-A filed October 30 (which replaces AL 1260-E), SDG&E initiated a credit reflecting the 6.5 cent/kWh energy rate ceiling retroactive to June 2000 for applicable customers which take bundled service.
10. SDG&E began implementing the retroactive credits filed in AL 1260-E-A on November 2000 bills.
11. SDG&E filed AL 1264-E on October 19, 2000 requesting authority to apply the provisions of AB 265 and D.00-09-040 to applicable DA customers.
12. We accept Scripps' late-filed protest to AL 1254-E as a protest to AL 1264-E.
13. TPC protested SDG&E's DA Plan as filed in AL 1264-E to apply the provisions of AB 265 and D.00-09-040 to DA customers.
14. Utility.com filed comments in support of AL 1264-E but requests that SDG&E amend its proposed bill language described in the AL.
15. ORA submitted a late-filed protest to AL 1264-E which expressed general support for SDG&E's DA Plan but suggested content and process improvements to SDG&E's plan for customer notification. We accept ORA's late-filed protest.
16. On December 6, 2000, SDG&E filed supplemental AL 1264-E-A, which replaces AL 1264-E, to address the concerns raised by Utility.com in its comments and by ORA in its late-filed protest.
17. Mr. Larry Cornett protested SDG&E's request in AL 1264-E-A to apply the rate stabilization plan to DA customers, and stated that the Commission should allow SDG&E's customers to opt-out of AB 265. TPC protested AL 1264-E-A along the lines of its protests to ALs 1254-E and 1264-E.
18. ARM filed a letter in support of AL 1264-E. CREC (formerly ARM) filed letters on December 7 and 14, 2000 in support of AL 1264-E/E-A urging swift resolution of the AL to allow customers to make reasonable choices.
19. As of December 14, 2000, the Commission's Public Advisor's Office had received 144 contacts supporting SDG&E's AL 1264-E. ED and other Commission staff also received calls from several DA customers, some supporting and others opposing inclusion of DA customers in the rate stabilization plan.
20. SDG&E estimates that the billing system changes necessary to implement its proposed DA Plan would take 45 days to complete.
21. PU Code Section 394 denies Commission authority over the rates of competitive ESPs. AB 265 does not expand Commission authority over ESP rates.
22. PU Code Section 332.1, added by AB 265, neither requires nor forbids the Commission to authorize SDG&E to apply the rate stabilization plan to the customers of ESPs.
23. Neither AB 265 nor D.00-09-040 provide clear directives about DA customers.
24. The rate ceiling required by AB 265 applies to the energy component of customers' bills and SDG&E procures electric energy only for its bundled customers.
25. In seeking to apply the provisions of AB 265 and D.00-09-040 to DA customers, SDG&E is proposing to offer a loan program to these customers.
26. ESPs have the authority to offer loans or other pricing options to help their customers manage their energy costs; but SDG&E likely has a competitive advantage in this respect.
27. Mandating AB 265 rate ceiling provisions for ESPs and their customers would amount to price fixing since ESP rates are competitive.
28. SDG&E's bundled customers need accurate information about their potential future obligations to repay SDG&E's reasonable electric procurement costs.
29. Direct access customers need accurate information about their potential future obligations to repay benefits they receive based on the rate stabilization plan.
30. It is reasonable to require SDG&E to track and show on each customer's monthly bill, the EERA for that month, and the total net deferred amounts (or for DA customers, the loaned amounts) as defined in the Discussion section of this Resolution.
31. We have balanced the public interest in avoiding the possible harm to public welfare flowing from the delay in considering this resolution against the public interest in having the full 30-day period for review and comment as required by Rule 77.7(f)(9). We conclude that the former outweighs the latter. We conclude that failure to adopt a decision before the expiration of the 30-day review and comment period would cause significant harm to the public welfare.
THEREFORE IT IS ORDERED THAT:
1. Advice Letter 1249-E is approved, noting that it was revised by a subsequent advice letter filing as authorized by D.00-12-024.
2. Advice Letters 1254-E and 1260-E-A are approved with the bill format and customer notice modifications described in this Resolution.
3. Advice Letter 1264-E-A which requests authority to include DA customers in the expanded rate stabilization plan adopted in D.00-09-040 is approved with modifications.
4. Beginning no later than its April 2001 billing cycle, SDG&E shall display the following information each month on the bills of all customers who currently receive, have received, or may become eligible to receive (e.g., customers who may open a new account in SDG&E's service territory), the Electric Energy Rate Adjustment (EERA) and the Retroactive Rate Ceiling Adjustment (RRCA):
5. The current month's EERA;
6. The total net deferred amount through the current month which equals the RRCA credit, plus the sum of all prior months' and the current month's EERA, plus all accrued interest, minus any optional customer payments received to date which may be used to reduce the total deferred amount.
7. No customer shall be liable for future cost recovery, including carrying charges, of fully paid electricity bills or of partially paid portions thereof, including directly associated carrying charges.
8. Within 10 days of the effective date of this Resolution, SDG&E shall file an advice letter showing a sample bill containing the information required by this Order. This advice letter shall include a draft informational letter to customers explaining this new billing information. The draft informational letter shall be reviewed by Energy Division, ORA, and the Public Advisor's office. This advice letter shall become effective on April 1, 2001, subject to Energy Division's finding that it is compliant with this Order.
9. The protests of TPC on ALs 1254-E, 1264-E, and 1264-E-A and Scripps' protest on AL 1254-E all apply to AL 1264-E-A. These protests are resolved as described in this resolution.
10. The protest of Mr. Cornett on AL 1264-E-A is granted to the extent that it allows DA customers to pay their full bills and not be burdened with the future cost recovery associated with the loans offered by SDG&E to its DA customers. All other aspects of Mr. Cornett's protest are denied.
11. ORA's protest to AL 1264-E is resolved as described in this Resolution.
12. Utility.com's suggested change to the billing information proposed by SDG&E in AL 1264-E as modified in AL 1264-E-A, is resolved as described in this Resolution.
1.
This Resolution is effective today.
I certify that the foregoing resolution was duly introduced, passed and adopted at a conference of the Public Utilities Commission of the State of California held on March 27, 2001; the following Commissioners voting favorably thereon:
_____________________
WESLEY M. FRANKLIN
Executive Director
1 1. AB 265 requires the Commission to establish an accounting procedure to track and recover reasonable and prudent costs of providing electric energy to retail customers unrecovered through retail bills due to the application of the ceiling. SDG&E's recovery of its reasonable and prudent costs of procuring energy at prices above the energy rate ceiling may thus be "deferred" to a future date.
2 2. All statutory references are to the Public Utilities Code unless otherwise stated.
3 3. ARM states that it is "a coalition of firms that are committed to the creation of a robust retail market", and that its members "serve the bulk of direct access customers" in California.
4 4. Although SDG&E replaced AL 1264-E with AL 1264-E-A, the substance of AL 1264-E which TPC protested was not modified by AL 1264-E-A.
5 5. CREC was formerly ARM. Its members include AES NewEnergy, Inc.; AXON Field Solutions; Chevron Energy Solutions; Commonwealth Energy Corp.; Enron Energy Services, Inc.; Green Mountain Energy Company; The New Power Company; Shell Energy Services; and Strategic Energy, L.L.C.
6 Section 332.1 (f) requires the Commission to establish a voluntary 6.5 cent/kWh energy rate ceiling for large commercial, agricultural, and industrial customers who buy energy from SDG&E, with a true-up after a year. D.00-12-033 implementing Section 331.2(f), specifically excludes from the voluntary program, DA customers with loads greater than or equal to 100 kW.
7 Note that the bill passed the assembly two days earlier on August 30 and passed the Senate August 29. 2000
8 TPC believes from its reading of SDG&E's DA Plan, that SDG&E proposes to compute the EERA and the RRCA on a customer-by-customer, month-by-month basis for DA customers, and to record a customer's balance on the same basis We direct SDG&E to perform this accounting monthly for each bundled and DA customer and to display this information on customers' bills.
