XI. DA Customers Cut-Off Date for Applicablility of the Bond Charge⁵⁴

A. Parties' Positions

Parties are in dispute as to which categories of DA customers, if any, should be excluded from the Bond Charge, or at least subject to a reduced share of obligation. The range of proposals for who should or shuold not pay includes: (1) all DA customers; (2) customers that switched to DA after January 17, 2001; or (3) customers that switched to DA after July 1, 2001.⁵⁵ Various parties also present proposals which would assign cost responsibility on a more granular level, by disaggregating the calculation into more precise measures as they relate to the variations in individual DA customers.

DWR's modeling approach applies a uniform responsibility for historical costs to the increment of DA customer load that switched from bundled service between July 1, and September 20, 2002. DWR assumes a total pre-July 1, 2001 DA load of 2%, and a post September 20, 2001 level of 13.62%. DWR Model Scenario 5 provides the following detailed break down of DA level of the three IOUs:

	PG&E	SCE	SDG&E
July 1, 2001 Cutoff	1.22%	0.97%	9.90%
September 20, 2001 Cutoff	14.83%	10.99%	20.10%

In Navigant's modeling calculations, the total undercollection amount is assumed to be recovered as a levelized annual charge (taking into consideration financing costs, allowances for uncollectibles, and a loan reserve) over a period of 15 to 20 years.

Certain parties such as PG&E argue all DA customers should pay both the Bond Charge and the Ongoing DWR charges because of the benefits they received through DWR's success in keeping the power grid running. SDG&E disagrees with PG&E's proposal (Exh. 41, p. 2-4) that all DA customers should pay, because the proposal fails to achieve bundled ratepayer indifference consistent with D.02-04-067. (P. 4.)

In order to make bundled customers indifferent to the increase in DA load that occurred between July 1, 2001 and September 20, 2001, SDG&E proposes that application of the DA CRS should only apply to DA customers that became active DA on or after July 1, 2001.

SDG&E has proposed that the bond charge should apply to all DA customers, including continuous DA customers, because SDG&E agrees with the findings by the Commission that all customer classes have benefited from DWR's intervention in the market (FOF 38, D.02-02-052). Certain parties have proposed that the Commission ignore this finding of benefits and exempt continuous DA based on cost causation (see, e.g., SCE Opening Brief, p. 12; Callaway Opening Brief, 18-19). SDG&E states that exempting continuous DA customers from the bond charge, however, would result in the failure of these DA customers to pay for those Commission identified benefits and therefore, the Commission should not adopt this policy.

B. Discussion

We conclude that it is reasonable for continuous DA customers (i.e., those taking DA continuously before and after DWR began buying power) to be excluded from paying either for the DWR Bond Charge or for DWR undercollections. Since the bond charge is intended to compensate for the undercollection of historic costs incurred by DWR, it is equitable that the charge bear some relationship to those groups of customers that actually purchased power from DWR at least for some portion of the period covered by the historic undercollection. DWR purchased power on behalf on the expected load of bundled customers of the IOUs. DWR did not purchase power to serve customers that took DA service continuously both before and after DWR began purchasing power in January 2001.⁵⁶ DWR Witness McDonald testified that DWR never incurred any costs to serve this continuous direct access load because DWR assumed that these customers would remain as direct access customers into the future.⁵⁷

DWR did not purchase short-term power supplies for continuous DA customers because DA load was not a part of the utilities' residual net short requirements. Tr. 9/1201 (Magill, SDG&E); Tr. 2/200 (McDonald, DWR). And, DWR did not purchase power for continuous direct access customers under long-term contracts

We are not persuaded by parties' arguments that continuous DA load should be assessed a bond charge solely because they benefited from DWR's purchasing of power for others, which kept the power grid operating and avoided power blackouts. While DWR played some role in stabilizing energy markets and preventing power blackouts, its purchasing program was not the only factor involved. No one has quantified the extent to which any benefit of maintaining power flows can be attributed to DWR as opposed to other factors. Thus, there is no basis to assign a specific economic monetary value to the role played by DWR. Attempting to assign a charge to DA customers based solely on indirect societal benefits would be arbitrary and speculative. Moreover, it would be unfairly discriminatory to assess a uniform bond charge among DA customers when some of them had actually consumed DWR-procured power while others had consumed none. Those DA customers that had never consumed any DWR power would unfairly bear a double burden, first for the energy they had purchased from their ESP during 2001, plus secondly, a share of the costs for DWR power that had been consumed by other customers.

We decline to adopt any of the proposals that would determine cost responsibility for historic undercollections based on pro rata allocations for the specific period of time that each DA customer took bundled service. We acknowledge that in theory, such approaches would more accurately match charges paid for DWR power consumed. Nonetheless, such an approach is not appropriate in this instance. Our stated goal is to achieve bundled ratepayer indifference. Consistent with this goal, the practices and protocols for the regulatory treatment of individual DA customers should be consistent with that for individual bundled customers. Under the utility tariffs charged to bundled customers, uniform terms and rates apply irrespective of the particular circumstances of individual bundled customers. There is no provision for bundled customers to pay lower rates merely because they may have, for example, moved into the utility service territory after DWR began procuring power and thus, did not consume DWR power for the full duration of the period covered by the DWR undercollection. This regulatory policy instead casts a much broader net and applies uniformity to broad groups of bundled customers consistent with the terms and rates or charges adopted in the respective tariff. Likewise, DA customers should be subject to the same sort of uniform regulatory protocols that apply to bundled customers in the interests of bundled ratepayer indifference.

Moreover, while the application of a uniform bond charge to DA customers without regard to exact periods each customer's bundled service does not precisely reflect cost causation, our adopted approach is consistent with D.02-02-051 in which the principles for application of the Bond Charge were articulated. In that order, we stated:

"The Act does not require Bond-Related Costs to be recovered through charges that are imposed only on the power that is sold by DWR. Nor does the Act require the use of a particular ratemaking method to recover DWR's Bond-Related Costs or Department Costs. Therefore, the Commission may use its broad authority under Water Code § 80110 and Pub. Util. Code § 451 and § 701 to devise and implement the separate Power Charges and Bond Charges set forth in the Rate Agreement. . .

"At the time the Act was passed into law, it was unknown how the energy crisis would unfold or how long DWR might be selling power, which suggests that the Legislature intended to provide DWR and the Commission with great flexibility in the Act to devise a means to recover DWR's revenue requirement. . . " (D.02-02-051)

In addition, as noted by SDG&E, there are practical limitations in its billing system that would make such customer-by-customer determinations of charges impractical and unduly costly. For all of these reasons, it is appropriate to apply uniform charges to DA customers subject to the bond charge in a similar manner as is being applied to bundled customers in A.00-11-038 et al.