ALJ/TRP/sid DRAFT Agenda ID #1147

Decision PROPOSED DECISION OF ALJ PULSIFER (Mailed 9/24/2002)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking Regarding the Implementation of the Suspension of Direct Access Pursuant to Assembly Bill 1X and Decision 01-09-060.

Rulemaking 02-01-011 (Filed January 9, 2002)

O P I N I O N

TABLE OF CONTENTS

Title Page

O P I N I O N 1

I. Introduction 2

II. Background 5

III. Procedural Summary 7

IV. Scope of Costs Subject to CRS 8

V. Legal Authority for Imposing Cost Responsibility Surcharges 10

A. DWR-Related Costs 11

B. Non-DWR Related Costs 12

VI. Standard for Determining Ratepayer Indifference 17

A. Parties' Positions 17

B. Discussion 22

VII. Modeling of DA Cost Responsibility Surcharges for DWR Costs 25

A. Role of Modeling in Analyzing DA Cost Shifting 25

B. Summary of Proposed CRS Based on Modeled Results 28

C. Merits of Multi-Year Modeling Versus Annual Forecasting 31

1. Parties' Positions 31

2. Discussion 34

VIII. Structure of Costs Comprising DA CRS 36

IX. "Historic Costs" 37

A. Parties' Positions 37

1. Separate Levelized Charge or Bond Charge 37

2. Claimed Double-Counting of Bond Charge 43

3. Discussion 46

X. DA Customers Cut-Off Date for Applicablility of the Bond Charge 52

A. Parties' Positions 52

B. Discussion 54

XI. Criteria for Determining July 1 Cut-off Date for Applicability of DA-CRS 57

A. Parties' Positions 57

B. Discussion 59

XII. Ongoing DWR Operating and Portfolio Costs 62

A. Overview 62

XIII. Modeling of Ongoing DWR "Indifference" Costs 65

A. Areas of Dispute Relating to Forecasts 67

1. Assumptions Regarding New Generation Additions 68

2. Assumptions Regarding Market Price for Surplus Power Sales 69

B. Categories of Costs to be Excluded to Measure "Bundled Ratepayer Indifference 72

1. Exclusion of 130% of Baseline Quantities 72

2. Long-Term Contract Only Versus Incremental Short-Term Costs 74

3. Administrative & General Costs 78

C. Utility-Specific versus Statewide Surcharges 79

1. Parties' Positions 79

2. Discussion 81

XIV. Proposals for DA CRS Covering Costs Other than DWR Procurement 81

A. Introduction 81

B. Parties' Positions 82

1. PG&E Proposal 82

2. SCE Proposal 85

3. SDG&E Proposal 88

4. ORA 93

5. CMTA 94

6. CLECA 96

C. Discussion 96

XV. CRS Mitigation: Capping or Levelizing CRS 99

XVI. Other Issues 110

A. Implementation of DA CRS in Coordination with Companion Proceedings 110

1. Remittance of Funds to DWR 112

2. Revenue Allocation and Rate Design of Non-DWR Costs 113

B. Process for Updating the DA CRS/ True ups and Balancing Account Treatment 116

C. Billing and Tariff Implementation 123

D. TURN's Proposal to Include the Costs of the Interruptible Program in the Distribution Component of Rates 123

E. Negative CTC 124

F. Rescission of the One Cent Surcharge from D.01-01-018 as Applicable to Direct Access Customers 126

G. PG&E's WAPA Contract 129

H. Additions to DA List 132

XVII. Rehearing and Judicial Review 132

Findings of Fact 133

Conclusions of Law 138

ORDER 143

APPENDIX A - Summary of Parties' Proposals Concerning Direct Access Cost Responsibility Surcharge Cost Elements for 2003

APPENDIX B - Modeling Scenarios Performed by Navigant Consulting, Inc.

APPENDIX C - PG&E Calculation of DA CRS (Using Navigant Model)

APPENDIX D - SDG&E Calculation of DA CRS (Using Navigant Model)

APPENDIX E - CLECA Calculation of DA CRS (Using Henwood Model)

Table 1- Total Utility Resource Versus DWR-Only Basis

Table 2- Total Utility Resource Basis by Individual Utility

APPENDIX F - List of Inputs and Calculations for Computing DA CRS

APPENDIX G - List of Appearances

I.