III. Issues Relating to MDL CRS Obligations
In this decision, we also resolve issues relating to the CRS obligations of MDL customers.26 By ALJ ruling dated March 28, 2005, the Working Group process was expanded to include MDL CRS issues, including the quantification of the level of MDL CRS obligations.
A number of Commission decisions establish the requirements regarding MDL CRS obligations and authorize limited exemptions from certain components of the MDL CRS.27 The cost allocation for MDL CRS calculations depend on data inputs categorized by year. MDL customers are responsible for different amounts of CRS obligations based upon their year of departure from bundled service.
We resolve certain methodological issues concerning CRS obligations applicable to MDL customers in this order, as discussed below.
A. MDL CRS Accruals and Undercollections
as of December 31, 2005
Based on data provided and reviewed through the Working Group process, it appears that for the period 2001-2004, all MDL was exempt from the DWR power charge component of the CRS. The Report further states that it appears that no MDL is responsible for the DWR power charge component of the CRS for 2005, either. Table Appendix C-1, as reproduced in the Appendix of this decision sets forth the calculations of MDL CRS accrual rates for the period 2004-2011, based on the benchmark adopted in D.05-01-040 (applied through 2005) and the Working Group's recommended benchmarks through 2011. Accordingly, based on the calculations of the Working Group Report, we affirm that no CRS undercollections apply to MDL customers as of December 31, 2005.
B. Use of Market Benchmark
for MDL CRS
For determining MDL CRS obligations, the parties propose to apply the same market benchmark as described above to calculate the DA CRS (comprised of the cost of a one-year strip of power plus a RA/capacity adder). In this respect, the MDL Parties propose use of the procedures set forth in Section II of Appendix E of the Report as applying to the DL CRS for customers which pay the DL power charge.
The parties agree to calculate the DWR power charge component of the DL CRS to accommodate ongoing CTC and the indifference charge for customers who pay the DL power charge. Parties disagree, however, as to the point in time when the revised benchmark methodology should take effect. Some parties propose to apply the revisions starting in 2003. Other parties propose that the revisions only take effect prospectively in 2007.
We find the proposal reasonable to apply a consistent market benchmark to MDL as to DA and hereby adopt it. A consistent benchmark will provide for a more uniform and coherent approach to avoiding cost shifting and promoting bundled customer indifference. We shall also adopt a consistent starting point for both MDL and DL load, and authorize it to apply effective beginning with the 2006 calendar period.
C. Applicability of Total Portfolio
Indifference Standard to MDL
Parties representing MDL interests agree with the consensus recommendation for determining how to set CRS for those non-bundled customers, including MDL customers, who are responsible for the costs of DWR power. Under the consensus proposal, DA and MDL customers that are not exempt from the DWR power charge would pay the sum of the ongoing CTC and the PCIA. This approach would not modify their ongoing CTC obligation.
Parties did not reach consensus, however, on how to determine the CRS obligation applicable to MDL customers who are exempt from the DWR power charge. The IOUs recommend applying the same approach to such MDL customers as for bundled and DA customers. For continuous DA customers and MDL customers who are exempt from paying the DWR power charge, the Working Group recommends that they simply pay ongoing CTC with no "total portfolio indifference" adjustment.28
The IOUs believe that the indifference principle is applicable only to those non-bundled customers responsible for paying the DWR power charge. Thus, the IOUs believe that a total portfolio indifference approach is applicable only to customers responsible for DWR power costs. If it were applicable to all DL customers, the IOUs argue, it would in effect mean that the ongoing CTC for all customers is calculated on a total portfolio basis. The IOUs believe that such an interpretation would be in contradiction to methodology for calculating ongoing CTC method adopted in prior Commission decisions.
Parties representing MDL interests recommend that a "total portfolio adjustment" apply to MDL customers who are not responsible for DWR power charges, but who pay ongoing CTC.29 The "total portfolio adjustment" would allocate both the above or below market cost of the residual IOU portfolio [Total IOU portfolio less the "Statutory" CTC portfolio] pro-rata among non-exempt bundled, DA, and DL customers by volume. Above or below market costs would be calculated in reference to the market price benchmark established in this proceeding.
MDL parties argue that the "total portfolio adjustment" is necessary to ensure equivalent treatment of DA and DL customers, and to keep bundled customers indifferent to the departure of all DA and DL customers. Specifically, they argue that migrating customers subject only to ongoing CTC will not receive the benefit of the below market costs of the residual portfolio. MDL parties believe that the resulting charges would be inconsistent with the total portfolio approach for determining bundled customer indifference, and that bundled customers would not be indifferent to the departure of the load, but would be benefit from it.
The IOUs argue that MDL parties' position is illogical and inconsistent with the Commission's determination that ongoing CTC would be calculated based on the requirements of Pub. Util. Code § 367(a)(1) - (6). The IOUs characterize any use of the indifference charge to modify "statutory" CTC for these customers as nothing more than a "back door" way of determining a "total portfolio" CTC charge for them.
Under current market conditions, the obligation to pay DWR power costs actually serves to lessen these customers' total CRS obligations, as the total portfolio indifference charge is currently lower than the ongoing CTC. However, under past market conditions responsibility for the DWR power costs has placed burdens, rather than benefit, on these customers. If market conditions change in the future, lowering market rates, then the DWR obligation may again increase these customers' burdens.
The approach described in the Working Group Report is intended to apply regardless of market conditions, or whether the DWR cost responsibility works to reduce, or increase, non-bundled customers' total obligations. From the IOUs' perspective, the appropriate distinction to determine whether a non-bundled customer pays the ongoing CTC only, or the ongoing CTC plus the PCIA, is whether the non-bundled customer is responsible for the costs of DWR power. The IOUs argue that if the non-bundled customer is exempt from DWR power costs, then the customer should incur the "statutory" CTC, according to D.05-12-045. The IOUs argue that there should be no "indifference" or "total portfolio" adjustment for such customers. Otherwise, the IOUs argue, the customer would not pay "statutory" CTC, but would pay a "total portfolio"-based CTC in contravention of D.05-12-045.
Consistent with D.05-12-045, we affirm that the method for calculating ongoing CTC for all customers, regardless of whether they pay a DWR power charge, is based on Pub. Util. Code §367(a)(1) - (6). As explained in D.05-12-045, parties in that proceeding were mistaken in believing that there is a "total portfolio" method to calculate ongoing CTC for at least some customer groups. As a result, in D.05-12-045, we found that most of parties' arguments in that proceeding as to whether a "total portfolio" method should be used to calculate ongoing CTC were inapposite.
In D.05-12-045, moreover, we reached no final disposition as to the applicability of the total portfolio indifference method to MDL customers that are exempt from the DWR power charge. We stated therein that questions "regarding the use of the total portfolio method to determine the indifference costs included in the CRS" were deferred for resolution in R.02-01-011.30 Accordingly, D.05-12-045 does not prejudge nor preclude adoption of a total portfolio indifference standard for MDL customers in the instant order.
We find no inherent conflict between applying a uniform ongoing CTC on MDL customers and applying a "total portfolio" indifference standard in computing CRS. The application of the total portfolio method to calculate the indifference costs included in the CRS involves recognition of a separate category of URG costs, but does not negate the calculation of ongoing CTC.31
The ongoing CTC amount is not reduced by applying an indifference standard in deriving the overall cost responsibility of MDL customers. Rather, the total portfolio indifference adjustment merely accounts for the additional URG portfolio costs that are not included in the ongoing CTC calculation for MDL. Only the residual URG portfolio (i.e., the total URG portfolio less the ongoing CTC portfolio) would be reflected in the adjustment.32 Therefore, applying the total portfolio indifference standard to MDL customers exempt from the DWR Power Charge is consistent with uniform application of the ongoing CTC.
We also disagree with IOUs' argument that the bundled customer indifference standard applies only where the customer pays a DWR power charge. While we instituted the bundled customer indifference standard to avoid cost shifting to deal with the DWR power charge, the bundled customer indifference standard has broader applicability than just DWR power charges. In D.03-07-028, moreover, we indicated that to avoid cost shifting, MDL customers were to bear responsibility for their fair share of costs necessary to achieve the goal of bundled customer indifference.33 In applying that indifference requirement, we did not exclude MDL customers that are exempt from the DWR power charge. The fact that we granted exemptions from DWR power charges to certain MDL customers does not negate the applicability of the bundled customer indifference standard in order to avoid cost shifting.
We thus conclude that applying a bundled customer indifference standard is appropriate in deriving the cost responsibility for MDL customers even if no DWR power charge is involved. We shall apply a total portfolio indifference standard to all MDL CRS obligations whether or not a DWR power charge is applicable. The indifference adjustment in the context of such MDL customers applies to the residual URG portfolio and does not change the ongoing CTC that applies uniformly to all bundled, DA and DL customers.
For 2004-2006, the total portfolio adjustment is set forth in Table Appendix C-1, of the Working Group Report (reproduced in Appendix 6 of this order), under the DL recommended methodology and benchmark.34 For 2007 forward, the total portfolio adjustment would be determined in the ERRA proceeding and applied to non-bundled customers exempt from the DWR power charge and subject to ongoing CTC. Projected results based on various alternative benchmarks and methodologies are shown in the same table.
D. Applicability of Credits for Individual Customers
that Migrate From Bundled to MDL
MDL parties propose that individual bundled customers who become municipal departing load customers prior to the full repayment of the CRS undercollection receive credits against their CRS obligation. The DL parties propose to adjust individual bundled customers' bills retrospectively so that each customer would receive a portion of the not-yet-repaid DA CRS loan, if the customer departed from bundled service prior to full repayment of the CRS loan.
Under this proposal, determination of any credit due to a transferred MDL customer would be a function of the amount of the CRS undercollection at the time the customer departed.35 The DL parties propose a one-time determination of this credit based on the "vintage" of the MDL. MDL customers that were DA customers during the period when the liability accrued would not be eligible for the credit.
The IOUs oppose this proposal, characterizing it as administratively complex and ill-advised. The IOUs also argue that the proposal does not account for the possibility that other balancing accounts may be undercollected at the time the customers depart, nor hold such customers responsible retrospectively for such undercollections.
The IOUs characterize the proposal as a request that MDL customers be paid to depart from the IOU's system. As a general policy, the IOUs argue that the Commission should not require bundled customers to make such payments to departing load customers. The IOUs argue that a better approach here is the simpler one, and that the Commission should ensure that bundled customers collectively receive full repayment of the DA CRS loan.
We decline to authorize a credit to individual groups of customers who depart to MDL status. With respect to the DA CRS undercollections, bundled customers as a group are entitled to repayment of the "CRS loan" they provided to DA customers. The entitlement of bundled customers, on a group basis, however, does not entitle specific bundled customers to individual "refund amounts." That would be, in effect, a retrospective adjustment to the cost responsibility for electricity received earlier. Instead, the loan is repaid as an adjustment to bundled customers' charges on a prospective basis.
If a bundled customer leaves the IOU's service territory before complete repayment of the loan, that customer does not receive a check from the utility. Likewise, a balancing account may be overcollected in a given year, indicating that customers paid a surplus for that year. However, such overcollection does not entitle any individual customer to a refund. Instead, future charges are reduced to amortize the overcollection. Ratepayers, in general, receive the benefit of the lower charge, but no refund checks are provided based on any customer's past consumption.
Individual, retrospective refunds as proposed would also be administratively burdensome to administer. With such after-the-fact adjustments, customers never have certainty at the time they are consuming utility service as to their cost responsibility for that service. For these reasons, we decline to authorize retrospective adjustments to individual customers who depart from bundled service to MDL status.
E. Treatment of Negative CRS
for MDL Customers
The MDL and IOU parties disagree concerning how to treat negative components of the CRS, including whether a particular negative CRS component may be used to offset any other CRS components (other than ongoing CTC). As indicated above, a negative CRS component may result where the ongoing CTC amount is larger than the overall CRS indifference charge.
The DL participants believe negative CRS components should be used to offset other CRS components in order to maintain bundled customer indifference. The DL participants believe that the CRS components represent various costs of power commitments made by or on behalf of the IOUs prior to the time of the DL customer's departure. DL Parties believe that in order to ensure that bundled customers' charges do not change from the departure (i.e., are no longer indifferent), the offsets of the various cost components should be allowed to occur.
To the extent that the DWR power charge is a negative amount and offsets ongoing CTC in its entirety, the DL participants believe that the indifference charge should be allowed to go negative. Once the negative indifference charge has been applied to recover past undercollections, they propose that it offset other CRS components. In any month in which a negative indifference charge is not used to offset past undercollections or other CRS components, they propose that it be carried forward to offset future CRS. DL parties believe this is consistent with the treatment of ongoing CTC in D.05-12-045.
The IOUs believe that the indifference charge should remain non-negative for each IOU after that IOU's existing CRS undercollection is eliminated. The IOUs argue that allowing the indifference charge to become negative after the existing CRS undercollection is eliminated is effectively paying DL customers for departing from the IOUs' procurement activities. Additionally, use of a negative indifference charge to offset other CRS charges such as the DWR bond charge or PG&E's ECRA charge is inappropriate. This argument, were it successful, would also impact the very nature of the consensus benchmark agreement which represented a compromise between the DA Agreement Parties. The IOUs indicate that they would be far less comfortable with the agreed benchmark if it could lead to payments to certain groups of DL customers.
In D.05-12-045, we directed that beginning in 2006 and subsequent years, negative ongoing CTC shall be netted against positive above-market costs included in ongoing CTC (referred to as positive ongoing CTC). The use of negative ongoing CTC to offset positive ongoing CTC yields a more accurate measurement of total above-market costs over time.
We directed in D.05-12-045 that any negative ongoing CTC that occurs in 2006 and subsequent years may only be used to offset positive ongoing CTC during these years, with no accrued interest. We directed that the tracking of negative ongoing CTC would cease when all ongoing CTC costs had been recovered, and that any remaining negative ongoing CTC balance would have no further effect on cost allocation or rates.
In D.05-12-045, we restricted the use of negative ongoing CTC only to offset positive above-market costs, but not to offset other components of ongoing CTC (e.g., QF restructuring costs) or other CRS components. This is because negative ongoing CTC provides no cash, and thus, cannot be used to offset costs that involve actual cash expenditures (e.g., QF restructuring costs). We indicated, however, that D.05-12-045 did not prejudge how to treat any negative amounts that may result when the total portfolio method is used to calculate the indifference costs recovered via the CRS.
D.05-12-045 did not result in the payment of negative ongoing CTC to any customers, but merely expanded the period of time for measuring ongoing CTC, so that negative ongoing CTC in future years is used to offset positive ongoing CTC in future years. Based on these considerations, we adopt the IOUs' proposals, as outlined above, concerning limitations on the treatment of negative ongoing CTC. The indifference charge shall remain non-negative for each IOU after that IOU's existing CRS undercollection reaches zero. A negative ongoing CTC-plus-PCIA amount shall not offset other components of the CRS. Any reduction provided to MDL customers, whether it is a direct refund or a reduction in another CRS component, must be funded by the remaining bundled customers. Therefore, no offset to other CRS components shall be allowed. MDL customers should not be paid for departing from the IOUs' procurement activities.
F. Allocation of CRS Exemptions
Among MDL Customers
The parties reached consensus on procedures for allocating the DWR power charge exemptions for transferred MDL. In D.03-07-028, the Commission adopted provisions for publicly owned utilities (POUs) to qualify for MDL CRS exclusions for new load on behalf of qualifying customers. The administration of such exclusions, however, was left to the MDL billing and collection implementation phase. D.04-12-059 [which addressed applications for rehearing of D.04-11-014, the decision on rehearing of D.03-07-028] adopted MDL CRS exclusions for new load associated with (1) POUs serving in geographic areas identified in the PG&E Bypass Report for transferred load and (2) POUs formed before July 2003 capped on an interim basis at 80 MW.
In addition, in D.06-03-004, the Commission established protocols for POUs not identified in PG&E's Bypass Report to claim eligibility for DWR power charge exemptions. The Commission has further clarified that new load located in the geographic area "identified in the PG&E Bypass Report attributable to transferred MDL, as the existing POU existed at the time of the Bypass Report" receive an unlimited exemption from the DWR Power Charge. (D.05-07-038, Finding of Fact 10.) Therefore, there is no need to allocate or otherwise track such new load exemptions for MDL.
An ALJ ruling dated December 23, 2004, solicited proposals concerning, among other items, protocols for administering the first-come, first-served rules for POUs seeking to qualify for authorized CRS exclusions on behalf of their customers. A workshop held on January 31, 2005 reached a productive outcome on this question for MDL "transferred load." Working Group representatives presented a joint proposal for "Allocation of Transferred Load Exceptions from the CRS." On October 3, 2005, members of the Working Group met to discuss and develop recommended protocols, and used the January 31, 2005 POU proposal as their starting point for specific protocols that can be implemented by the Commission. The Working Group recommends that, as applicable, these principals be applied to protocols for the "first-come, first-served" exceptions provided to transfer departing load. Separate protocols will be necessary for new load.
At the meeting, PG&E agreed to compile its confidential load data for each affected POU and to provide that data to the Energy Division for distribution.
We find the proposed procedures for allocation of transferred MDL to be reasonable and hereby adopt them, as summarized below. The following principles shall apply in administering the MWh exceptions from the CRS allocated to transferred MDL, as adopted in D.04-11-014, as modified by D.04-12-059.36
· CRS will assessed as a volumetric based on historical pre-departure metered consumption:
- Historical pre-departure metered data will be determined as recorded in each customer's departing load statement.
- IOUs will cooperate in providing copies of each customer's departing load statement to the serving POU.
· POU's determination of the amount of load eligible for an annual exception shall be done on an annual basis.
· POUs will provide the amount of their transferred load exception for the previous year to DWR by February 1 of the following year:
- Priority allocation for transferred load CRS exceptions shall be (1) entities named in the Bypass Report up to the full amount set forth in the report, followed by; (2) POUs with customers departing PG&E bundled service on a first-come, first-served basis, followed by; (3) all other eligible POUs on a first-come, first-served basis.
- Each year, entities named in the Bypass Report have priority for up to the full amount set forth in the Report; however, once established, the priority for allocating excess exceptions will be followed each year.
· Any exception amount not used in a calendar year remains available for [use by qualifying DL in] subsequent years.
· POUs are not required to provide any customer specific information to the IOUs.
· Each year, the CRS transferred load exceptions are assigned to the load of a POU, and not to particular customers.
· Payment of CRS will be for the preceding year.
· For entities not named in the Bypass Report, first-come, first-served priority for the CRS exception should be determined on the date the affected service area came under the control of the POU (by annexation, agreement or otherwise).
· Any collection costs incurred by the IOU are the responsibility of the IOU.
G. Conversion of MW Cap Into
MWH Figure
In D.04-11-014, the Commission granted a CRS exception cap up to 150 MW of "new" MDL in the PG&E and SCE territories, available through 2012. The Commission set this cap on an interim basis, and allowed parties "to revisit the size of the cap (but not whether there should be a cap), through workshops or other means as determined by the assigned ALJ, in the billing and collections phase of this proceeding." (D.04-11-014 at 14.)
Decision 04-12-059 (on rehearing of D.04-11-014) reduced the interim cap from 150 MW to 80 MW and reiterated that "the amount of the cap is interim in nature and shall be revisited in the billing and collections phase of this proceeding." (D.04-11-014 at 14.) The Commission further stated: "We expect that during this phase, the parties will present for our consideration a specific amount for the cap, whether 80 MW or another number, that is fully presented, explained and justified." (D.04-12-059 at 24.)
Parties remain in disagreement as to a specific amount for the cap, whether 80 MW or another number. For the present time, therefore, the 80 MW cap remains in effect. In rulings on December 23, 2004 and January 26, 2005, the IOUs to were directed to "provide system average load factors ... from which the applicable MW caps can be converted into a corresponding MWh figure." PG&E and SCE provided preliminary load factor figures at the January 31, 2005 workshop and confirmed those figures in follow-up communications with the Energy Division.
The December 23, 2004 ALJ Ruling also solicited comments on the appropriate methodology for converting the 80 MW cap into a MWh figure. In its January 14, 2005 opening comments, PG&E proposed that the 80 MW cap be multiplied by 8,760 hours per year, which should then be multiplied by a system average load factor. No party expressed any objection to this approach. In its April 15, 2005 comments, DWR indicated it did not wish to administer the program. As a result, the Energy Division recommends that it take on this responsibility itself. Accordingly, we shall delegate responsibility for administering this program to the Energy Division, and adopt PG&E's proposal as to the conversion of the 80 MW cap into a MWH figure.
H. Protocols for Allocation of
Exemptions for New MDL
New load of POUs not named in PG&E's Bypass Report but "serving at least 100 customers as of July 10, 2003" are exempt from the DWR Power Charge up to a cap of 80 MW.37 The Working Group discussed, but did not agree upon protocols for administering such new MDL exemptions. The IOUs argue that the criteria for qualifying for the 80 MW new load exemption are identical to the criteria for qualifying for the "leftover" transferred load exemption, and that the same procedures adopted in D.06-03-004 can apply for determining which POUs qualify for the new load exemption.
The IOUs propose that 15 days following a Commission decision adopting the new load protocols, the Energy Division would post that 80 MW of new load exemption is available. Within 10 business days, POUs that qualify for the new load exemption would notify the Energy Division of their interest in the available exemptions, with an estimate of their exempted new load (similar to step 2). The IOUs propose that they be given 5 business days to confirm or comment on, as the case might be, the POU's notification to the Energy Division. Within 30 business days after that, the Energy Division would notify the POU whether their request for exemption was granted. The Energy Division would regularly update the amount of new load exemption available, as requests for exemption are processed on a first-come, first-served basis.
The MDL parties, however, argue that there is insufficient information in the Working Group Report upon which to determine the appropriate procedures for allocation of such new load.
The Working Group Report indicates that the amount of actual transferred departed load and new departed load in the IOU service territories is currently well below the total exemptions available. However, protocols are needed to allocate exemptions for transferred load when and if such exemption limits are reached. We direct the Energy Division to reconvene the Working Group within 30 days of this decision for the purpose of reaching a consensus on protocols for allocating exemptions for new load. To the extent that parties cannot reach consensus, any disputes shall be resolved through the advice letter filing process to implement billing and collections for new MDL.
26 Outstanding issues associated with the billing and collection of the CRS from departing load customers are being addressed separately in advice letters that PG&E and SCE have submitted to establish MDL billing and collection procedures. SDG&E elected not to file an advice letter for this purpose.
27 See D.03-07-028, D.03-08-076, D.04-11-014, D.04-12-059, D.05-007-038, and D.05-08-035.
28 In their filings, Parties refer to "statutory" CTC. However, as previously discussed, this phrase is synonymous with ongoing CTC, as there is only one methodology for calculating ongoing CTC (i.e., pursuant to Pub. Util. Code § 367(a)(1) - (6)).
29 See computational example in Appendix 1C of the Working Group Report.
30 D.05-12-045 at 20.
31 See D.05-12-045, p. 17; D.05-10-047, at 3; D.05-10-046, at 3, 5-8; and D.05-01-035, at 2-3.
32 See Working Group Report at 21-22.
33 See D.03-07-028 at 13.
34 The total portfolio adjustment would not apply for year 2003 as, in accordance with D.05-01-040, issued in this rulemaking proceeding in January 2005, the CTC rate for 2003 has been set at $0.00.
35 For example, Turlock Irrigation District (TID), pursuant to a negotiated agreement with PG&E, assumed a specified number of transferred MDL customers on December 8, 2003. Pursuant to a previous Commission decision, prior to the transfer, those customers paid PG&E bundled service rates. While a rate freeze was in effect at the time the customers were transferred from PG&E to TID, in March 2003, the Commission had approved a three cent rate increase paid by all bundled service customers. Accordingly, DL parties argue that from March 2003 until December 2003, current TID customers helped subsidize the CRS undercollection and should be reimbursed for such contributions.
36 D.04-12-059 was clarified in D.05-07-038, which was issued after the January 2005 workshop.
37 D.04-11-014, Ordering Paragraph 2; D.04-12-059, Ordering Paragraph 1.a.
