3. Treatment of Reductions in the Operating Reserves

One of the issues identified at the PHC and in the scoping memo is how the Commission should allocate to customers the 2010 reduction and future reductions in DWR's operating reserves. This issue arose because of the concern of the Alliance for Retail Energy Markets (AReM) that any reduction in DWR's operating reserves resulting from the expiration of the DWR power contracts should be returned on a pro rata basis to all customers, including direct access customers. At the PHC, DWR and the parties agreed to meet to discuss how the Commission should treat reductions in DWR's operating reserves.

An informal workshop was held on October 5, 2009 to discuss this issue. DWR presented an accounting of how its operating reserves work.

AReM, and the other parties interested in this issue "now agree that the current operating reserves have solely been funded through the power charge," and "stipulate that any reduction (including reductions caused by contract novation) in the operating reserves should be returned to utility customers through a reduction in the power charge consistent with the same percentage share as they contributed (i.e., 47.5% to SCE's customers, 42.2% to PG&E's customers, and 10.3% to SDG&E's customers)." This agreement and stipulation was included in the October 19, 2009 motion for official notice that was filed by SCE, PG&E, SDG&E, AReM, The Utility Reform Network, and the Division of Ratepayer Advocates (joint parties). The motion requests that official notice be taken of the joint parties'stipulation as to the allocation of reductions to DWR's operating reserves for 2010 and beyond.³

We will grant the motion to take official notice of the joint parties' stipulation.

³ When the Proposed Decision was issued, the time for responding to this motion had not yet expired. However, since AReM and the other joint parties agreed to how the reduction to the operating reserves should be allocated, and because the parties have an opportunity to comment on the Proposed Decision, there is no need to delay action on this issue.