Modeling Issues

DWR's August 16 Determination was based upon a modeling run referred to as PROSYM 36. Subsequently, DWR performed another modeling run, PROSYM 37. The results of PROSYM 37 were presented in DWR's Exhibit 12, which was distributed on October 2, and Exhibit 12-A, which was distributed on October 4. PROSYM 37 incorporates corrections suggested by PG&E, as well as post-processing adjustments that factor in some impacts of D.02-09-053. DWR did not modify the revenue requirement in its August 16 Determination as a result of PROSYM 37, but rather provided the new run for the Commission's use in allocating the revenue requirement among the utilities.

PG&E and ORA support the use of PROSYM 37, on the grounds that it contains the most current and accurate information.

SDG&E and SCE argue that PROSYM 37 should not be used here. While not specifically identifying problems with PROSYM 37, they argue that its presentation during evidentiary hearings was too late in the proceeding for parties to adequately evaluate it, perform discovery, or prepare for cross examination. Accordingly, SDG&E and SCE argue that use of PROSYM 37 in this proceeding would violate due process, Public Utilities Code section 1822, and Rule 74.5(b) of the Commission's Rules of Practice and Procedure. They further argue that it is not appropriate to use PROSYM 37 for allocation of the revenue requirement because it does not correspond to the model used by DWR in deriving its revenue requirement, resulting in a potentially unfair mismatch.

While we generally agree with PG&E and ORA that we should be using the most accurate and up-to-date information and assumptions, SDG&E and SCE raise a valid concern. If we were to use PROSYM 37, it could result in a significant change in the allocation of the DWR revenue requirement as compared with PROSYM 36, presumably to the detriment of SDG&E and SCE. PROSYM runs are complex and highly technical, and PROSYM 37 was presented too late in this proceeding for parties to meaningfully evaluate or address its contents, methodology, or effects. Based on the facts before us, it would be inconsistent with due process to base our allocation upon PROSYM 37.¹⁵ We are also concerned by the potential unfairness of basing our allocation of DWR's revenue requirement on one model, while the revenue requirement itself is based on another model.

Accordingly, for purposes of this decision, we are uniformly using PROSYM 36. Nevertheless, we do have a duty to ensure that our allocation is as consistent as possible with reality and with DWR's actual revenue requirement. The modifications and adjustments made in PROSYM 37 may also result in a somewhat lower revenue requirement than produced by PROSYM 36.¹⁶ While the potential for a reduced revenue requirement is very attractive, PROSYM 37 by itself does not provide an adequate basis for a new revenue requirement. Among other things, DWR has its own processes and requirements for the preparation and presentation of a new revenue requirement. However, SDG&E and SCE (and any others) should be given a reasonable opportunity to provide suggestions to DWR, with everyone being subject to the same deadline. DWR can then evaluate those suggestions, and incorporate those it finds to be appropriate in its supplemental determination.