Other Issues
PG&E recommends that the Commission retain the one-half cent per kWh "Catch-Up" surcharge originally adopted in D. 01-05-064 to partially offset DWR's requested increase in its revenue requirement. SCE similarly recommends that the Commission defer a potential rate increase by authorizing SCE to use the Catch-Up surcharge revenues to offset the increase in DWR's revenue requirement. (See, Resolution E-3776, issued June 6, 2002.) While these requests are facially similar, PG&E and SCE are in significantly different positions, and also differ significantly in the showings they have made on this issue.
In its testimony and in its Comments on the Proposed Decision, SCE describes the impact of DWR's 2003 revenue requirement, and specifically sets forth the impact of the portion of that revenue requirement allocated to SCE. According to SCE, that impact, when examined in the context of the settlement agreement in the filed rate doctrine litigation between SCE and the Commission, results in a retail rate increase to ensure that the surplus contribution to the Procurement Related Obligations Account (PROACT) is not affected. SCE states that it can defer a rate increase by using Catch-Up surcharge revenues to offset the increase in its portion of DWR's 2003 revenue requirement.21
We prefer to avoid a rate increase, and SCE has made a substantial showing how use of the Catch-Up Surcharge will avoid a rate increase. SCE's proposal is also consistent with D.02-11-026, which removed certain restrictions on the use of surcharge revenues. We accordingly grant SCE's request for use of the Catch-Up Surcharge revenues.22
PG&E has also consistently requested similar authorization to use the revenues from the Catch-Up Surcharge to offset an anticipated increase in its portion of the DWR revenue requirement for 2003. (See, e.g. Exhibit 1, p.6-1.) PG&E has not, however, shown that it actually needs to use the Catch-Up Surcharge revenues to avoid a rate increase. PG&E provides no detailed analysis of the sort provided by SCE, and in fact provides no analysis at all. PG&E's request to use the Catch-Up Surcharge revenues is unsupported, and is denied.
PG&E recommends that the Commission make clear to DWR that the Commission expects DWR to act immediately to lower its revenue requirement should DWR's costs become significantly lower. (PG&E Opening Brief, pp.31-32.) TURN agrees with PG&E. (TURN Reply Brief, p.8.) While we would hope this would go without saying, it bears repeating: every dollar of DWR's revenue requirement is a dollar that must be paid by California ratepayers, so every dollar by which that revenue requirement can be reduced is another dollar that can remain in the pocket of a California ratepayer. We encourage DWR to do all it can to reduce its costs, and to promptly lower its revenue requirement accordingly. We believe that DWR's supplemental determination may reflect a reduced revenue requirement, and we expect that DWR will make every effort to further minimize its revenue requirement.
We note that an update may have a significant downward impact on DWR's revenue requirement, and the resulting rates charged to customers in California. At issue are over $170 million in potentially duplicative ancillary service costs being; over a billion of cash reserves that should be unnecessary as the utilities resume the responsibility for procuring energy to meet their net short positions in 2003, and other matters. By appropriately updating their revenue requirement in a timely manner, DWR can help us ensure that the burden on ratepayers and the economy of California to pay for expensive DWR power is minimized.
SDG&E argues that no part of any DWR revenue requirement pertaining to power contracts entered into by DWR between August 22, 2002 and January 1, 2003 (pursuant to D.02-08-071) be allocated to SDG&E. According to SDG&E, any such contracts would be for the sole benefit of the customers of SCE and PG&E, and SDG&E customers should not have to bear their costs. SDG&E acknowledges that DWR's revenue requirement does not currently contain any such costs, but SDG&E expects that DWR may incur costs as provided for in D.02-08-071, and it would be appropriate for ratemaking mechanisms to be put in place in anticipation.
In D.02-08-071, we authorized PG&E and SCE to enter into power contracts using the credit backing of DWR. We did not extend that authority to SDG&E, as we found that there was no need for DWR to "backstop" purchases by SDG&E. Since the contracts potentially at issue would be entered into by the individual utilities on behalf of their own customers (as opposed to the earlier contracts negotiated by DWR on behalf of the whole state) it is reasonable to assign the costs of those contracts to the customers of the utility that entered into them. Consistent with SDG&E's request, to the extent that DWR's revenue requirement includes costs associated with this category of contracts, those costs will be directly assigned to the customers of the utility that entered into any such contract or contracts.
21 The Catch-Up Surcharge revenues would not flow directly to DWR, but rather would be used to maintain the level of SCE's surplus. As SCE describes it: "Beginning in January 2003, on a monthly basis, SCE will determine through the operation of the Rate Change Tracking Account [fn. omitted] the actual amount of reduced Surplus being caused by increased procurement costs (both DWR and SCE-related). The Surplus impact calculated in the Rate Change Tracking Account will determine the amount of Catch-Up surcharge revenues to be transferred from the Catch-Up Surcharge Revenue Memorandum Account [fn. omitted] to the PROACT. The transfer from the Catch-up Surcharge Revenue Memorandum Account to the PROACT will ensure that the Surplus contribution to PROACT is not affected by the increased procurement costs." 22 We do not otherwise modify our prior decisions regarding the Catch-Up surcharge here.
