SDG&E

SDG&E argues that a paper-only proceeding is inadequate to deal with the potentially complex and controversial technical issues that may be presented by a supplemental determination from DWR. This is a valid concern, so while we remain committed to an expedited process, we will allow the ALJ and Assigned Commissioner(s) to determine the appropriate procedural approach, rather than make that determination here.

SDG&E recommends that the Commission review any supplemental determination provided by DWR concurrently with the true-up of the 2001-2002 revenue requirement. While this would be procedurally simpler, we are hoping that DWR will provide its supplemental determination significantly earlier than the anticipated date of the true-up phase of this proceeding. PG&E opposes SDG&E's recommendation, on the grounds that it would needlessly delay Commission action on the supplemental determination. We agree with PG&E that the revenue requirement and its corresponding inter-utility allocation should be revised as quickly as possible. We will not make SDG&E's requested change, and we will leave such scheduling and procedural matters to the discretion of the ALJ and Assigned Commissioner(s), with an exhortation to DWR to submit its supplemental determination early in 2003, well before the true-up phase of this proceeding.

SDG&E notes that the Commission should more clearly state that the implementation date for interim rates is January 1, 2003. We have clarified the decision to state that interim charges go into effect January 1, 2003.

SDG&E recommends that the Commission make clear that when a pre-load migration adjustment is made to the adopted allocation, such a calculation should not include continuous direct access load. ORA agrees with SDG&E that references to DA migration in the decision should refer only to non-continuous direct access load. This is generally correct, but SCE further elaborates on this issue:

SCE believes that the appropriate DA load adjustment should reflect that portion of DA load that is subject to a CRS for DWR going-forward contract costs. Pursuant to D.02-11-022, that is currently any DA load that took bundled service on or after February 1, 2001. (SCE Reply Comments, p. 3.)

We make the change recommended by SDG&E and ORA, with SCE's clarification.

SDG&E repeats its request that the cost of ancillary services be removed from DWR's revenue requirement, and provides a new argument for its request, based upon ALJ Halligan's Draft Decision in R.01-10-024, and a DWR exhibit in that proceeding. The exhibit cited by SDG&E reads, in relevant part, "The financial obligation for ISO charges will be allocated to the Utility, unless otherwise extended..." SDG&E focuses upon the first phrase, and the Halligan DD's recommendation that the full responsibility for ISO charges revert back to the utilities. The "unless otherwise extended" language, however, presents a problem. It means that the financial obligation for ISO charges, such as ancillary services, may not revert back to the utilities. DWR makes this point in its Reply Memorandum: "[U]ntil the utilities are actually paying for ancillary services costs in 2003 and can continue to do so, the Department does not intend to reduce its Determination of Revenue Requirements to reflect this fact." (DWR Reply Memorandum, p. 3.) While we are sympathetic to SDG&E's request, particularly as it is the utility least likely to need DWR to purchase ancillary services on its behalf, we still cannot remove the $170 million for ancillary services from DWR's revenue requirement.

SDG&E believes that the $0.00931 cent/kWh "Charge Component to Fund Operating Account" from the corrected Table C collects approximately $100 million or 33 percent more than the $307,752,619 of revenue to maintain Operating Account above $1 billion also shown in the corrected Table C. SDG&E, therefore, requests that the Commission consider a prospective decrease in this Charge Component to Fund Operating Account, if it is indeed at a higher level than otherwise necessary due to the fluctuating daily balances in the Operating Account. (SDG&E Comments, p. 4.)

Essentially, setting the power charge high enough to maintain the operating account balance above $1 billion has the indirect effect of leaving DWR's accounts $307 million higher at the end of 2003 than at the beginning of the year. But it is a residual effect of the solution for the power charges, rather than a directly calculated "revenue requirement" item. Since the total power charges are set to get DWR over a low-balance "hurdle" in mid-2003, and since DWR's deliveries of power are higher in the second half of 2003, any fixed charge set in this manner will have the result of producing "excess" revenues in the DWR operating account by the end of 2003. The $307,752,619 shown in Table C is simply the result of this effect: it is the calculated difference between the operating account balance on 12/31/2003 and 12/31/2002