Background

AB 1890, the electricity deregulation legislation, was enacted into law on September 24, 1996. The legislation authorized an "immediate rate reduction of no less than 10 percent for residential and small commercial ratepayers," which was to terminate on March 31, 2002. (Stats. 1996, ch. 854, § 1.(b)(2).) In order to finance the rate reduction, the Legislature directed the electric utilities to apply for a financing order with the Commission, and for "rate reduction bonds from the California Infrastructure and Economic Development Bank in amounts sufficient to achieve a rate reduction in the most expeditious manner for residential and small commercial customers of not less than 10 percent for 1998 and continuing through March 31, 2002." (Id., § 1.(e); Pub. Util. Code § 330(w).)

AB 1890 also added § 368 to the Code. Section 368 provides for the submission of a cost recovery plan to the Commission to recover the electric utilities' uneconomic costs related to generation-related assets and obligations identified in § 367. In order for the Commission to authorize recovery, the cost recovery plan must meet the following criteria, among others:

"(a) The cost recovery plan shall set rates for each customer class, rate schedule, contract, or tariff option, at levels equal to the level as shown on electric rate schedules as of June 10, 1996, provided that rates for residential and small commercial customers shall be reduced so that these customers shall receive rate reductions of no less than 10 percent for 1998 continuing through 2002. These rate levels for each customer class, rate schedule, contract, or tariff option shall remain in effect until the earlier of March 31, 2002, or the date on which the commission-authorized costs for utility generation-related assets and obligations have been fully recovered." (Pub. Util. Code § 368(a).)

SCE's cost recovery plan was filed in Rulemaking (R.) 94-04-031 and Investigation (I.) 94-04-032 on October 15, 1996. SCE's cost recovery plan, and the plans of the two other electric utilities, were addressed by the Commission in D.96-12-077 (70 CPUC2d 207). Ordering Paragraph 1 of D.96-12-077 states:

"The cost recovery plans filed by Pacific Gas and Electric Company ..., San Diego Gas & Electric Company ..., and Southern California Edison Company (Edison) are approved, subject to the limitations discussed in this opinion." (70 CPUC2d at 232.)

D.96-12-077 also discussed the Commission's role in the review and approval of the cost recovery plans, and the principles or limitations that the cost recovery plans would be subject to. The decision also addressed the "rate freeze" provision of § 368(a) which requires the cost recovery plans to freeze rates at the June 10, 1996 level, and that rates for residential and small commercial customers be reduced by no less than 10%.

D.96-12-077 described the 10% rate reduction as follows:

"Section 368(a) requires the utilities' plans to include a rate reduction of at least 10% for small commercial [Footnote 2] and residential customers. [Footnote 3]⁴ This reduction is `for 1998 and continuing through 2002.' We construe the term of this reduction to be from January 1, 1998 to March 31, 2002, if the rate freeze is not terminated earlier. The latter date is specified elsewhere in § 368(a) as the end of the rate freeze." (70 CPUC2d at 220.)

In D.97-09-056 (75 CPUC2d 555), the financing order for SCE was approved, which allowed SCE to finance $3 billion in transition costs through the issuance of rate reduction bonds. One purpose of the rate reduction bonds was to allow SCE to provide the 10% rate reduction during the rate freeze period to residential and small commercial customers. Ordering Paragraph 17 of D.97-09-056 stated:

"To the extent that rate reduction bonds have been issued, beginning January 1, 1998, Edison shall reduce the rates to eligible residential and (as defined in PU Code Section 331(h)) small commercial customers, from the rates that were in effect on June 10, 1996 by providing a 10% bill credit. For such purpose, eligible customers shall include all residential customers, commercial customers in the Domestic and General Service (GS-1) rate groups." (75 CPUC2d at p. 580.)

In Conclusion of Law 32 of D.97-09-056, the Commission stated:

"For purposes of eligibility to receive the rate reduction and responsibility to pay for FTA charges, Edison's residential and small commercial customers should be determined as described in Edison's prepared testimony." (75 CPUC2d at p. 578.)

In the "Eligibility" section of D.97-09-056, the Commission stated the following:

"The rate reduction applies to residential and small commercial customers as defined by AB 1890. For this purpose, Edison's eligible customers are those served on rate schedules in Edison's Domestic and General Service (GS-1) rate group. [Footnote 5.]⁵ Edison's proposal to address this issue, reflected in its proposed Schedule RRB, and as modified below, is adopted. All other customers will neither receive the rate reduction nor be responsible for FTA charges.

"Subject to the bypass provisions discussed below, customers who no longer meet the applicability for service criteria on a rate schedule that qualifies for the 10% reduction will no longer receive the 10% bill credit, nor will they be required to continue to pay the FTA charge. [Footnote 6 omitted.] This provision will apply, for example, when a GS-1 customer's load grows beyond 20 kilowatts and the customer migrates to a rate schedule with a higher demand eligibility criterion, such as schedule GS-2. Edison does not expect that this provision will encourage such migration, because it is unlikely that customers will add load to increase beyond 20 kilowatts, solely for the purpose of avoiding the FTA charges. [Footnote 7 omitted.] This provision is consistent with the treatment of nonbypassable competition transition charges in other proceedings for customers who change rate schedules. Residential customers cannot migrate to a schedule which does not require an FTA charge." (75 CPUC2d at p. 570.)

Anchor filed a civil action against SCE in Los Angeles Superior Court on April 10, 2001, Case No. BC 248372. SCE filed a demurrer to the civil complaint asserting that the Commission has jurisdiction over the dispute. According to the complainants, the Superior Court "sustained the demurrer challenging the Court's jurisdiction as to certain causes of action, namely, violation of Public Utilities Code §2106 (predicated upon a violation of Public Utilities Code §330 et seq.), negligence in billing, common counts for overcharging, unjust enrichment based upon improper collections, and constructive trust over ill-gotten gains." (Complaint, p. 3.) The causes of action for a violation of the Unfair Competition Act and fraud were stayed by the Superior Court pending the Commission's determination on whether SCE violated any statute or tariff.⁶

On March 27, 2002, four days before the expiration of the 10% rate reduction, the complainants filed their complaint against SCE with the Commission. SCE filed an answer to the complaint on May 22, 2002. In a September 10, 2002 ruling, the administrative law judge (ALJ) set a prehearing conference for September 24, 2002. The ruling stated in part:

"Based on the complaint and the answer, the threshold question that faces the Commission is whether or not the Commission made a final determination of the issues presented in the complaint. The issue of eligibility for the 10% rate reduction was developed in A.97-05-006, the proceeding in which D.97-09-055 was issued.⁷ No one filed a timely application for rehearing or a petition for modification of D.97-09-055 on the issue of eligibility for the 10% rate reduction.

"Resolution of the threshold question would involve an analysis of several relevant code sections. A review of §§ 841(c), 1709, 1731(b), 1732, and 1756 suggest that the Commission should proceed with the issuance of a decision addressing whether a final determination of the issues raised by the complaint has already been made by the Commission. If such a final determination was made, the application of these code sections to this proceeding suggest that the complaint should be dismissed." (Sept. 10, 2002 Ruling, p. 8.)

At the September 24, 2002 prehearing conference, the ALJ directed the parties to file opening and reply briefs on whether the complainants' allegations regarding the lawfulness of the decisions and the tariffs were timely filed or not. The ALJ also allowed parties to brief the issues of (1) whether SCE complied with the financing order decision; (2) even if SCE complied with the financing order decision, whether SCE remains liable based on its failure to comply with other Commission decisions and § 331(h); and (3) whether SCE's Rule 1 was based on SCE's misrepresentations to the Commission. The complainants and SCE filed their respective opening briefs on October 29, 2002, and their reply briefs on November 19, 2002.

The Assigned Commissioner issued the scoping memo and ruling for this proceeding on May 8, 2003.