II. Background

SCE filed its ERRA application in response to Commission directives in Decision (D.) 02-10-062 and D.02-12-074. Those decisions established ratemaking mechanisms to enable California investor-owned electric utilities to resume purchasing electric energy, capacity, ancillary services and related hedging instruments.

D.02-10-062 established an ERRA balancing account for the major energy utilities to track fuel and purchased power revenues against actual recorded costs.¹ This balancing account was modeled after the Energy Cost Adjustment Clause (ECAC) balancing account. That decision also required the major energy utilities to establish a fuel and purchase power revenue requirement forecast for 2003, a trigger mechanism, and a schedule for semiannual ERRA proceedings through an initial ERRA application.

D.02-12-074 modified and clarified the cost recovery mechanisms adopted in D.02-10-062. Those modifications and clarifications required the major utilities to amend their initial ERRA tariffs to, among other matters, identify the trigger and threshold amounts and exclude EETA costs.