V. Rule Applicable to Both Gains and Losses
A. Comments - Same Rule for Gains/Losses
The OIR suggested that we apply the same rules to gains and losses in most cases. Aglet Consumer Alliance (Aglet) and ORA/TURN support a symmetrical rule, with the exception of large losses related to nuclear power plants or other significant assets.
ORA/TURN claim that, "Sometimes there are unique reasons for the Commission's assigning losses to shareholders [rather than utility ratepayers]. For example, the Commission has assigned losses to shareholders when the utility engaged in highly risky and non-utility-related adventures, or if the utility grossly mismanaged certain projects."6 ORA/TURN therefore advocates a case-by-case approach to catastrophic losses. Aglet recommends the same approach. The utilities did not address these arguments.
B. Discussion - Same Rule for Gains/Losses
We agree that where a utility incurs unusual or catastrophic losses from sale of a capital asset, any party may request that we analyze the loss on a case-by-case basis. We obviously cannot anticipate in advance all types of losses for which we should conduct this type of analysis, but note that the Commission has had very few applications seeking to allocate losses in the last several years. Most sales of land or buildings used to provide utility service produce capital gains. For the small number of situations that produce losses, we propose two triggers for a case-by-case analysis:
Losses greater than $50 million: If the asset causes a utility an after-tax loss greater than $50 million, the utility shall automatically file an application seeking case-by-case determination of how to allocate the loss.
Other unusual losses: In cases involving losses of $50 million or less, the utility may seek allocation of the loss to ratepayers. If any party, including ORA, contends that the Commission should allocate the loss, in whole or part, to utility shareholders, the party should seek case-by-case treatment in a protest to the utility application.
For losses that do not exceed $50 million, or for which no party seeks case-by-case treatment, the general rule for allocation of losses will be the same as for gains. As we discuss below, for depreciable assets, the utility may allocate 100% of the after-tax loss to ratepayers. Ratepayers and shareholders will equally share the loss from non-depreciable assets - 50% to ratepayers, 50% to shareholders.
6 ORA/TURN Comments at 4, n.8, citing Application of SoCalGas for Authority Pursuant to PU Code § 851 to Sell Certain Intellectual Property, D.00-06-005, 2000 Cal. PUC LEXIS 281, and In the Matter of Application of SCE for Authority to Encumber Certain Fuel Oil Pipeline and Storage Systems Facilities, D.94-10-044, 56 CPUC 2d 642 (1994). All parties' comments in this proceeding are cited as "___________'s Comments" or "________'s Reply Comments."
