3. Should the Application be Considered at This Time?
In its opposition to considering the Application at this time, AReM states that SCE historically has been hostile to retail competition, and contends that SCE's proposed fees were designed with anticompetitive motives.17 AReM asserts that, because of SCE's antipathy to retail competition, the proposed fees are unduly discriminatory to residential DA customers, and, therefore, the Commission should reject the Application. AReM points to positions taken by SCE in earlier Commission proceedings as evidence that SCE is motivated to propose fees which are anticompetitive and harmful for DA customers.
SCE states that its original DA service fees were established in 1997 before the implementation of DA in 1998, and that, according to SCE, the existing service fees need updating to reflect current costs and current DA processes.18 SCE also states that, since DA began in 1998, the cost of providing DA services has changed due to process changes in SCE's operations or in response to new services required by regulatory changes.
Although AReM recommends that the Commission reject the Application, it recommends that SCE be permitted to re-file after the proposed fees are determined by independently conducted analysis. AReM further recommends that SCE be required to demonstrate that it has worked cooperatively with the parties that will be subject to the new DA service fees so the proposed fees reflect their concerns.
CMTA does not go as far as AReM in attributing malevolent motives to SCE, but contends that, because of the potential for anticompetitive behavior and to avoid the perception of bias, SCE must be especially scrupulous in how it calculates fees charged to its ESP competitors and DA customers.19 Because SCE is calculating a cost that it directly imposes upon its retail competitors, CMTA contends SCE has no financial incentive to explore how it might provide DA services in a more reasonable and cost-effective manner.
CMTA recommends that the Commission not approve the proposed DA service fees, and that the Commission require SCE to perform an independent cost of service analysis prior to implementing new DA service fees. Although CMTA and AReM recommend that the Application be rejected in its entirety, they also comment and make recommendations on specific fees, the costing methodology employed and other SCE proposals (e.g., SCE's request for advice letter authority).
SCE responds that no bias entered into the creation of the proposed DA service fees.20 SCE states that the proposed DA service fees were developed using a cost study in order to accurately and appropriately capture the incremental cost of providing DA services so that DA participants pay for the services they receive and to avoid cost-shifting to bundled service customers. SCE contends that AReM's and CMTA's reference to excerpts from SCE's legal pleadings are irrelevant, because its consistent arguments for fair DA rules that do not harm bundled service customers do not constitute bias.
SCE states that the original DA service fees were based on predictions of what DA services would be required, and not actual experience with DA or the additional DA activities that have evolved since that time.21 For example, SCE states that many of the existing service fees were developed with very little experience installing and maintaining solid state Interval Data Recorder meters.22 As a result, the existing DA service fees were prepared with little prior experience or data upon which to establish cost-based rates.
Discussion
SCE's existing DA service fees were developed when its DA service tariff was approved by D.97-10-087. D.97-10-087 anticipated that the appropriateness of the fees for all UDCs would be considered in a subsequent proceeding (Anticipated Proceeding). In the meantime, D.97-10-087 authorized the UDCs' DA tariffs on an interim basis.23
Due to events such as the California energy crisis, the Anticipated Proceeding was delayed and has not yet commenced. Ideally, prior to approving permanent changes to SCE's DA service fees, the Anticipated Proceeding should take place because policy and other issues remain unresolved that apply to all UDC DA tariffs, and the Application implicates some of these issues. However, the passage of almost a decade since SCE's DA service fees were established persuades us to consider the Application at this time.
There have been two changes to SCE's DA service fees established by D.97-10-087. In SCE's 2003 general rate case (GRC), the Commission adopted a $5 per month fee on an interim basis for large (i.e., over 20 kilowatts (kW)) DA customers.24 The Commission adopted this fee to reduce the subsidization of DA customers by bundled service customers. However, SCE eliminated Schedule DA-SF as part of a settlement agreement adopted by D.06-06-067 in A.05-05-023 (SCE's 2006 GRC Phase 2 Proceeding). In doing so, the $5 fee established by D.04-07-022 was eliminated. In D.06-05-016, the Commission adopted a 25% increase in SCE's discretionary DA service fees to account for inflation which occurred since the DA fees were first established, because the Commission was concerned that SCE's bundled service customers were subsidizing DA customers.25
Except for these two Commission-ordered increases to SCE's DA service fees in 2004 and 2006, the first of which was subsequently eliminated, the fees have not been updated since they were originally established nearly a decade ago. However, because the Anticipated Proceeding to address the appropriateness of DA fees on a statewide basis has been delayed, we have not yet had an opportunity to determine the appropriateness of the UDCs' DA and other service fees or the underlying methodologies used to develop them.
The passage of so much time is possibly resulting in fees that are becoming less and less related to SCE's actual costs, and, if so, may be undermining our policy of sending accurate price signals that would allow a competitive market to develop. Although enrollment of new DA customers is currently suspended, the Commission is presently considering whether, when, or how the suspension of DA may be lifted. 26
AReM recommends that the Application be rejected because it is designed to be anticompetitive and harmful for DA customers. In support of its allegations, AReM submitted into evidence exhibits containing excerpts from:
· SCE's January 5, 2007 Opposition to Petition to Adopt, Amend or Repeal a Regulation Pursuant to Pub. Util. Code § 1708.5;27
· SCE's Comments on Draft Decision of ALJ Barnett (determining that DA should be suspended as of July 1, 2001);28
· SCE's November 12, 2002 Reply to Petition of Albertsons, Inc., to Modify Decision 02-03-055;29
· SCE's April 28, 2003 Comments on Alternate Proposed Decision of Commissioner Wood and Proposed Decision of ALJ Pulsifer (regarding switching exemption);30 and
· SCE's July 9, 2003 Petition for Writ of Review in the Supreme Court of the State of California, Southern California Edison Company, Petitioner, versus California Public Utilities Commission, Respondent.31
AReM's arguments and exhibits purportedly evidencing SCE's bias do not persuade us that the Application is a malicious attempt to disadvantage ESPs or discourage DA customers. The exhibits do not show, for example, that SCE has stated the cost of an activity to be a particular amount in one proceeding and a different amount in this proceeding, or that SCE has otherwise made false or misleading representations to the Commission.
Instead, the exhibits show that SCE has consistently attempted to protect and promote its interests before this Commission and the courts; something that any reasonable person would do and something that all parties that come before this Commission attempt to do. The utilities we regulate are not required to agree with our decisions. They are required only to comply with them.
While SCE may disagree with other parties or the Commission on DA issues, AReM and CMTA present no evidence that the Application was filed with the intent to disadvantage ESPs or DA customers, or that SCE has otherwise failed to comply with Commission orders. Therefore, AReM's and CMTA's arguments for rejecting the Application lack merit.
This does not mean that we do not have concerns with the proposed DA service fees or with the underlying methods used to develop them. However, AReM and CMTA have not shown that the Application is designed to undermine ESPs or the DA market.
Updating DA service fees at this time will help to ensure that they are based on current processes and cost studies that better reflect SCE's actual cost of providing services that facilitate DA. SCE states that the proposed service fees were developed using cost-causation principles and incremental costing methods in order to better align the service fees with the actual cost of the services provided. SCE contends this reduces cost-shifting among customers who utilize these services and those who do not.32 SCE's proposal to eliminate the 25% increase in discretionary DA service fees adopted in D.06-05-016, for example, will help to ensure that DA service fees more accurately reflect related costs.
In D.04-07-022 and D.06-05-016, the Commission adjusted DA service fees because of concerns that the fees were not aligned with costs, and, as a result, SCE's bundled service customers were subsidizing DA customers. While these prior adjustments were not based on SCE's actual cost data, with the passage of time the differences are likely increasing between the existing DA service fees and SCE's actual cost of providing these services, even with the limited adjustments previously made.
While the right to acquire new DA service is currently suspended, current DA eligible customers may continue to participate and new ESPs may enter the market to serve current DA-eligible customers.33 According to SCE, it is presently serving approximately 26,000 DA customers and 15 ESPs.34 The Commission may at some point in the future lift the suspension on DA, and if so, ideally, accurate, up-to-date cost-based fees should be in effect.
The existing DA service fees were based on predictions of what DA services would likely be required (including some fees for services which have never been requested), and do not include fees for some activities that SCE contends have evolved since the tariffs were first established. Therefore, it is appropriate to consider the Application at this time, including SCE's proposals to add new DA services and fees that were not contained in the original schedules.
17 AReM Opening Brief, pp. 5, 18-20, 22-23. AReM Reply Brief, pp. 4-5.
18 Application, p. 3.
19 CMTA Opening Brief, pp. 1-3.
20 SCE Opening Brief, pp. 15-16.
21 SCE Opening Brief, pp. 2-3.
22 Exh. SCE-1, p. 8.
23 OPs 3, 7, and 8 (76 CPUC2d, 334).
24 D.04-07-022, FOF 130.
25 D.06-05-016, p. 106.
26 The Commission has determined that the suspension of direct access cannot be lifted at the present time because the Department of Water Resources (DWR) is still supplying power pursuant to Assembly Bill (AB) 1X. However, the Commission will continue to consider possible approaches to expediting DWR's exit from its role of supplying power under AB 1X. See D.08-02-033 in R.07-05-025, Order Granting Petition for Rulemaking and Instituting Rulemaking As To Whether, When, Or How Direct Access Should Be Restored.
27 Exh. AReM/CMTA-6.
28 Exh. AReM/CMTA-7.
29 Exh. AReM/CMTA-8.
30 Exh. AReM/CMTA-9.
31 Exh. AReM/CMTA-10.
32 Exh. SCE-1, p. 2.
33 D.01-09-060, as modified by D.01-10-036, p. 8; D.03-05-034, COLs 3, 4; and D.03-01-078, COL 4, OP 2.
34 Exh. SCE-1, p. 5.
