Introduction

In this 2001 Attrition Rate Adjustment (ARA) application, PG&E seeks an electric revenue increase of $184,575,000. PG&E's requested increase has two components: (1) an Electric Distribution and Customer Services (electric distribution) revenue requirement increase of $184.196 million and (2) a Humboldt Nuclear SAFSTOR revenue requirement increase of $379,000.¹ PG&E calculated its electric distribution ARA allowance by using: (1) 1999 recorded rate base as adjusted by the recommended adjustments included in the Energy Division's financial audit dated May 8, 2001; (2) expense levels adopted in D.00-02-046; and (3) two years of cost growth to determine the rate base and expense allowances. PG&E also requests that the balance in its VMBA be credited to PG&E's TRA.

ORA contends that attrition for PG&E for 2001 should be denied on policy grounds. ORA states that PG&E justifies its attrition request by claiming that it is needed to give it a reasonable opportunity to earn its authorized rate of return. For attrition year 2001, ORA estimates earnings of 8.22% compared to the authorized amount of 9.12%. While this earning estimate is less than authorized, ORA maintains that this calculation assumes that PG&E's bankruptcy filing will have no impact on its expenses or capital spending. ORA argues that PG&E's spending can be expected to decrease as a result of the bankruptcy. Given these circumstances, ORA recommends that attrition be denied. In the alternative, ORA recommends an attrition increase limited to $113 million. ORA says that PG&E has overstated its attrition request by escalating costs for 2000 and 2001, rather than just 2001, and by erroneously computing its capital spending estimate. In regard to the VMBA overcollections, ORA recommends a credit directly to ratepayers rather than a credit to the TRA.

Aglet Consumer Alliance (Aglet) and The Utility Reform Network (jointly referred to as Aglet) filed a joint brief recommending a denial of relief. Aglet argues that PG&E has not met its burden to show that its proposed increase will match the anticipated cost changes that the attrition mechanism is to recover. As a result of PG&E's bankruptcy filing, Aglet expects PG&E's costs to lessen, not increase. As a secondary recommendation, Aglet would limit an attrition increase to the electric portion of $112.5 million. (See D.00-02-046, at 471.) Next best, argues Aglet, would be to authorize an increase based on a single year of expense escalation and capital additions, using PG&E's previously-authorized attrition formulas, modified for recorded 1999 capital costs. In no event should the Commission approve two years of expense escalation or capital additions. Aglet supports ORA's position regarding the VMBA adjustment.