9. Joint Motion to Amend Settlement
Agreement
On February 11, 2000, the Settling Parties filed a joint motion to amend the Settlement Agreement because of new developments following the signing of the Settlement Agreement. Specifically, the parties are concerned that D.99-10-057, issued in the Post-Transition Electric Ratemaking proceeding, might prevent PG&E from recovering portions of settled CEMA revenue requirements not collected in rates.
K. Background
The Settlement Agreement includes four major elements: (1) the reasonable total revenue requirement resulting from PG&E's CEMA application is $69.8 million, separated into components for electric generation ($1.5 million), other electric revenue requirements ($57.8 million), and gas distribution ($10.5 million); (2) PG&E would be allowed to recover in rates the settled $69.8 million revenue requirement; (3) any reallocation of insurance proceeds is fully accounted for in the Settlement Agreement; and (4) the CEMA revenue requirements would be collected in 2000.
Under the Settlement Agreement, PG&E would recover the $1.5 million for electric generation as a one-time debit entry to the Revenue Section in PG&E's TCBA. The $57.8 million for other electric costs would be recorded as part of the distribution revenue requirement in PG&E's Transition Revenue Account (TRA), to be collected during the 12 months of 2000. The $10.5 million for gas costs would be collected over 12 months through PG&E's customer class charge.
On October 21, 1999, subsequent to the motion for approval of the Settlement Agreement, the Commission signed D.99-10-057 in A.99-01-016 et al., known as the Post-Transition Electric Ratemaking proceeding. The decision states, in relevant part, "No utility may carry over any costs from the TRA or the TCBA or any other account from costs incurred during the rate freeze period into the post rate freeze period." (D.99-10-057, discussion at mimeo., p. 15; see also Ordering Paragraph 2 at mimeo., p. 39.)
On February 2, 2000, as the Commission had not yet issued its decision approving the Settlement Agreement, PG&E sent to all parties a letter stating the intention of the Settling Parties to amend the Settlement Agreement to mitigate rate recovery risks imposed by D.99-10-057. The letter sought responses from any party concerned with this proposal by February 14, 2000. No responses were filed.
L. Impact of D.99-10-057
The CEMA revenue requirements that are the subject of the Settlement Agreement cover PG&E costs incurred due to catastrophic events during the period from 1991 through May 31, 1999, well before the end of PG&E's rate freeze. According to the Settling Parties, when they negotiated the Settlement Agreement, they did not contemplate that the Commission might in another proceeding preclude post-rate freeze recovery of pre-rate freeze CEMA costs. The Settling Parties intended that PG&E would recover all of the settled revenue requirements during 2000, in accordance with the provisions of Section 454.9, which provides that reasonable CEMA costs approved by the Commission shall be recoverable in rates.
The Settling Parties state that if the rate freeze ends before the end of 2000, D.99-10-057 might prevent PG&E from recovering portions of settled CEMA revenue requirements that are not yet collected in rates. This outcome would be contrary to PG&E's interests and to the intent of the Settling Parties, and would upset the balance struck in the Settlement Agreement. It might also cause disputes over interpretation of the terms of the Settlement Agreement. Therefore, the Settling Parties negotiated the Amendment to the Settlement Agreement.
Similarly, the Settling Parties are concerned that strict construction of the rate recovery provisions of the Settlement Agreement might prevent PG&E from recovering portions of settled CEMA revenue requirements because less than 12 months will remain in 2000 after Commission approval of the Settlement Agreement. This would also be contrary to PG&E's interests and to the intent of the Settling Parties. According to the Settlement Parties, the Amendment to Settlement Agreement is meant to mitigate that risk.
M. Amendments to Settlement Agreement
The Settling Parties request that the Settlement Agreement be amended as follows:
"A. If PG&E's electric rate freeze does not end before the end of 2000, PG&E is authorized to recover in rates the $57.8 million of non-generation electric CEMA revenue requirement that is allowed under the Settlement Agreement over the remaining months of 2000 beginning after Commission approval of the Settlement Agreement and these Amendments to the Settlement Agreement.
B. If PG&E's electric rate freeze ends before the end of 2000 or if that event seems reasonably likely, Settling Parties agree to renegotiate in good faith the rate recovery mechanism and period for the $57.8 million of non-generation electric CEMA revenue requirement that is allowed in the Settlement Agreement. The Settling Parties intend that PG&E's ability to recover the $57.8 million before the end of 2000 should not be compromised if the rate freeze ends prior to that time.
C. PG&E is authorized to recover in rates the $10.5 million of gas distribution CEMA revenue requirement that is allowed in the Settlement Agreement over the remaining months of 2000 beginning after Commission approval of the Settlement Agreement and these Amendments to Settlement Agreement." (Joint Motion filed February 11, 2000, p. 4.)
