Background

In D.00-02-048, dated February 17, 2000, we determined that Pacific Gas and Electric Company (PG&E) and Southern California Edison Company (Edison) are required to credit their respective Transition Cost Balancing Accounts (TCBA) for the aggregate net book value of their remaining non-nuclear generation assets, as stated in Ordering Paragraph 6:

PG&E and Edison shall credit the TCBA appropriately for estimated market value on an aggregate basis and for not less than net book value for non-nuclear assets, including the land surrounding such assets and Helms pumped storage plant. Assets jointly owned with other utilities shall be excluded from this approach. These credits shall be reflected in the monthly TCBA reports and Annual ATCP reports. PG&E and Edison shall include a list of all assets over $500,000 in the first TCBA report in which these changes are implemented.

As described in the Assigned Commissioner's Ruling (ACR) issued on March 2, 2000, there is no corresponding debit to this credit entry. The proposed decision anticipated establishing a new account, the Estimated Gain on Asset Disposition Account to track the estimated gain and to true it up after final market valuation, if necessary. In comments to the proposed decision, PG&E and Edison expressed concerns with this account. Edison stated that the Commission must articulate its jurisdiction to accomplish this ratemaking and that all parties should have the opportunity to raise objections through judicial review before the Commission proceeds. PG&E contended that using estimated market value to end the rate freeze is inconsistent with D.97-10-057, in which the Commission stated that the end of the rate freeze occurs on the date the utility has recovered authorized costs for generation-related assets and obligations.

In acknowledging these concerns, D.00-02-048 stated:

The proposed decision called for the establishment of a new account, the Estimated Gain on Asset Disposition Account. PG&E and Edison are convinced that allowing a true-up when estimated market value is greater than actual market value will violate § 368(a) and the principles established in D.99-10-057. We are persuaded that crediting the TCBA for the aggregate net book value of the remaining generation non-nuclear assets is an extremely conservative approach and remedies these concerns. D.99-10-057 established ratepayer refund accounts for overcollections that occur when CTC collection extends beyond the point when generation-related transition costs are recovered. Accordingly, we do not establish this new account.

PG&E argues that establishing the Estimated Gain on Asset Disposition Account would establish a generation-related regulatory asset that, in turn, must be recovered prior to the end of the rate freeze. PG&E argues that absent a legally sustainable true-up, PG&E would have to take an immediate write-off against earnings as a result of the assigned estimated value. PG&E further contends that such a result would lead to a "loss of the opportunity to collect these uneconomic costs through CTC during the transition period and would violate Sections 330(s) and (t), as well as the Taking Clause of the United States and California Constitutions."

We do not agree with PG&E's analysis, but in any event, PG&E's arguments are moot, because we are not establishing the Estimated Gain on Asset Disposition Account. The Commission has the discretion to manage such balancing accounts such as the TCBA in a manner that avoids huge over-collections or under-collections of revenues, consistent with the guidelines established in D.97-06-060 and clarified in D.97-11-074 and D.97-12-039. Crediting the TCBA for the aggregate net book value of remaining non-nuclear generating assets is a simple accounting procedure that manages the netting procedure called for in § 367(b) during the transition period, rather than waiting for the conclusion of the transition period. (Id., mimeo., at pp. 38-39.)

In recognizing these concerns, however, the Commission inadvertently did not establish a corresponding debit to the TCBA credit. The ACR proposed that the Commission establish the Generation Asset Memorandum Account to record this debit.