Summary of Parties' Positions

Edison states that it is critical that the Commission establish this account in order to avoid an unintended impact on earnings. Edison proposes that this account be established as a balancing account (the Generation Asset Balancing Account, or GABA) in order to avoid problems associated with limits for short-term borrowing purposes. Edison explains that Pub. Util. Code § 832(c)² provides that utilities may issue short-term obligations up to 5% of the par value of other securities then outstanding. This authority was extended by D.99-06-046. Edison now has the necessary flexibility to increase short-term general purpose borrowings in order to support ongoing variations in its cash flows, to meet large dollar obligations (e.g., tax payments and payments to qualifying facilities (QFs), or to avoid issuing long-term securities when the market conditions are not attractive. In D.87-09-050 and D.89-08-023, the Commission authorized Edison to issue special purpose obligations to finance the amounts reflected in balancing accounts. Edison states that the amounts in the TCBA are financed with short-term debt under this authority.

Edison contends that when it credits the estimated value of its non-nuclear generation assets to the TCBA, the under-collection that must be financed will be reduced. At the same time, however, Edison will be required to finance a proportionate amount in the new debit account. Edison is concerned that the Commission will not allow it to finance this amount pursuant to the balancing account financing decisions, but would have to use general purpose borrowing authority. In turn, this requirement would make it difficult for Edison to comply with the requirement to bring down the aggregate amount of short term general purpose borrowings once each year to no more than 5% of the par value of other securities then outstanding.

Edison also recommends that the new account earn the 90-day commercial paper interest rate (5.87% as of March 2000). This rate corresponds to the interest rate applied to the balance in the TCBA and thus keeps both ratepayers and shareholders whole. Edison urges that we establish ratemaking procedures at this time and recommends that the balance in this account be zeroed out at the time of final market valuation. The remaining balance in the account, positive or negative, including accumulated interest, would be transferred to the TCBA and the GABA would be closed. Because the date when the rate freeze ends occurs on the date each utility has recovered authorized costs for generation-related assets and obligations, Edison believes the balance in the GABA must be transferred to the TCBA when final market valuation occurs. This transaction would be reviewed in subsequent Annual Transition Cost Proceedings (ATCP), Edison posits, and would reduce the possibility that any balance would remain in the account after the date when the rate freeze ends.

PG&E basically agrees with Edison, but suggests that a weighted average interest rate be applied to the GABA. PG&E also requests a finding that the GABA balance is a transition cost that is fully recoverable under § 368 prior to the rate freeze ending. PG&E states that to the extent that the amounts booked to the new account are used to manage the TCBA under-collection, the 90-day commercial paper rate should apply. To the extent that amounts booked to the new account are used to accelerate transition cost recovery, the reduced rate of return on those costs should apply, according to PG&E.

ORA generally agrees that the accounting approach proposed by the ACR is reasonable³ and recommends that the 90-day commercial paper rate be applied to this account. ORA is also concerned that transfers to the TCBA of debit amounts in the GABA could lead to the utilities collecting more stranded costs than is allowed under § 367.

Enron agrees that the account should be created, but questions whether transfers to the TCBA of debit amounts in the GABA are reasonable, both on a legal and policy basis. Enron is concerned that approving such a transaction would lead to recovery of economic generation costs, a situation that D.00-02-048 was trying to ameliorate. Enron maintains that PG&E'S proposal to use a weighted average interest rate for the new account is appropriate only if the estimated credit to the TCBA is used to accelerate the end of the rate freeze. Enron recommends that both Edison and PG&E apply the same interest rate to the new account.