Decision 02-10-067 October 24, 2002

Before The Public Utilities Commission Of The State Of California

Application of Southern California Edison Company (U 338-E) for Authority to Institute a Rate Stabilization Plan with a Rate Increase and End of Rate Freeze Tariffs.	Application 00-11-038 (Filed November 16, 2000)
Emergency Application of Pacific Gas and Electric Company (U 39 E) to Adopt a Rate Stabilization Plan.	Application 00-11-056 (Filed November 22, 2000)
Petition of The Utility Reform Network for Modification of Resolution E-3527.	Application 00-10-028 (Filed October 17, 2000)

ORDER MODIFYING DECISION (D.) 02-04-016 AND DENYING REHEARING OF THE DECISION, AS MODIFIED

This rehearing application concerns Commission Decision (D.) 02-04-016 (URG Decision), which established interim cost-of-service revenue requirements for the utility retained generation (URG) of Pacific Gas and Electric Company (PG&E), Southern California Edison Company (Edison) and San Diego Gas & Electric Company (SDG&E) for 2002.

In 1996, with the support of PG&E and other regulated utilities, the California Legislature enacted Assembly Bill (AB) 1890.¹ AB 1890 intended to bring competition into the generation segment of California's electricity market, and provided, inter alia, that "[g]eneration of electricity should be open to competition and utility generation should be transitioned from regulated status to unregulated status through means of commission-approved market valuation mechanisms." (Former Pub. Util. Code, § 330(l)(2).) When enacted, AB 1890 intended that by December 31, 2001, utility non-nuclear generation assets would no longer be subject to Commission rate regulation. (See, e.g., Former Pub. Util. Code, §§ 216(h), 367 and 377.) On January 18, 2001, as part of its response to California's energy crisis, the Legislature enacted AB 6X.² AB 6X amended Public Utilities Code sections 216, 330 and 377 to remove the provisions relating to market valuation and prohibited the utilities from disposing of their electric generation facilities prior to January 1, 2006. (Legis. Counsel's Dig., Assem. Bill No 6 (2001-2002 1^st Extraordinary Sess.), p. 1.)

As part of the URG Phase of these proceedings, we issued D.01-10-067. That decision determined, inter alia, that the market value of PG&E's generation assets should not be used as the basis for determining the URG revenue requirement. (D.01-10-067, at p. 2.) PG&E's rehearing application of D.01-10-067 was denied in D.02-02-029.³

On April 4, 2002, we issued the URG Decision, the subject of the instant application for rehearing. In the URG Decision, we reaffirmed that, pursuant to D.01-10-067, PG&E's prospective revenue requirements would not be based on a market valuation approach.⁴ (D.02-04-016, at p. 16.) Instead, we adopted interim cost-of-service revenue requirements for PG&E based on net book value. (D.02-04-016, at p. 16.) Balancing accounts were also adopted for the three utilities so that these interim URG revenue requirements would be trued up to reflect actual costs. (D.02-04-016, at pp. 74-75.)

On May 8, 2002, PG&E filed a timely application for rehearing of the URG Decision. We have carefully considered all the arguments presented by PG&E and are of the opinion that no grounds for rehearing have been demonstrated. Therefore, PG&E's application for rehearing of the URG Decision is denied.

I. DISCUSSION

As an initial matter, we note that PG&E attempts to raise in this rehearing application an argument it had raised in its rehearing application of D.01-10-067. In its rehearing application of D.01-10-067, PG&E alleged that AB 6X did not support the Commission's conclusion that market valuation could not be used to set prospective URG rates. PG&E did not seek judicial review of D.01-10-067 and D.02-02-029 and those decisions are now final. (Pub. Util. Code, § 1756.)

In the instant rehearing application, PG&E again asserts that AB 6X "left the Commission with the obligation to have PG&E realize the market value of its URG assets, presumably through its URG revenue requirement." (Application, at p. 4.) However, this issue had been raised and addressed in D.02-02-029. Had PG&E wanted to challenge this finding, it should have sought judicial review of D.01-10-067, as provided by statute. (See, Pub. Util. Code, § 1756.) However, PG&E failed to do so and is precluded from attacking determinations made in earlier decisions that are now final.. Thus, we deny PG&E's application for rehearing of this issue on these grounds.