V. Scope of Costs Subject to CRS

In compliance with D.02-03-055, charges must be imposed on DA customers sufficient to ensure that bundled service customers do not bear higher costs due to the migration of a significant number of customers from bundled to DA service between July 1 and September 20, 2001. This migration of DA load reduced the bundled customer base over which costs could be spread. Unless DA customers pay their respective share of such costs, bundled customers would have to make up the shortfall through higher bills, thus, resulting in a cost shifting.

By ALJ ruling dated March 29, 2002, parties were put on notice that the Commission would address in this proceeding "the full range of costs" necessary to avoid such cost shifting from DA to bundled utility customers. The ALJ Ruling defined the scope for determining surcharges, stating: "In order to ensure that the Commission is able to consider a fully compensable surcharge, a record must be developed that takes into account all possible cost responsibilities including but not limited to DWR purchase costs . . . attention will be focused on how such cost responsibility can be formulated."⁹ DWR purchases are the obligations of retail end-users within the service territories of the three electric utilities. (See Water Code § 80104.) In D.02-03-055, we noted that these purchases included those made by DWR on behalf of DA customers who returned to bundled service and also those bundled service customers who later entered into DA arrangements. In D.02-03-055, the Commission observed that: "There would be a significant magnitude of cost-shifting if DWR costs are borne solely by bundled service customers, and direct access customers are not required to pay a portion of these costs that were incurred by DWR on behalf of all retail end use customers in the service territories of the three utilities during a time when California was faced with an energy crisis."¹⁰

DWR costs may be divided into two broad categories for purposes of assessing DA cost responsibility: (1) "historic" costs incurred between January 17, 2001 and the issuance of this decision, and (2) prospective costs (that will continue to be incurred under long-term DWR contracts from January 1, 2003 going forward until contract termination projected to be 2011. "Historic" costs may further be subdivided into costs incurred (1) between January 17, 2001 and September 20, 2001 and (2) between the suspension date of September 21, 2001 and December 31, 2002.

Among the other potential categories of additional costs noted in the ALJ ruling as being subject to DA CRS were purchased power costs from qualifying facilities (QFs) and costs related to the utilities' retained generation. In D.02-04-067, the Commission referenced the scope of additional non-DWR costs noted in the March 29, 2002 ALJ ruling, and expressly clarified D.02-03-055 to make clear that the CRS will take into account recovery of relevant non-DWR costs and that DA customers will be held responsible for such costs as required by AB 1X and other statutes (e.g., AB 1890). (See D.02-04-067, Ordering Paragraph (OP) 1e.) D.02-04-067 affirmed that nowhere in D.02-03-055 are DA customers relieved of their responsibility for AB 1890 transition costs, including those transition costs collected by SCE and PG&E during the rate freeze.

The determination of a DA CRS thus must take into account all relevant costs that would otherwise result in cost shifting from DA to bundled customers of customers of the three major IOUs. The scope of costs include those of DWR pursuant to AB1X and Utility Retained Generation (URG)-related costs. We also take into account relevant companion proceedings where the Commission either has already adjudicated and adopted charges for DA cost responsibility or is in the process of adopting such charges for DA.¹¹