XII. Criteria for Determining Cut-Off Date for
Applicability of Ongoing DWR Power
Charges

A. Introduction

With respect to the ongoing DWR power charge, there are two issues to resolve relating to determining which DA customers should be liable for the charge. One issue relates to the cut off date for determining whether certain DA customers should be excluded from the power charge. The other issues relates to what triggering event defines the point in time when a customer's migration from bundled to DA service became effective.

As to the issue of what cut off date should apply for purposes of applying ongoing power charges to DA customers, there is a dispute as to whether the date should correspond to when DWR first began purchasing power under AB 1X, or whether the date should correspond to July 1, 2001, the date specified in D.02-03-055 for determining bundled customer indifference.

Recently, the Legislature passed Assembly Bill No. 117 ("AB 117"), which was signed into law on September 24, 2002. ((Stats 2002, ch. 838.) Although AB 117 is primarily about community aggregation programs, the Legislature took the opportunity to amend Public Utilities Code Section 366 to add subsection (d) in order to clarify its intent concerning the cost responsibility of each retail end-use customers who was a customer on or after February 1, 2001. This subsection states:

"It is the intent of the Legislature that each retail end-use customer that has purchased power from an electrical corporation on or after February 1, 2001, should bear a fair share of the [DWR's] electricity purchase costs, as well as electricity purchase contract obligations incurred. . . that are recoverable from electrical corporation customers in commission-approved rates. It is further the intent of the Legislature to prevent any shifting of recoverable costs between customers." (Pub. Util. Code, § 366, subd. (d)(1).)

This section is relevant to this DA CRS proceeding.⁵⁸ The cost responsibility imposed by this statute clearly applies to DA customers who took bundled service from an electrical corporation on or after February 1, 2001. Thus, the issues concerning an appropriate cut-off date (whether it should be July 1, 2001 or not and what it should be based on) have been made moot by this statutory provision. The cut-off date is now statutorily set by the Legislature in AB 117. Pursuant to AB 117, therefore, DA customers who were took bundled service, e.g. purchased electricity, on or after February 1, 2002, from an electric corporation are responsible for the DWR Power Charges.

We shall accordingly require that the DWR ongoing power charge component of the DA CRS apply to all DA customers that took bundled service on or after February 1, 2001. Continuous DA customers, that is, those customers that were on DA service both before February 1, 2001 and continued on DA service after that date will be excluded from the DWR ongoing power charge. Since DWR did not purchase power for continuous DA load, that segment of DA customers did not contribute to any cost shifting and therefore should not be required to participate in the ongoing DWR power charge. This is consistent with the legislative intent and mandate set forth in AB 117 that each retail end use customer, including a DA customer who took bundled service on or after February 1, 2001, bears "a fair share" of Department electricity power costs. This is also consistent with further "intent of the Legislature to prevent any shifting of recoverable costs between customers." (Pub. Util. Code, § 366, subd. (d)(1).)

The second issue to resolve with respect to the determination of which DA customers are liable for the DWR power charge has to do with the measurement criterion for determining the point in time when a customer's status as a DA customer became effective.

Certain parties argue that the measurement of DA load for purposes of applying DA charges in this proceeding should be based on contract execution date, and not on the date when power under those contracts actually began to flow or the first date on which such power flows were billed. These parties take issue with Navigant's modeling assumption that only 2% of total load was on DA as of July 1, 2001, and claim that there was a substantial body of DA customers who were not "physical" DA customers as of June 30, 2001 but who nevertheless possessed a legal right to obtain such service even assuming a July 1, 2001 cut-off date for new DA service. As a result, these parties claim that Navigant's indifference measure overstates the amount of DWR costs for which DA customers properly bear responsibility.

SBC Services, Inc. (SBC) argues that basing the July 1, 2001 cut off on contract execution date is the only fair measure because DA customers have no control over any other aspect of a switch to DA. SBC argues that use of the billing cycle date is inherently unfair as a cut off criterion because some DA customers that properly entered into DA arrangements prior to July 1, 2001 could be subject to 15 years worth of DA CRS costs merely because their billing cycle began on July 2^nd.

SBC disputes SDG&E's claims that the administrative burdens of implementing measures to recognize a contract execution date, rather than a billing cycle date, would unduly delay the institution of a DA CRS. SBC supports the approach proposed by CMTA as a means of implementation on an expedited basis. CMTA proposes using the procedures already adopted in D.02-03-055 to administer the September 21, 2001 DA suspension date. Under those procedures, customers and ESPs are to use an independent third party to verify that a DA contract existed as of July 1, 2001, with both the customer and the ESP submitting an affidavit under penalty of perjury that the contract date is correct.⁵⁹

B. Discussion

We find SBC's arguments to be unpersuasive. The affidavit process adopted in D.02-03-055 was intended to be the exception, not a procedure to determine the eligibility of thousands of applicants. The Commission allowed for the affidavit process only if the there was a dispute regarding the omission of a customer from the ESP-supplied list of customers with valid contracts.

Basing the cut off on a contract date criteria is not workable, increases implementation time and costs, and creates uncertainties and risks. Implementing such a proposal would be extremely difficult for the utility. The utility does not have information regarding contract dates. This approach would, therefore, require the utility to first attempt to obtain this information and then attempt to verify its accuracy, which would increase implementation time and costs (Ex. 55, p. 7). Risks of misconduct and uncertainty would be created, because utilizing this exemption date will require self-certification of the contract date by the DA customer and ESP. A process involving a system of self-certification of a date that has financial incentives for the DA customer and ESP could lead to misconduct. This process would also cause uncertainties in the amount of excluded load, because the amount would not be known until some time after a decision date. Therefore, it is reasonable to use the DA "active date" to define the official DA customer start date for purposes of determining whether the customer should be excluded from the DA CRS.

In order to exclude a customer from the DA CRS, the billing system must be able to identify the account based on available data. SDG&E recommends that the customer's DA "active date" be used as the criterion for an exemption of CRS since the customer's billing account is established based on this date and it is easily determined. This date is consistent with the costs incurred in the development of the DA CRS and is easily identifiable and consistent across the parties involved. SDG&E argues that using a different criterion may be feasible to determine the exclusion criteria, but the data would need to be available and tracked by the utility.

The customer's contract date cannot be used as the exemption criteria according to SDG&E since this information is not available to SDG&E. Using the date of the Direct Access Service Request (DASR) criteria also has difficulties. SDG&E argues that the criteria would need to be defined as "accepted DASR

date" since "submitted DASR date" is too vague and includes DASRs which have been rejected by the utility. Most customers are not aware of their DASR submittal date since the ESP submits the DASR.

As pointed out by Ms. Osborne of SDG&E, if the DA load excluded from the DWR power charge was interpreted as the amount of load referenced to a contract date, it would take months to learn how much load did qualify for the exclusion.⁶⁰ This would impede the Commission's ability to implement DA CRS in a timely manner.

SDG&E's DASR processing system is separate from the billing system and would require special programming to pull the DASR accepted date from the DASR system and populate the billing system with this criteria as necessary to exempt these customers from the CRS. The DA "active date," is known by the customer and already exists within the billing system. This date shall be defined as the customer's official start date on DA for the exclusion from DA CRS.

Determining the cut-off date based on contract execution leaves bundled service customers with reduced CRS revenues to offset their costs, and it leaves the remaining DA customers worse off, since they will now have to pay a higher unit charge. For purposes of imposing charges, it is not always practical or realistic to achieve exact precision in matching each customer's charges with kWhs consumed. In this instance, we conclude that reliance on billing records, as opposed to contract execution date, forms an acceptable measure for purposes of determining the cut-off for DA CRS purposes.⁶¹

Costs incurred are a function of when bills were rendered for service, not when contracts were executed for DA service. Thus, if a contract is dated before the cut-off date, but the ESP did not provide the DASR to the utility until after the cut-off date, this customer would not have become an active DA customer until after the July 1 cut off. Until this time DWR was procuring power for this customer. It was the amount of bundled service load that drove the DWR decisions on how many contracts to sign, not some unknown figure of how many customers might have had DA contracts. Accordingly, the entire bundled load as of the cut-off date is a relevant determinant of whether the DA CRS applies. The contract date, therefore, does not necessarily correspond to the load that migrated on or after the cut-off date. We shall base the measurement criteria on the "DA active date" as proposed by SDG&E.

Another argument offered by parties to support a contract date exemption criteria is that the active date is within the control of the utility. SDG&E witness Osborne testified, however, that the active date is actually controlled by the ESP through the date it submits its customer's DASR to the utility, and therefore, is within the control of the customer through contractual requirements imposed on the ESP (Tr. 10 at 1350-1353).