Background
In January 2001, in response to the energy crisis facing California, the Legislature gave DWR the authority to purchase electricity and sell it to the retail customers of California's electric utilities. This authority was provided for in Assembly Bill 1 of the First Extraordinary Session of 2001-2002 (Stats. 2001, Ch. 4) (AB X1).
In March 2001, the Commission ordered PG&E to segregate, and hold in trust for the benefit of DWR, certain amounts its customers had paid for DWR's electricity. (D.01-03-081.) At the request of DWR, this arrangement was formalized in the "Servicing Agreement Between State of California Department of Water Resources and Pacific Gas and Electric Company" (Servicing Agreement), which the Commission approved in D.01-09-015. D.01-09-015 ordered PG&E to provide the services requested by DWR as set forth in the Servicing Agreement. On September 24, 2001, PG&E filed a motion in Bankruptcy Court requesting an order that PG&E be entitled to refrain from entering into and implementing the Servicing Agreement as ordered in D.01-09-015.
On April 18, 2002, DWR submitted a memorandum to the Commission requesting that PG&E be ordered to comply with the terms and conditions set forth in DWR's modifications to the Servicing Agreement. In D.02-05-048, the Commission approved a modified version of the Servicing Agreement in the form of the Original Servicing Order. D.02-05-048 ordered PG&E to comply with all of the terms and conditions of that order.
Prior to today's decision, PG&E's servicing arrangement uses the terms and conditions contained in the Original Servicing Order.
Under AB X1, DWR's authority to contract for electricity purchases expires on January 1, 2003. (Water Code § 80260.) Rulemaking (R.) 01-10-024 was initiated by the Commission to allow the electric utilities to resume the responsibility of procuring electricity for their customers. In D.02-09-053, the Commission ordered PG&E, and the other two large electric utilities, to assume all of the operational, dispatch, and administrative functions for the electricity contracts that DWR had entered into, effective January 1, 2003. D.02-09-053 also allocated the DWR contracts to the resource portfolios of the three utilities, who are to schedule and dispatch the contracts in a least-cost manner.
As a result of the assumption of the operational duties for the DWR contracts, the Contract Allocation Decision recognized that the existing "servicing arrangements" with respect to PG&E would need to be altered to reflect the new operational arrangements as a result of the allocation of DWR's contracts to the utilities. (D.02-09-053, pp. 15, 59.) In Ordering Paragraph 3 of D.02-09-053, DWR was directed to request that the Commission make appropriate modifications to the Original Servicing Order governing PG&E. DWR was directed to "submit its proposed modifications" by October 1, 2002. DWR and the three electric utilities were also directed to jointly file proposed operational agreements and proposed standards for reasonableness review by October 1, 2002.
The three utilities requested an extension of the submission date for the proposed modifications to the servicing arrangements and proposed operational agreements. The Commission's Executive Director, in a letter dated September 27, 2002, granted an extension of one week, to October 8, 2002.
In response to the submissions ordered in D.02-09-053, on October 8, 2002, DWR electronically transmitted to the Commission, and to the service list, a memorandum from Peter Garris of DWR, along with the proposed modifications to the Original Servicing Order for PG&E, and the other two utilities.2 The document containing DWR's proposed modifications to PG&E's Original Servicing Order is labeled "2003 Servicing Order Concerning State of California Department of Water Resources And Pacific Gas and Electric Company." DWR also transmitted four other documents for PG&E consisting of Attachment A, Attachment B, Attachment E and Attachment J.3
Due to the earlier extension by the Executive Director, the assigned administrative law judge (ALJ) issued a ruling on October 10, 2002, allowing interested parties additional time to submit comments on the proposed modifications to PG&E's servicing arrangements, and reply comments.
PG&E filed its comments on DWR's proposed modifications to the Original Servicing Order on October 18, 2002. On October 23, 2002, DWR transmitted a memorandum entitled "Comments Concerning Submissions Requested by the California Public Utilities Commission Decision 02-09-053."
2 DWR also submitted the proposed operating agreement and related attachments. 3 DWR did not submit Attachments C, D, F, G, H and I. We assume, therefore, that the version of these six attachments that were approved in D.02-05-048 can be used for the 2003 Servicing Order. Attachments C, D, F, G, H and I appear in Appendix A and Appendix B of this decision.
