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 to Adopt a Rate Stabilization Plan. (U 39 E)	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 AMENDING DECISION

I. SUMMARY

After providing parties with notice and opportunity to comment, we amend Decision (D.) 02-12-045 to restore $29 million to the 2003 Revenue Requirement of the California Department of Water Resources ("DWR"). We have made no determination regarding DWR's standing to file an application for rehearing. Rather, we herein reopen the matter, on our own motion, to consider the substantive allegations raised by DWR.

II. BACKGROUND

In Decision 02-12-045 ("Decision"), the California Public Utilities Commission ("Commission") allocated among customers of the three major California utilities¹ the cost of DWR's 2003 Revenue Requirement for its power purchase program. The three major utilities were joined as parties to this proceeding. DWR, however, declined to become a formal party to this proceeding.² Before apportioning the Revenue Requirement among the three service territories, the Commission disallowed $29 million from DWR's Revenue Requirement.

Although not specifically identified in the Decision, the $29 million at issue represents costs under a Demand Reserves Purchase Agreement ("Contract") between DWR and the California Consumer Power and Conservation Financing Authority ("Power Authority"). While the Contract was not part of the record of this proceeding when DWR filed its Application for Rehearing, SCE attached the Contract as Appendix B to its Comments in Response to the January 13, 2003 Administrative Law Judge ("ALJ") Ruling. Accordingly, the Contract is now a part of the record of this proceeding.

On December 27, 2002, DWR filed an Application for Rehearing of Decision 02-12-045 ("Application for Rehearing") along with an accompanying Memorandum. The Rehearing Application and Memorandum make several substantive arguments. First, DWR alleges that the Commission committed legal error by conducting a "justness and reasonableness" review of the Contract costs. AB1X exempts the DWR Revenue Requirement from any "justness and reasonableness" review by the Commission. DWR argues that the question of whether these costs are authorized to be included in its Revenue Requirement is a matter of "justness and reasonableness." DWR similarly argues that the Commission violated the Rate Agreement because it has an affirmative obligation to establish power charges sufficient to satisfy the Revenue Requirement as specified by DWR.

Second, DWR alleges the Commission erroneously found that the Contract was not for the purchase of energy. DWR argues that the Contract is an agreement to purchase energy and capacity. Third, DWR alleges that even if it is not an energy purchase, the Contract and any costs under it are authorized pursuant to several other provisions of the California Water Code. Water Code Section 80100(f) authorizes DWR to contract for "other related power services necessary or desirable to accomplish the purposes of this division." Water Code Section 80200(b)(1) authorizes DWR to pay out of the Electric Power Fund costs for "electric power and transmission, scheduling, and other related expenses incurred by the department," and Water Code Section 80122 authorizes DWR to "[c]ontract for the services of other public agencies."

Subsequent to receiving DWR's Application for Rehearing, the assigned ALJ issued a ruling on January 13, 2003 ("ALJ Ruling"), requesting comments on the following issues: (1) DWR's authority as a non-party to file an application for rehearing in this proceeding pursuant to Public Utilities Code Section 1731(b) and (2) other issues raised in DWR's Memorandum and Application for Rehearing. SCE and SDG&E timely filed comments in response to this ruling.

On January 31, 2003, a Draft Decision was mailed addressing issues raised in DWR's filing of December 27, 2003. Parties were provided with notice and opportunity to comment on the Draft Decision. PG&E and SDG&E timely filed comments in response to the Draft Decision. DWR also timely submitted a letter in support of the Commission's Draft Decision. Therefore, the parties had at least two rounds to comment on the restoration of the $29 million to DWR's Revenue Requirement.

III. DISCUSSION.

While having reviewed the parties' comments on DWR's standing to file an application for rehearing, we decline to reach that issue. Whether or not DWR has standing, we wish to reach the merits of its arguments. Accordingly, the Commission will, on its own motion, reopen this matter to consider herein the substantive issues raised by DWR. This will avoid any uncertainty about our ability to reach the substantive merits.

The Commission has continuing jurisdiction to rescind, alter or amend any prior decision at any time. Public Utilities Code Section 1708 ("Section 1708") fully authorizes the Commission to reopen and reverse any order or decision, provided that parties are given notice and an opportunity to be heard. Section 1708 states:

The commission may at any time, upon notice to the parties, and with opportunity to be heard as provided in the case of complaints, rescind, alter or amend any order or decision made by it. (Cal. Pub. Util. Code § 1708.)

The parties have been provided the requisite notice and opportunity to be heard.³ The ALJ Ruling specified issues for parties to comment. The ruling noted that the DWR Rehearing Application "objects to the Decision's removal of the $29 million from DWR's requested 2003 Revenue Requirement."⁴ The ALJ Ruling then solicited comments on the merits of the Rehearing Application as well as the standing of DWR. This is in addition to the requisite notice and comment period associated with the filing of the Rehearing Application, and the opportunity to file responses to the rehearing application.

Comments were filed by SDG&E and SCE in response to the ALJ Ruling. Neither party requested an evidentiary hearing. Additionally, neither party raised any factual issues that might warrant such a hearing. We note that the allegations raised by DWR are purely matters of law, and thus, an evidentiary hearing is not required.

After considering the comments in response to the ALJ Ruling, a Draft Decision was mailed for comment. Two parties filed comments and DWR submitted a letter. We have considered the comments, and are of the opinion that the arguments of DWR have merit for the reasons discussed below.

Having addressed the procedural aspects of this proceeding, we turn to the merits of DWR's allegations. We agree with DWR that the $29 million is an authorized power expense under AB1X that is properly included in its Revenue Requirement. The $29 million represents costs under the Contract between DWR and the Power authority. Pursuant to AB1X, energy and capacity fall within the meaning of the term power and DWR is authorized "to make power available directly or indirectly to electric consumers."⁵ Furthermore, pursuant to Water Code Section 80122(c), DWR may "[c]ontract for the services of other public agencies" if, "in the determination of the department, [that is] necessary for the purpose of this division." Here, DWR has contracted for the service of another public agency to help secure an adequate power supply for California. We view the securing of an adequate power supply for California as one of the key purposes of Division 27 of the Water Code, and therefore this Contract would also be authorized by Section 80122(c) of the Water Code.⁶

IV. COMMENTS

The Commission has reduced the 30-day period for public review and comment on this decision pursuant to Commission Rules of Practice and Procedure Section 77.7(9). Parties to this proceeding already had several opportunities to comment on the substance of DWR's position. Furthermore, we recognize DWR's interest in being able to timely recover its authorized Revenue Requirement. Accordingly, we find that the public interest in the Commission adopting this decision before expiration of the 30-day public review and comment period clearly outweighs the public interest in having the full 30-days for public review and comment on this decision. Comments to the Draft Decision were filed by PG&E and SDG&E. We have reviewed these comments and are of the opinion that arguments against the restoration of the $29 million DWR's Revenue Requirement are without merit.

V. CONCLUSION

For the reasons stated above, the Commission amends its Decision to restore the subject $29 million to the 2003 Revenue Requirement of DWR.

FINDINGS OF FACT

1. The ALJ Ruling noted that the DWR Rehearing Application "objects to the Decision's removal of the $29 million from DWR's requested 2003 Revenue Requirement." The ALJ Ruling then solicited comments on the merits of the Rehearing Application as well as the standing of DWR.

2. The Rehearing Application had a notice and comment period associated with its filing.

3. The ALJ Ruling gave "notice . . . that the issues raised by this matter may be addressed by the Commission at its meeting on January 30, 2003."

4. SCE and SDG&E filed comments in response to the ALJ Ruling.

5. No party requested an evidentiary hearing in response to the ALJ Ruling.

6. SDG&E and PG&E filed comments in response to the Draft Decision.

7. No party requested a hearing in response to the Draft Decision.

8. The $29 million represents costs under a Demand Reserves Purchase Agreement ("Contract") between DWR and the Power authority.

9. The Contract reduces demand when power supplies may otherwise be insufficient and therefore makes power available indirectly to electric customers.

CONCLUSIONS OF LAW

1. Because the parties were given notice and opportunity to heard on the amendment, the due process requirements of Public Utilities Code Section 1708 have been satisfied. 2. Because the amendment involves a legal issue and no dispute of material facts were raised by the parties, an evidentiary hearing was not required.

3. There is good cause to amend the Decision to restore the subject the $29 million to the 2003 Revenue Requirement of DWR.

4. AB1X authorizes DWR "to make power available directly or indirectly to electric consumers."

4. The $29 million is authorized by AB1X and properly included in DWR's Revenue Requirement.

5. The public interest in timely resolving this matter clearly outweighs the public interest in having the full 30-day period for public review and comment on this decision when there have already been several opportunities for comment.

6. Therefore, public necessity requires a reduction of the 30-day period for public comment and review of this decision.

Therefore IT IS ORDERED that:

1. This matter is reopened pursuant to Section 1708.

2. Decision 02-12-045, as corrected by Decision 02-12-052, is amended to restore the subject $29 million to the 2003 Revenue Requirement of DWR, and to read as shown in Attachment A.

This order is effective today.

Dated: February 13, 2003, at San Francisco, California.

MICHAEL R. PEEVEY

President

GEOFFREY F. BROWN

SUSAN P. KENNEDY

Commissioners

I will file a dissent.

/s/ LORETTA M. LYNCH

Commissioner

I dissent.

/s/ CARL W. WOOD

Commissioner

A.00-11.038 et al. ATTACHMENT A

D.02-12-045 as Modified by D._______

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 to Adopt a Rate Stabilization Plan. (U 39 E)	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)

TABLE OF CONTENTS

Title Page

AMENDED OPINION ADOPTING INTERIM ALLOCATION OF THE 2003 REVENUE REQUIREMENT OF THE CALIFORNIA DEPARTMENT OF WATER RESOURCES 2

Summary 2

Chronology of the Proceeding 3

The Issues 5

Allocation of DWR's 2003 Revenue Requirement 5

SCE 7

PG&E 10

SDG&E 11

ORA 12

Excess Energy Sales and Revenues 19

Ancillary Services 22

Modeling Issues 26

Ratemaking and Remittance Issues 27

Direct Access Cost Responsibility Surcharge 32

2001-2002 True Up 34

Other Issues 35

Implementation 38

A. Narrative Explanation of the Revenue Requirement Allocation 38

Definitions 38

Revenue Requirement Adjustments 39

Allocation of 2003 DWR Revenue Requirement 39

B. The DWR Supplemental Determination Process 40

Rehearing and Judicial Review 42

Comments on Proposed Decision 42

SCE 42

PG&E 45

SDG&E 50

DWR 52

ORA 53

Assignment of Proceedings 53

Findings of Fact 53

Conclusions of Law 56

ORDER 57

AMENDED OPINION ADOPTING INTERIM ALLOCATION OF THE
2003 REVENUE REQUIREMENT OF THE CALIFORNIA
DEPARTMENT OF WATER RESOURCES

¹ The three major utilities are Pacific Gas & Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E) and Southern California Edison Company (SCE).

² Rather, DWR agreed to respond to limited discovery requests from other parties and agreed to provide witnesses and testimony in this and other proceedings. (See e.g. Rate Agreement, Section 7.2.)