8. Final Categorization and Review and Comment Period

Based on our review of this application, we conclude that there is no need to alter the preliminary determination as to the ratesetting categorization made in Resolution ALJ 176-3080 (January 23, 2002). We modify our preliminary determination that a hearing is necessary, because no hearing was necessary in this proceeding.⁶⁸

The draft decision of ALJ Prestidge was mailed to the parties in accordance with Section 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure on February 11, 2003. Comments were received from PG&E, TID, and ORA on March 3, 2003. Late-filed reply comments were received from PG&E and ORA on March 10, 2003.⁶⁹

PG&E and TID comment that the Commission should not defer its determination of the allocation of PG&E's gain on sale from this transaction between shareholders and ratepayers to a subsequent rulemaking on gain on sale issues. ORA's comments also express disappointment that the proposed decision deferred the Commission's determination regarding allocation of the gain on sale, but recognized that this issue is a policy matter for the Commission. In response to these comments,⁷⁰ we have modified Section 5 of the decision to address the ratemaking issues here and to allocate PG&E's gain from the sale of distribution assets to TID to shareholders pursuant to Redding II. We have also added language to clarify that PG&E shall allocate its gain from the sale of transmission assets to TID according to applicable FERC authority.⁷¹

We need not address other comments from the parties regarding the placement of PG&E's gain on sale in a holding account pending the upcoming gain on sale rulemaking, because we have allocated the gain on sale here.

ORA comments that the proposed decision errs by improperly shifting the burden of proof to ORA regarding whether TID is likely to default on its obligations to pay NBCs on behalf of departing customers and the amounts that would otherwise be owed by departing customers under PG&E energy efficiency contracts. We disagree with this comment and have added footnote 29 to clarify that while PG&E has the overall burden of proof in this matter, ORA failed to meet its burden of producing evidence in support of its affirmative recommendations. ORA further comments that the Commission lacks jurisdiction to order TID to reimburse PG&E for NBCs otherwise owed by departing customers. We have modified Section 5 to clarify that this decision does not order TID to pay NBCs in effect before the closing date on behalf of departing customers, but approves the asset sale agreement, in which TID assumed this obligation, and directs PG&E to enforce this obligation if TID should default. We have also added language to clarify that while we will not require TID to pay NBCs imposed after the closing date which it has not agreed to pay, we may require departing customers to pay these charges as consistent with state law and Commission decisions. We need not respond to ORA's other comments, which consist of rearguments of positions stated in ORA's briefs.

PG&E further comments that the proposed decision does not include a finding requested by PG&E that TID's agreement to pay NBCs established before the closing date on behalf of departing customers, according to the methodology and calculations contained in PG&E's testimony, fully satisfies any obligation of PG&E and its customers for NBCs. We have added language to Section 5 regarding ratemaking issues to deny PG&E's request and to state that TID's agreement to pay NBCs in effect before the closing date cannot satisfy the obligation of PG&E customers or departing customers here to pay their fair share of any applicable new NBCs or CRCs imposed after the closing date. As requested in ORA's reply comments, we have retained language in the proposed decision that requires PG&E to enforce TID's obligations to pay NBCs established before the closing date and amounts owed under energy efficiency contracts on behalf of departing customers through the dispute resolution process set forth in the closing agreement, if TID should default on these obligations.

PG&E's comments also ask the Commission to approve the specific methodology and calculations of NBCs to be paid by TID on behalf of departing customers contained in PG&E's testimony. We have added language to Section 5 to state that while PG&E's overall methodology appears sound, we cannot approve the specific calculations of NBCs owed because some of the calculations are based on illustrative examples, rather than actual figures. We have also added language to require PG&E to file a revised statement of its methodology and a recalculation of NBCs to be paid by TID and any new NBCs or CRS that have been adopted and apply to departing customers by advice letter within 90 days of the effective date of this decision.

PG&E and TID further comment that the Commission should permit PG&E to waive the amounts that would otherwise be owed by departing customers under PG&E energy efficiency program contracts. PG&E and TID state that since the departing customers are being transferred into TID's service area involuntarily, it is not fair to require them to pay these amounts. We need not respond to these comments, which are mere rearguments of positions argued by these parties in their briefs. PG&E further comments that waiver of the amounts owed by departing customers under energy efficiency contracts will not place an unfair financial burden on remaining ratepayers, because PG&E's remaining ratepayers will still benefit from the reduced energy load and associated savings that result from the installation of energy efficiency measures. We have added footnote 33 to state that although the installation of energy efficiency measures should result in overall energy savings, the record contains no evidence that this savings or any overall reduction in energy load would be equivalent to the amount owed by departing customers under the energy efficiency contracts.

In addition, PG&E's comments request modification of the decision to provide that if TID's agreed-upon payments up to $500,000 on behalf of departing customers for amounts due under energy efficiency contracts do not cover all amounts owed, PG&E may collect any additional amounts from departing customers who received large rebates under energy efficiency contracts, such as $50,000 or more. PG&E states that this approach would permit more efficient collection of the amounts owed than requiring PG&E to collect from departing customers on a pro rata basis, because many of the energy efficiency program contracts involve small dollar amounts. We have modified the proposed decision to make this change.

Comments from the parties also requested several minor technical corrections to the proposed decision. We have corrected the decision as appropriate. We have also made non-substantive edits to Section 5.

Since this decision results in a significantly different outcome on ratemaking issues than the proposed decision, we wish to allow an additional seven-day period for public review and comment. Any additional comments from the parties must be filed and served by no later than March 28, 2003. No reply comments will be accepted.

Additional comments were received from ORA, PG&E, TID and WPA,⁷²

and Patterson Frozen Foods on March 28, 2003. The comments of all parties support our allocation of PG&E's gain on sale in the revised decision, rather than deferring this issue to the upcoming rulemaking. In its comments, Patterson Frozen Foods fully supports the revised decision and urges the Commission to adopt it expeditiously. However, the comments of PG&E, TID/WPA, and ORA raise further issues regarding the liability of departing customers for NBCs or CRS established after the closing date.

PG&E and TID comment that requiring departing customers to be responsible for payment of any NBCs or CRS established after the closing date would be inconsistent with the asset sale agreement as negotiated by PG&E and TID. TID states that the allocation of future charges imposed to recover costs incurred by DWR in procuring power for PG&E was a major issue in negotiations between PG&E and TID. PG&E and TID agree that, as stated in the revised decision, the asset sale agreement requires TID to pay NBCs authorized by the Commission before the closing date, but that this obligation does not apply to NBCs established after the closing date. PG&E states that TID's contractual obligation to pay NBCs established before the closing date on behalf of departing customers is predicated upon PG&E's agreement not to require departing customers to pay additional NBCs established after the closing date. PG&E further argues that in view of the overall benefits of this transaction to PG&E's ratepayers, it is appropriate to relieve departing customers from liability for NBCs or CRS that may be established after the closing date.⁷³

TID further comments that Sections 1.1 and 4.3 of the asset sale agreement clearly indicate that PG&E, through its ratepayers, is responsible for NBCs or CRS established after the closing date. TID therefore contends that the revised decision errs in stating that the asset sale agreement does not provide for the payment of any NBCs or CRS established after the closing date by either PG&E, its ratepayers, TID, or departing customers.

We decline to modify the revised decision to exempt departing customers from applicable NBCs or CRS established on or after the closing date as suggested in the comments of PG&E and TID. Although PG&E and TID may have considered liability for applicable NBCs or CRS established after the closing date an important issue in their negotiations, under Section 851, the Commission may approve the transfer of assets only if the transaction is in the public interest and will not interfere with PG&E's ability to provide adequate service at reasonable rates. The Commission may also impose reasonable conditions on the transfer of assets pursuant to Section 851. Here, as stated in the revised decision, if departing customers are not held responsible for payment of applicable NBCs or CRS established after the closing date, these costs will most likely be shifted to remaining PG&E ratepayers and will create an unfair financial burden for them. This situation would not serve the public interest. The language of the asset sale agreement is also unclear and appears not to predicate TID's responsibility to pay certain NBCs for departing customers on PG&E's waiver of any obligation of departing customers to pay NBCs or CRS established after the closing date.⁷⁴ In addition, we believe it more appropriate to define our policy regarding responsibility of departing load for CRS or newly established NBCs in a proceeding which specifically focuses on this issue, such as R.02-01-011.

However, in response to TID's comments, we have modified the revised decision at page 26 to clarify that while the asset sale agreement does not specifically require PG&E, its customers, TID or departing customers to pay NBCs or CRS established after the closing date, as a practical matter, these costs will be shifted to PG&E and its remaining ratepayers if departing customers do not pay their fair share. We have also modified Finding of Fact 18 and added a new Finding of Fact 19 to clarify this issue.

In its comments, ORA supports our decision not exempt departing customers from a legal obligation to pay applicable NBCs or CRS established after the closing date, but requests modification of the decision to impose an interim CRS of 2.7 cents per kilowatt hour (kWh) to be collected from under 20 kilowatt (kW) customers by TID and collected from 20kW and above customers by PG&E. ORA states that the amount of CRS to be imposed is still being considered in R.02-01-011, and the final CRS adopted may apply to billing cycles that occurred prior to the date of this decision. ORA therefore argues that if departing customers are not required to pay any interim CRS, they may later have to pay a large CRS to cover not only current charges but also an undercollection caused by their failure to pay CRS during the interim period. ORA claims that this situation would cause a spike in electricity rates for customers being transferred to TID.

We deny ORA's request to impose an interim CRS in the amount of 2.7 cents per kWh on departing customers because ORA has exceeded the permissible scope of comments pursuant to Rule 77.3.⁷⁵ ORA's suggestion is not based on any factual, legal, or technical error in the revised decision, but improperly raises a new issue in this proceeding. There is no evidence in the record related to the imposition of an interim CRS on departing customers or the appropriate amount to be collected through CRS, and opposing parties have had no opportunity to either request a hearing or file briefs on this issue in this proceeding. In the future, ORA should raise issues for the Commission's consideration in a timely manner, such as at the prehearing conference, so that the assigned Commissioner and ALJ may determine whether to include such issues in the scope of the proceeding and opposing parties will have the opportunity to request a hearing or to file briefs on the issue.⁷⁶ We have added Conclusion of Law 17 to grant the motion of PG&E and TID to strike portions of ORA's comments related to the imposition of interim CRS on these grounds.

We have also made several minor clerical and technical corrections to the revised decision.

...Comments shall focus on factual, legal or technical errors in the proposed decision and in citing such errors shall make specific references to the record... New factual information, untested by cross-examination, shall not be included in comments and shall not be relied on as the basis for assertions made in post publication comments. (Emphasis added.)