III. Framework for Evaluating the DA CRS Cap

As a framework for evaluating the appropriate level of the cap, we begin with recognition of the two overriding goals to be balanced: (1) maintaining bundled customer indifference with respect to DA migration and (2) avoiding making DA uneconomic to customers.

In evaluating the DA CRS cap with respect to bundled customer indifference, we first consider the criteria by which to assure that bundled customer indifference is preserved. By default, bundled customers absorbed stranded costs attributable to migrated DA load. D.02-03-055 set forth the requirement for bundled customer indifference. Time was required after issuance of D.02-03-055 to conduct further proceedings to implement a methodology and process to measure and bill DA customers for their share of cost responsibility. By the time that a DA CRS methodology was adopted in D.02-11-022, a significant undercollection had already accumulated attributable to DA CRS past obligations.

Bundled customer indifference must be accomplished, therefore, by providing a means for bundled customers to be made whole for these accumulated past undercollections as well as for ongoing stranded costs attributable to the DA CRS. Yet, if we were to require that DA customers immediately reimburse bundled customers for the entire past obligation plus prospective ongoing stranded cost requirements, the required increase in the surcharge on DA customers could seriously threaten the economic viability of DA as a continuing option.

Thus, in order to balance the countervailing goals of bundled customer indifference and preventing harm to DA, we devised an approach in D.02-11-022 whereby the DA obligation is paid off over time, subject to a cap limiting current DA CRS payments.

To preserve bundled customer indifference, any DA CRS cap must be high enough to assure bundled customers are fully reimbursed for any funds advanced over time, including interest, to cover the DA CRS undercollections. Counterbalancing this goal, any DA CRS cap should be set low enough so that the cumulative burden of all energy charges faced by DA customers do not render the DA option untenable.

The next step is to assess the level of (1) DA CRS undercollections already incurred and (2) likely future years' DA CRS obligations and related per-kWh charges yet to be incurred. For purposes of this assessment, forecasts have been performed by Navigant involving a range of scenarios as to the potential streams of DA CRS obligations over future years during which time bundled customers are funding a portion of the DA CRS obligation.

Based upon the assessment of these scenarios and the likely level of future DA CRS obligations, the appropriate level of cap can be calculated required to satisfy our dual criteria of preserving bundled customer indifference and avoiding making DA uneconomic. We thus balance the countervailing effects both on bundled and DA customers, so that the cap is neither too high nor too low.