IV. Relationship of this Proceeding to the DWR and CTC Revenue Requirement Proceedings

Parties express differing views concerning the scope of this phase of the proceeding and how it relates to the determination of the overall DWR revenue requirement for 2003 in A.00-11-038 et al., and to the finalization of the total revenue requirement for DA load, including CTC, applicable to the 2001-2002 undercollection and to the 2003 prospective revenue requirement for DA CRS elements. PG&E, in particular, views this phase as forum to adopt final values for those DA CRS elements. Accordingly, PG&E recommends that a final 2003 prospective DA CRS revenue requirement be determined in this phase of the proceeding using the same DWR analysis used to develop the DWR revenue requirement in A.00-11-038. PG&E calculates its DA CRS amount to be $381 million, and proposes that this amount be used to set its DA CRS obligation in this proceeding. PG&E also proposes adoption of CTC elements.

Other parties disagree that this phase of the proceeding is intended to adopt final DA CRS values, but rather view that process as subject to a separate phase to be coordinated with the DWR proceeding in A.00-11-038. Parties object to the proposed DA CRS values offered by PG&E and argue that further scrutiny of its proposal is warranted before any final charges are adopted.

We have previously stated that the DA CRS total obligation should be determined using consistent assumptions with the overall DWR revenue requirement in order to avoid a mismatch between the allocation of costs between bundled and DA customers. Yet, this phase of the proceeding is not focused on determining the precise amount of the total DA CRS obligation, but rather, on the appropriate cap to impose. These are two separate and distinct steps in the process. For purposes of assessing the appropriate cap, the most reliable and accurate estimates of relevant resource assumptions over time are more important than exact tracking with assumptions underlying the total DWR revenue requirement as determined in A.00-11-038. The appropriate time to focus on consistent matching of resource assumptions between the DA CRS and DWR revenue requirement is in the phase of the proceeding where we actually determine the total DA CRS obligation for the 2001-2003 period in parallel with the total DWR revenue requirements determined in A.00-11-038. We shall address, quantify, and implement the total DA CRS DWR obligation for the period from 2001 through 2003 utilizing consistent resource assumptions with the DWR revenue requirements determination in A.00-11-038. We direct the ALJs in both of these proceedings to coordinate, as required, to implement this process expeditiously.

We affirm that this phase of the proceeding is focused on setting the DA CRS cap. Thus, we use the data presented in this proceeding to assess longer term conditions as a basis to set an appropriate DA CRS cap. The finalization of the actual DWR and URG revenue requirement elements is a separate exercise that must be closely coordinated with the DWR proceeding in A.00-11-038 et al. A separate determination is also required of the actual recorded undercollection applicable to the DA CRS for the historic period from September 20, 2001 through December 31, 2002.

In addition to the DWR component, we must finalize and adopt amounts for the URG component of the DA cost responsibility obligation. Since the DWR proceeding in A.00-11-038 et al. does not address URG costs, a separate process is needed to examine URG costs and to adopt a CTC component as prescribed under the total portfolio approach prescribed in D.02-11-022.

The ALJ's Proposed Decision designated the Energy Resource Recovery Account (ERRA) proceeding for determination of the final CTC revenue requirement. ORA opposes the use of the ERRA proceeding for litigating the final CTC values. ORA argues that the complexity of CTC issues will require additional time to litigate, and will compromise the goal of timely processing of these proceedings as called for in Public Utilities Code Section 454. 5. As an alternative, ORA suggest placing the CTC issues in the Annual Transition Cost Proceedings, or else to open a new proceeding.

PG&E opposes litigating its 2003 CTC revenue requirement in the ERRA proceeding. PG&E argues that the limited schedule for completing the ERRA prior to the end of 2003 will not accommodate litigating the 2003 ongoing CTC revenue requirement. The current ERRA proceeding was filed on February 3, 2003. PG&E contends that the proceeding should not be slowed down to incorporate the 2003 ongoing CTC. If the Commission chooses to litigate this issue further, in spite of the record already developed here, PG&E argues that a separate proceeding should be held as quickly as possible to set this rate component and revenue requirement.

PG&E agrees that the ongoing CTC revenue requirement and rate component for 2004 could be established in the ERRA proceeding. PG&E argues that determination of the ongoing CTC in the ERRA, however, should not be allowed to keep that proceeding from reaching conclusion by the end of 2003. PG&E's ERRA revenue requirement for 2004 will be presented in its August 1, 2003, filing, thus leaving five months to complete the ERRA proceeding before the end of the year.

SCE does not oppose litigating its CTC component in the ERRA proceeding, but notes that the currently defined scope of its ERRA is limited to 2003 fuel and purchased power costs. If CTC is addressed in the ERRA, SCE seeks authorization to augment its showing in that proceeding to introduce additional evidence relating to its total URG. SCE still prefers that the historical URG costs for 2001 and 2002 be considered in this proceeding. If the Commission, however, directs that even the CTC for the 2001-02 period be considered in the ERRA proceeding, SCE would need to supplement the record with data relating to that recorded period.

In view of the time constraints involved, we conclude that the final determination of the CTC component for 2003, as well as the historic CTC for 2001-02, for each utility should be finalized in a separate phase of this proceeding, rather than in the ERRA. Given the requirement to ensure timely recovery of procurement costs in the ERRA proceeding as prescribed in Section 454.5, we recognize that it could delay timely completion of that proceeding if additional issues relating to 2001-03 CTC were added to the scope.

As noted above, we have prescribed that the DWR power charge component of the DA CRS for the 2001-02 historic periods and 2003 prospective period shall be determined in this proceeding on a parallel track with the redetermination of the DWR revenue requirement being litigated in A.00-11-038 et al. Accordingly, we shall direct that the final determination for CTC for the 2001-02 historic period and prospectively for 2003 be addressed at the same time in this docket. The concurrent finalization of both the DWR and URG components of the DA CRS should facilitate adopting a final cost responsibility obligation for DA and Departing Load through 2003, including confirmation of the final 2001-02 undercollection balance.

For subsequent years beginning with 2004, we conclude that prospective determination of the CTC for each utility can be accommodated within the ERRA proceeding.

SCE seeks guidance as to whether assume the use of the 4.3 cents/kWh benchmark for CTC adopted in D.02-11-022 for every year from 2001 through 2003, or to update the figure in the ERRA proceeding. Since it was the intent in D.02-11-022 to adopt the 4.3 cents/kWh as an initial benchmark for use in determining above-market resource costs, parties should apply this value for computing CTC for the years 2001 through 2003. For the year 2004 and subsequent years, the 4.3 cents benchmark will be subject to revision to reflect more updated data.

While DWR used its base case assumptions from its previous DWR revenue requirements filing as a point of departure for modeling scenarios, we are not bound by those assumptions for our purpose here which is a multi-year assessment of DA CRS based upon the best information available. Accordingly, we do not adopt final figures for DWR or CTC revenue requirements for any of the utilities in this phase of the proceeding. We do establish a specific process, however, as outlined above to assure that final figures are adopted on a timely basis in coordination with A.00-11-038 et al.