IX. Frequency of Subsequent Reviews and
Readjustments of DA CRS

Because forecasts are inherently subject to uncertainty, we must provide a means for ongoing periodic review of the DA CRS including prospective amounts and amortization of the undercollection level to assure that bundled customers are fully reimbursed by no later than the end of the DWR contract term. With respect to the process for updating the DA CRS, two separate issues arise. First, an ongoing process is required for updating of the DA CRS annual prospective cost responsibility obligation. Second, an ongoing process is required for reevaluating and adjusting, as necessary, the level of the DA CRS cap to assure that the goal of full payback by 2011 is achieved.

As stated above, we shall coordinate with the redetermination of the 2003 DWR revenue requirement in A.00-11-038 et al. to finalize the undercollection for 2001-02 and the prospective DA CRS obligation for each utility for calendar year 2003. Each subsequent year through the remaining life of the DWR contracts, an annual DA cost responsibility obligation must be determined in coordination with the bundled customer revenue requirement for DWR contract costs to assure consistent allocation between bundled and DA load and proper interest accruals on the undercollection. Unless the allocation between bundled and DA load is made based upon consistent assumptions in each annual update, the requirement for bundled customer indifference will be compromised.

A recurring process is also required for review of the adequacy of the DA CRS cap level. For purposes of such review, however, we conclude that the frequency need not necessarily be once a year. The process of reassessing the cap in this phase of the proceeding has been resource intensive, and we find no value in conducting such an intensive review more frequently than is warranted.

Since the cap already anticipates that collections will occur over multiple years, variances in forecast costs over a single year will not necessarily require annual changes in the cap level. With the establishment of DA CRS tracking accounts, any variance between the authorized DA CRS obligation and collections under the DA CRS caps will be captured and accounted for with interest. On the other hand, it would not be prudent to keep the 2.7 cents cap in place without reasonable periodic reassessment and readjustment, as necessary to make sure that more current forecasts remain consistent with our expectation of full payback by 2011. We shall thus authorize the following measures to balance these concerns. In the modeling scenarios performed by Navigant, three variables were found to be particularly sensitive to projected payback period, namely, natural gas prices, sales prices for off-system sales, and levels of DA load. Thus, in each annual update proceeding for DWR and DA CRS revenue requirements, we shall examine changes in the level of each of these variables. To the extent that any one of these variables deviates significantly from the forecast assumptions underlying this order, we shall order the assigned ALJ to take further procedural steps to consider the need for a reassessment of the level of the DA CRS cap. We define a significant deviation as a magnitude of variance distinguishing Navigant's low and base case assumptions, as presented in this proceeding.

In the absence of a need to revisit the cap earlier as a result of a significant variance in one of these identified forecast variables, we conclude that reassessment of the cap once every two years is sufficient to assure the payback schedule is met. We shall thus authorize the next regular reassessment of the DA CRS cap to be initiated two years from the effective date of this order.

By requiring subsequent reassessment on this basis, we can readjust the cap, as necessary, to reflect updated forecasts and to maintain assurance of full payback by 2011. This approach also will provide greater stability to DA customers seeking to negotiate power arrangements, and will avoid unnecessary expenditure of parties' and Commission scarce resources.

To the extent in subsequent reviews, if we conclude that the existing cap remains sufficient to meet our established goals for payback by the end of the contract term, we shall continue to leave the caps in place. To the extent that updated review of expected payback period indicates that a revision in the DA CRS cap is required to keep the repayment schedule on track, we shall adjust the cap of one or more of the utilities, as necessary.