VI. Comments on Proposed Decision

The proposed decision of the ALJ in this matter was mailed to the parties in accordance with § 311(d) and Rule 77.1 of the Commission Rules of Practice and Procedure.

Comments were filed by Avista Corporation d/b/a Avista Utilities, LIF/Greenlining, Mountain Utilities, ORA, PG&E, Pacificorp, SDG&E and SoCalGas, SCE, and TURN. CMTA filed a motion to intervene noting its previous participation in this case. Currently on the Information Only portion of the service list, CMTA asks that it be reclassified as an interested party and that its comments on the proposed decision attached to its motion be accepted. CMTA's motion to intervene is granted and its comments are accepted. LIF/Greenlining, ORA, PG&E, SDG&E and SoCalGas, SCE, and TURN filed reply comments.

Comments on the proposed decision that reiterate positions taken during the proceeding are not repeated here. Several requested clarifications and corrections are made in the body of the decision as appropriate.

PG&E presents proposals for a scaled-down large household program and for a modified materiality threshold for exclusion of seasonal customer usage from baseline calculations, for Commission consideration if PG&E's primary recommendations are not adopted. We see no need to address these "split the difference" proposals, since we agree with the proposed decision's resolution of these issues.

SDG&E and SoCalGas take issue with the exclusion of seasonal usage from baseline calculations for gas utilities, since the proposed decision finds that a clear need for additional residential gas rate relief has not been established. We do not modify the decision in this regard, since the exclusion of seasonal usage is adopted to improve accuracy of baseline calculations rather on the basis of need for rate relief.

Mountain Utilities reports that it cannot determine whether exclusion of seasonal usage from baseline calculations would meet the adopted materiality threshold, since it has never done a customer survey. Additionally, because seasonal customers may comprise 65% to 80% of its 500 customers, Mountain Utilities anticipates that exclusion of such usage from baseline calculations and the resulting rate changes to maintain revenue neutrality may have large consequences. Mountain Utilities requests that any changes to its baseline quantities be deferred to its next general rate case or other appropriate proceeding.

Because of Mountain Utilities' extraordinarily high proportion of seasonal customers, it is reasonable to defer the exclusion of seasonal customer usage from baseline calculations as Mountain Utilities requests. This deferral will allow rate impacts of this requirement to be considered in conjunction with whether seasonal customers should be precluded from receiving baseline allowances. (Unlike some other small electric utilities, Mountain Utilities currently provides baseline allowances to its seasonal customers.) Consistent with Mountain Utilities' request, Energy Division should work informally with Mountain Utilities or any other utility requesting assistance in developing a reasonable method for determining the percentage of seasonal residents.

SDG&E states that it may not be able to complete the materiality test for exclusion of seasonal usage by the summer of 2004, explaining that the last RASS-like survey requesting seasonal residence information was performed in 1991 and new survey results will not be available until the first half of 2004 at the earliest. TURN supports allowing SDG&E to wait until RASS data is available. We agree that it is reasonable to defer SDG&E's related advice letter filing requirement until after it has received the pending RASS results.

SDG&E asks for a workshop on PG&E's proxy methodology for excluding seasonal usage from baseline calculations. Since we are not mandating that SDG&E or other utilities use PG&E's methodology, we see no need for workshops on this issue. SDG&E is free to consult with PG&E if it has questions regarding the methodology.

SDG&E continues to take issue with the conclusion that Water Code § 80110 added by AB 1X prohibits increases in total retail rates for residential electricity usage up to 130% of baseline for utilities bound by its provisions. ORA and TURN support the proposed decision's interpretation of AB 1X and the requirement that SDG&E reduce its rates to comply with AB 1X.

SDG&E's arguments regarding the interpretation of Water Code § 80110 are without merit. The legislative history of AB 1X clearly supports our prior conclusion, affirmed by this order, that AB 1X provides protection for total charges for residential usage up to 130% of baseline. Since the enactment of AB 1X, SDG&E's increases in non-commodity rates without other offsetting rate reductions for residential usage up to 130% of baseline have been in contravention of that statute.

We confirm that SDG&E's total rates for residential usage up to 130% of baseline should be rolled back to total rates in existence when AB 1X was passed. We disagree with SDG&E's assertion that this required rate adjustment is improperly outside the scope of this proceeding. Several parties argued during the proceeding that SDG&E's proposal to recover BBA undercollections through across-the-board residential rate increases would violate AB 1X, and interpretation of AB 1X in this regard was briefed. SDG&E does not contest that its total rates for residential usage up to 130% of baseline exceed those in effect when AB 1X became effective. Further, unlike § 1701.2 regarding adjudicatory proceedings, § 1701.3 regarding ratesetting cases does not preclude deviation from the scoping memo. For these reasons, a determination in this proceeding that utilities subject to Water Code § 80110 should conform their rates to its requirements in no way impinges on SDG&E's rights. Nor are business customers' due process rights compromised, as SDG&E alleges, since allocation issues are not resolved by this order.

We do not adopt TURN's proposal that SDG&E be sanctioned and ordered to provide refunds for the amounts by which SDG&E's total rates for residential usage up to 130% of baseline have exceeded rates in effect when AB 1X was enacted. While concerned that SDG&E proposed rate increases despite prior Commission interpretations of AB 1X to the contrary, we recognize that no party protested the rate increases and the Commission allowed them to become effective. Due to these circumstances, we do not find that sanctions or refunds would be appropriate. In reaching this conclusion, we do not address whether refunds would constitute improper retroactive ratemaking, as SDG&E alleges.

It is not necessary to add findings of fact and conclusions of law to support our rejection of various proposals as suggested by PG&E. The case law cited by PG&E which requires findings of fact and conclusions of law does not extend to rejected proposals. Nor do we augment the decision to cite certain record evidence, as suggested by LIF/Greenlining, since it is not needed to support the order.

Finally, Pacificorp requests that the Commission specify which ordering paragraphs apply to those respondent utilities that are not governed by the provisions of Water Code § 80110. Consistent with Ordering Paragraph 1, each ordering paragraph applies to all Commission-regulated gas or electric utilities, unless the ordering paragraph specifies otherwise.