IV. Assignment of Proceeding

Geoffrey F. Brown and Carl Wood are the Assigned Commissioner and Thomas Pulsifer is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. In D.03-04-057, the Commission clarified that the "standstill" policy is aimed at "maintaining the then-current levels of DA" (i.e., as of September 20, 2001).

2. In D.03-04-057, the Commission clarified that "normal usage variations" means "daily and seasonal load fluctuations," and thus does not include growth of load on DA accounts from expanding customer operations, as proposed by Petitioners' modification.

3. Joint Parties' proposed modification to Rule 6 of D.03-04-057 fails to provide a definition of "normal increases in load" that would permit enforcement of the "standstill principle" adopted in D.02-03-055.

4. Granting the requested Modification of Rule 6 of D.03-04-057 would not address the concerns raised by Joint Parties opposed to SCE's two-meter policy.

5. The proposal of PG&E and SDG&E (i.e., to permit DA load growth up to the point where capacity requires a panel upgrade) would violate the standstill principle under D.02-03-055.

6. A panel upgrade request signifies that peak load has grown substantially, typically more than 10 %. At least in some cases, such growth probably exceeds what might be considered a "normal load fluctuation."

7. SCE's proposal would impose additional burdens on DA customers, but its proposed criteria for installing second meters fail to relate to any relevant benchmark that corresponds to September 20, 2001 DA suspension levels.

8. SCE's reference to "current levels" of load in its proposed process for second meters is unduly vague and provides no means to determine whether such levels necessarily correspond to the authorized contract limits in effect as of September 20, 2001, taking into account "normal load fluctuations" as allowed under existing suspension rules.

9. SCE has not justified that its proposed modifications are an appropriate way to implement the Commission's standstill principle, or that the modifications are fair to DA customers.

10. The Workshop convened on March 11, 2004, provided an opportunity to seek consensus concerning processes, procedures, and/or administrative measures to address growth in DA load in a manner consistent with the Commission's suspension rules.

11. Through the workshop process, participants reached general agreement on ten principles, with limited disagreement, as follows. Consensus was achieved on Principles 2, 3, 6, 7, and 9. Consensus was achieved with all parties except TURN on Principles 1 and 5. Consensus was reached with all parties except FEA on Principle 8.

12. The 10 principles to which most participants agreed provide a reasonable resolution of the issues raised by the petitions to modify.

13. With respect to Principle 10, Alternative A should be adopted, rather than Alternative B, since it promotes greater clarity and overall consistency.

14. An affidavit requirement for large DA customers provides a reasonable process for verification of contracted load and attention of compliance with contractual limits.

15. A DA "growth trigger" provides a safeguard against unforeseen growth. SDG&E's proposal for a 15% growth trigger provides a reasonable interim figure.

16. No refunds should be required retroactively for the effects of prior load splitting by PG&E.

17. The DA CRS is not a "tax," but is a charge for DWR costs and ongoing CTC costs for which non-continuous DA customers are responsible, including federal government DA customers.

18. The modifications proposed by PG&E to Principles 7 and 9, as discussed in the text above are reasonable.

Conclusions of Law

1. The modifications to D.03-04-057 sought by Petitioners would violate the "standstill principle" adopted in D.02-03-055 and related statutory DA suspension requirements of AB 1 X and AB 117.

2. The modifications of D.03-04-057 proposed by Petitioners is overly broad and vague with respect to the definition of "normal load growth."

3. Without adequately addressing the bundled customer cost impacts of removing DA load restrictions, parties have not justified the proposed modification to D.03-04-057.

4. The Joint Parties' Petition to Modify Rule 6 of D.03-04-057 should be denied, but the typographical error in Conclusion of Law 8 in that decision should be corrected.

5. SCE has failed to justify that its proposed procedures for requiring a second metered account for DA customers is an appropriate way to enforce the Commission's "standstill" rule.

6. SCE's Petition to clarify D.02-03-055 should be denied.

7. PG&E and SDG&E have failed to justify that their alternative criteria for requiring DA customers to install a second meter are consistent with the Commission's "standstill principle."

8. To the extent that increases in the load level served through a DA account subsequent to September 20, 2001 are based upon contractual load commitments that were executed on or before September 20, 2001, such load levels thus are properly entitled to DA treatment since they were negotiated prior to the date of suspension.

9. The principles governing DA load growth, as set forth in Appendix 1 of this order, provide a reasonable resolution of issues relating to the petitions for modification and warrant adoption.

10. Incremental load growth at existing DA accounts attributable to "add-on" commitments for new DA load executed by contract after September 20, 2001, would violate the DA suspension rules adopted in D.02-03-055.

11. A Rule 22 Working Group Meeting should be scheduled to develop an affidavit process whereby DA customers beyond a designated minimum load must attest to their contractual DA load limits, and that they have not exceeded contractual limits. The Working Group should seek consensus on the appropriate minimum load per customer per utility for applying the affidavit.

12. SDG&E's proposed growth trigger of 15% should be adopted as an interim measure to guard against unforeseen growth of DA load.

ORDER

IT IS ORDERED that:

1. The Petition to Modify Rule 6 in Decision (D.) 03-04-057 filed by SBC Services, University of California/California State University, and California Large Energy Consumers Association (CLECA) (Joint Petitioners) is hereby denied.

2. The following typographical correction is hereby made to Conclusion of Law 8 of D.03-04-057, inserting the word "not":

"The limitations on DA eligibility of load from replacement or relocation of facilities as adopted in the modifications herein to D.02-03-055 are not intended to prohibit load changes associated with normal usage, variations for accounts at other locations that are eligible for DA as of September 20, 2001." (Correction in bold face.)

3. The Petition to clarify D.02-03-055 filed by Southern California Edison is hereby denied.

4. The modifications to the Commission's standstill policy proposed jointly by Pacific Gas & Electric Company and San Diego Gas & Electric Company are not adopted.

5. The principles governing DA load growth, as set forth in Appendix 1 of this order, are hereby adopted.

6. The assigned ALJ is directed to schedule a Rule 22 Working Group Meeting to develop an appropriate affidavit process to implement Principle 3. Notice of the Meeting shall be provided both to the current Ruling 22 mailing list and to all parties in this docket. The Rule 22 Working Group shall submit a report to the assigned ALJ within five business days after conclusion of the meeting, summarizing areas of consensus and/or disagreement for further Commission action.

7. The Commission may conduct spot audits or informal investigative inquiry, as deemed necessary, to deal with any potential disputes concerning the accuracy of claims concerning contractual volumes.

This order is effective today.

Dated July 8, 2004, at San Francisco, California.

MICHAEL R. PEEVEY

President

GEOFFREY F. BROWN

SUSAN P. KENNEDY

Commissioners

I reserve the right to file a dissent.

/s/ LORETTA M. LYNCH

Commissioner

I reserve the right to file a dissent.

/s/ CARL W. WOOD

Commissioner

APPENDIX 1

ADOPTED PRINCIPLES GOVERNING

DIRECT ACCESS LOAD GROWTH

1. Load growth is permitted on existing DA accounts provided that the load growth does not result in customer's total load exceeding the contracted level of DA load defined by the terms of customer's DA service contract entered into consistent with the Commission's DA suspension decisions.

2. Utilities are not required to review, monitor, interpret or make recommendations regarding ESP/customer DA contracts.

3. An affidavit process will be developed to provide verification of the contracted amount of DA load and to attest to compliance with that load limit for customers with DA load exceeding a designated minimum load per customer.

4. The Commission's determination in the DA suspension decisions prohibiting new contracts and arrangements for DA service, and add-ons of new load after September 20, 2001 remains in effect.

5. The utilities should not be permitted to require customers to "split" existing DA accounts into a pre-DA suspension load portion (entitled to DA rates) and a post-DA suspension load growth portion (which would be required to pay bundled service charges). Thus no second meter or split billing should be required on eligible DA accounts. The customer and the utility could, however, by mutual agreement, install a second meter to split existing DA accounts between DA and bundled service.

6. DA load growth should not cause cost-shifting to bundled service customers.

7. To allow some degree of flexibility for customers, but to ensure that non-continuous DA load growth does not place a burden on bundled customers, a growth trigger of 15% is established for total non-continuous DA load growth. If, based on the utilities' monthly DA activity reports submitted to the Commission, aggregate DA load increases within a given utilities' service territory more than 15% above DA levels in existence as of the date of this order, a party may file with the Commission requesting review of the growth trigger and reevaluation of the DA CRS accrual rate.¹² Otherwise, the DA CRS and cap will occur in the regularly scheduled DA CRS proceedings. In the event that the trigger is exceeded in between regularly scheduled DA CRS proceedings, the utilities or the Commission may initiate earlier review.

8. Any future DA CRS adjusted for DA load growth would apply to all billable non-exempt DA load, not just the incremental DA load above the pre-suspension levels.

9. Continuous DA accounts (i.e., exempt from DA CRS) should continue to be exempt from DWR components of DA CRS for all load on the accounts.

10. With respect to relocations and replacements of DA accounts addressed in Decision 04-02-024, such replacements and relocations shall be permitted as long as the customer's total DA load after a replacement or relocation does not exceed the contracted level of DA load defined by the terms of customer's DA service contract entered into consistent with the Commission's DA suspension decisions.¹³

(END OF APPENDIX 1)

Dissenting opinion of Commissioner Carl Wood

to D.04-07-025 #54 - July 8, 2004

Today's decision has not been an easy one, as evidenced by the delay in addressing the two related pleadings seeking clarification and modification of previous Direct Access decisions regarding potential direct access load growth. In fact, this matter was before us late last year and, unable to come to a consensus, we asked Energy Division to convene a workshop to assist us in identifying principles to govern direct access load growth. I am happy that the result of the workshop has been a near-consensus development of 10 principles to address direct access load growth in conformance with the Commission's direct access suspension decision requirements. However, I cannot support this decision because it fails to provide the proper protections against impermissible direct access load growth.

While it is encouraging that the language in some of the principles has been changed to make it clear the Commission does not intend to allow impermissible load growth and to shield bundled customers from any cost-shift as a result of direct access load growth, I am not convinced that the principles offer any actual assurances to that effect. For example, Principle #6 has been modified to delete the word "significant" and now reads, quite appropriately, "DA load growth should not cause cost-shifting to bundled service customers." However, there are no real protections to ensure that this happens. In fact, the only apparent protection comes in the form of an affidavit process, which will require direct access customers to attest both to contracted load and compliance with direct access load limits. Yet even this protection is limited and rests entirely on faith.

These principles do nothing more than continue this Commission's policy of evading a clear legislative mandate to suspend direct access and instead explore ways in which to expand the program. There has always been a strong reluctance on the part of this Commission to require proper review of contracts with meaningful information. Instead we rely on a silly "trust me" approach to ensure compliance with our orders. For these reasons, I cannot support this decision.

/s/ CARL WOOD

Carl Wood

Commissioner

San Francisco, California

July 8, 2004