II. Background

We opened this rulemaking to implement Senate Bill (SB) 1755 (Stats. 2002, ch. 848). SB 1755 adds §§ 31149.7 and 71663.5 to the Water Code relating to electric power. SB 1755 authorizes county water districts and municipal water districts to provide, generate and deliver electricity, for their own purposes or for sale to wholesale customers if there is surplus. SB 1755 does not grant the authority for retail sales.

If a district elects to provide for its own generation of electricity, SB 1755 requires us to determine a cost-recovery mechanism to be imposed through a nonbypassable charge. This charge reimburses the Department of Water Resources (DWR) and the electrical corporation for certain electricity purchase costs to prevent a shifting of costs to an electrical corporation's bundled customers. In the Order Instituting Rulemaking (OIR), we proposed that self-generating water districts pay the CRS now applied to other customer generation departing load customers, that is, those customers who purchase or consume electricity supplied and delivered by what we term "customer generation" to replace all or part of the utility or direct access purchases.

In the OIR, we determined the CRS adopted in this proceeding would include DWR bond charges, DWR power charges, and utility-incurred charges, including but not limited to Utility Retained Generation (URG) charges, and tail-CTC costs, in a manner consistent with the methodologies and modeling principles discussed in D.02-11-022 and related decisions in Rulemaking (R.) 02-01-011.

The Association of California Water Agencies (ACWA), PG&E, the Marin Municipal Water District (MMWD),¹ the Contra Costa Water District (CCWD), SDG&E, SCE, the Modesto Irrigation District (Modesto), and the Chino Basin Coalition (Chino Basin)² filed opening comments on November 3, 2003. PG&E, the Office of Ratepayer Advocates (ORA), Chino Basin, CCWD, and SDG&E filed reply comments on November 17, 2003. A prehearing conference (PHC) was held on January 8, 2004.