Comments on Draft decision

The draft decision of ALJ Bertram Patrick in this matter was mailed on October 14, 1999 to the parties in accordance with Pub. Util. Code § 311(g) and Rule 77.1 of the Rules of Practice and Procedure. Comments were filed jointly by TURN, ORA, California Department of General Services, and Enron Corp. (Joint Parties). Also comments were filed by Edison, PG&E, and Sempra Utilities. Reply comments were filed by Joint Parties, SE Utilities, Edison, PG&E, and CBIA.

The draft decision provides that meter costs will continue to be, for the time being, a refundable cost to new line/service extension applicants. This means the utility will continue to provide the meter and incur the meter ownership costs if they are covered by the allowance. The Joint Parties ask that the draft decision be changed in this regard.

The Joint Parties propose that the meter ownership credit, like the other RCS credits, be subtracted from the net revenues used in the calculation of the line/service extension allowances. Since the draft decision requires that the utilities are still responsible for providing a meter to the new line/service extension applicants, it is not appropriate to remove this component of net revenue from the allowance calculation.

We agree with the draft decision that meter costs should continue, for the present, to be a refundable cost to new line/service applicants. Any attempt to reduce the line extension allowance without addressing the broader meter ownership policy issues is premature. Additionally, charging new applicants an up-front fee while electric distribution rates are designed to recover the exact same costs would unfairly charge new customers twice for one meter, and consumers as a group would be worse off. Any change in the line extension rules should serve the best interests of utility customers, not ESPs or MSPs.

SDG&E Should Calculate RCS Credits Using a Weighted Average to Include Dual-Fuel Customers.

SDG&E argues that the draft decision should reflect the fact that SDG&E should not base its RCS credits for line extension allowances upon the mistaken assumption that SDG&E will avoid the costs of reading the meter and the costs of billing its combination gas-and-electric customers.

SDG&E points out that a combination gas-and-electric utility like SDG&E does not avoid meter reading and billing costs for its combination customers who receive service from an ESP, unless the ESP actually reads both the gas meter and the electric meter and transmits both the gas and electric bill. According to SDG&E, for this reason, the Commission in D.98-09-070 agreed with SDG&E that its combination gas-and-electric customers should receive different RCS credits based upon the true costs which are avoided when a customer takes service from an ESP. SDG&E would have the Commission adopt a weighted-average of the credits for electric-only and dual fuel customers, rather than the electric-only figures.

TURN argues that since the RCS credits are presently set on an avoided cost basis, rather than the actual costs of those services (including embedded costs), removing the full credit only achieves a partial removal of the RCS-related costs. Therefore, TURN contends it is appropriate to use the electric-only credit as a proxy, since doing so comes closest to removing the full amount of RCS-related costs from the calculation of "net revenue."

We conclude that, consistent with the RCS decision D.98-09-070, SDG&E should calculate RCS credits using a weighted average to include dual-fuel customers. In D.98-09-070, the Commission specifically adopted SDG&E's proposal to calculate RCS credits differently for its electric-only customers than its combination gas-and-electric customers (see, D.98-09-070, AppendixA). PG&E should do likewise.

The record in this proceeding does not support any change in existing practices with regard to new meter installations, notwithstanding that the current practice of the incumbent utilities of providing a meter as part of the service extension is anticompetitive and harmful to direct access. The Commission should address meter ownership and competitive issues before the line and service extension rules are revised so that the Commission avoids replacing one form of undue competitive advantage with another. The line extension proceeding is essentially a proceeding for "flowing-through" into the line extension allowance the effects of policy decisions made in other proceedings. In hindsight, we believe that the line extension proceeding was not the best proceeding to resolve the implications of the TURN proposal.

Currently there is pending a Direct Access Service Fees and Revenue Cycle Services Cost and Rate Proposals consolidated proceeding for addressing certain metering, billing, and related service ratemaking proposals (A.99-03-033 et al.). We believe that any proposal to eliminate the competitive advantage to incumbent utilities with regard to new meter installations should be reviewed in that proceeding.

Findings of Facts

1. To eliminate any competitive advantage the utilities may have for new meter installations, PG&E and TURN propose that new applicants for line and service extensions pay up-front for their meters and deed the meters back to the utility.

2. Requiring applicants for line and service extensions to bear the cost of meters up front does not address the problem of customers automatically taking bundled service from the utility rather than some other form of service, whether from the utility or an ESP.

3. In most cases, the applicant for a line and service extension is the builder, and is not the homebuyer/customer who makes the choice between bundled utility service or direct access.

4. The TURN/PG&E proposal raises complex issues that must be resolved to implement competitively neutral changes to the line and service extension rules.

5. If, as required by the TURN/PG&E proposal an applicant/builder pays for the cost of procuring and installing a meter and deeds it back to the utility, the transfer would constitute a taxable contribution to the utility that is subject to ITCC payable by the applicant/builder.

6. The applicant/builder is not required to pay ITCC for a meter provided by an ESP; therefore, the applicant/builder would likely choose the lower priced ESP meter.

7. The ITCC requirement tilts the competitive playing field in favor of ESPs.

8. To the extent that the applicant/builder has to pay up-front for a meter, the applicant/builder would seek to recover that cost in the sale price of the house.

9. The TURN/PG&E proposal could shift a cost of $13.7 million per year from ratepayers onto builders.

Conclusions of Law

1. The Commission should await the conclusion of several pending proceedings dealing with meter-related policy issues before deciding whether it is appropriate to change the line and service extension rules to make the meter cost a non-refundable cost to new applicants for a line and service extension.

2. The goals of rate base reduction and avoidance of stranded investment, however worthwhile, have not been sufficiently justified in the record for this proceeding to require the immediate implementation of the TURN/PG&E proposal.

3. None of the tariff proposals offered by the utilities fully address the problem of customers automatically taking bundled service from the utility.

4. The Commission should address meter ownership and competitive issues before the line and service extension rules are revised so that the Commission avoids replacing one form of undue competitive advantage with another.

5. In the interim, Edison's Attachment B tariff proposal should be adopted because it would implement D.98-09-070, Conclusion of Law 5, part (2), by removing from the line and service extension allowances the RCS credits for meter services, meter reading and billing, and payment services.

6. Removal of the RCS meter ownership credit should be deferred until the Commission addresses meter policy issues in other pending proceedings.

7. For removing RCS meter reading and billing credits from the line extension allowance, SDG&E should use a weighted average of the credits for electric-only and dual fuel customers consistent with D.98-09-070. PG&E should do likewise.

ORDER

IT IS ORDERED that:

1. Pacific Gas and Electric Company, Southern California Edison Company (Edison), and San Diego Gas & Electric Company shall file revised tariff sheets that reflect changes to their Line and Service Extension Rules as set forth in Edison's Attachment B Proposed Tariff Revisions, attached as Appendix A to this decision.

2. The tariff sheets shall be filed within 90 days of the effective date of this order and shall become effective on the first day of the month which is 120 days after the date of this order, subject to Energy Division's determining that the tariff revisions are compliant with this order.

3. An applicant for a line or service extension shall be treated under the old rules if prior to the effective date of the new rules it had (1) completed written application for service in accordance with the utilities' rules, including those for application for service; (2) received a building permit or has a plan approved by the appropriate jurisdiction; and (3) if within one year from the effective date of the new rules it pays all monies due to the utility and is ready for service.

4. For special cases of customers who have signed agreements under the old rules but have proceeded, they shall have one year from the effective date of the new rules to complete steps 2 and 3.

5. Proposals to eliminate the competitive advantage of incumbent utilities with regard to new meter installations should be reviewed in Application 99-03-033 et al., the pending Direct Access Service Fees and Revenue Cycle Services Cost and Rate Proposals Proceeding.

6. This proceeding shall remain open to address other matters.

This order is effective today.

Dated December 16, 1999, at San Francisco, California.

APPENDIX A

SCE's PROPOSED TARIFF REVISIONS

NOTE: SEE FORMAL FILES FOR APPENDIX A

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