V. Assignment of Proceeding
Geoffrey F. Brown is the Assigned Commissioner and Thomas Pulsifer is the assigned Administrative Law Judge in this proceeding.
1. D.02-03-055 determined that as a condition of retaining the DA suspension date of September 21, 2001, bundled customer indifference should be preserved and no cost shifting from DA to bundled customer load should be allowed.
2. The Working Group formed pursuant to this proceeding did not reach consensus as to a single methodology to calculate the CRS undercollections as of December 31, 2005, but did reach a compromise consensus on the year-end 2005 CRS undercollection balance for each of the IOUs.
3. The consensus falls within a range of undercollection values calculated by the Working Group based both upon the existing market benchmark and a revised market benchmark using the MPR model as developed in R.04-04-026 and used in the ongoing CTC calculation in PG&E's 2006 ERRA proceeding. The resulting illustrative CRS accrual rates calculated for the 2003-2011 period based on the benchmark adopted in D.05-01-040 compared with Working Group recommendations are set forth herein in Appendix 5, Tables 1A-1C.
4. As support for its consensus on undercollection balances as of December 31, 2005, the Working Group presented calculations of undercollections for 2003-2011 under alternative benchmark assumptions as set forth in Appendix 5, Tables 2A and 2B.
5. As part of the Working Group process, parties reached consensus on a DA CRS undercollection for PG&E in the amount of $30 million as of December 31, 2005, and also reached consensus that PG&E's undercollection is $30 million for DWR bond charge recovery, applicable to DA load as of December 31, 2005.
6. Parties reached consensus on a DA CRS undercollection of $522 million for SCE as of year-end 2005. Parties also agreed on an undercollection of $55 million for SCE applicable to the DWR Bond Charge.
7. Parties agree that the DA CRS undercollection had already reached zero for SDG&E by December 31, 2005.
8. SDG&E filed Advice Letter 1726-E-A to set the DA CRS power charge component to zero, effective November 15, 2005.
9. Since its historical undercollection was paid off prior to the November 15, 2005, an overcollection exists that SDG&E will credit from bundled to DA Non-Exempt customers through a separate advice letter filing.
10. The Working Group identified several problems with the current CRS methodology in that it has proven cumbersome, administratively difficult and slow to provide predictions of the indifference charge. Parties are left without timely information concerning the level of CRS applicable to current consumption.
11. The Working Group participants agreed on the need for a revised simplified market benchmark methodology, on a prospective basis, based on futures prices. As a specific market proxy, parties agreed on an average of one-year strip power futures quotes for NP 15 and SP 15 as published in Megawatt Daily.
12. Working Group participants also recognized that because futures market prices may not adequately reflect all fixed RA/capacity costs, a cost adder should be incorporated into the benchmark for each IOU.
13. Although parties reached consensus on the level of the DA CRS undercollection for PG&E as of December 31, 2005, the parties were not able to agree on market price benchmarks for PG&E for 2004 or 2005.
14. Effective January 1, 2006, the implementation of the Phase 2 bundled rates in PG&E's 2003 GRC removed the undercollection loan element previously reflected in bundled customer rates.
15. For 2006, the market benchmarks developed by the Working Group result in the DA non-exempt customers' CRS obligations of $90.12/MWh ($95.52 at the meter) for PG&E and $95.17/MWh ($100.22 at the meter) for SCE. These benchmarks represent the 30-day average, over the period from November 15, 2005 to December 15, 2005, of 12 month forward prices for 2006 at NP 15 and SP15, respectively.
16. As the sales forecast for computing direct access non-exempt customers' 2006 CRS obligations, the Working Group agreed to use data from the IOUs' ERRA proceedings, as modified by the 2006 Annual Electric True-Up for PG&E.
17. The Annual Electric True-Up is an advice letter process in which PG&E consolidates revenue requirements authorized by the Commission during the year for a rate change effective January 1st of the following year.
18. Since March 2004, for PG&E, noncore bundled customers have contributed excess revenues to fund the CRS undercollection loan in the amount of $325 million, which payments benefited core bundled customers through lower power charges.
19. SCE's large bundled customers paid an estimated total of $701 million toward funding the CRS undercollection "loan" by end of year 2005. This amount exceeds the high point of the CRS undercollection balance, and large bundled customers have overpaid by $95 million.
20. SCE agrees to file an advice letter to reduce large bundled customer power charges, with DA undercollection repayment amounts to be credited to small and large bundled customers, respectively, in the same proportion as such loan amounts were paid.
21. The $95 million that the large bundled customers of SCE overpaid to fund the CRS undercollection loan relative to the maximum level of the DA CRS undercollection should be reimbursed by small bundled customers following the date on which the CRS undercollection balance reaches zero, over a reasonable amortization period.
22. In D.03-07-030, the 2.7¢/kWh CRS cap was continued subject to periodic review, to be readjusted, if necessary, to assure the DA CRS undercollections would be paid off no later than the expiration of the DWR power contracts.
23. Based on updated forecasts of CRS accruals and collections performed and reviewed by the Working Group, parties agree that the 2.7¢/kWh cap no longer applies to SDG&E, can be discontinued for PG&E effective September 1, 2006, and should continue in place for SCE until the CRS undercollection is eliminated, currently estimated to occur by year-end 2008.
24. The Working Group agrees that the adopted market price benchmark should be applied consistently across all relevant CRS components, including both ongoing CTC and DWR charges.
25. A negative PCIA can result where ongoing CTC is larger than the total indifference charge.
26. Because non-exempt DA customers in SCE service territory are subject to a much larger CRS undercollection than DA customers in the other territories, the parties agree that any negative indifference charge that may occur for SCE may offset any existing DA CRS undercollection.
27. The parties' agreement is reasonable that once the existing CRS undercollection is eliminated, the indifference charge for non-exempt DA customers should not be permitted to decrease below zero. However, any accumulated negative indifference amount shall continue to be tracked and applied to any future positive indifference amounts that may accrue in later years of the applicability of the DA CRS.
28. The parties' proposal to replace the DWR power charge with a PCIA is a reasonable way to preserve the indifference concept.
29. In D.03-07-028, and related decisions, the Commission prescribed requirements for the CRS obligations applicable to MDL customers, and authorized various exclusions for certain CRS elements.
30. Based the findings of the Report, no reported undercollections are applicable to MDL CRS obligations as of December 31, 2005 for PG&E or SDG&E.
31. Table Appendix C-1, as reproduced in the Appendix of this decision, sets forth illustrative MDL CRS accrual rates for the period 2004-2011, based on the benchmark adopted in D.05-01-040 (applied through 2005) and the Working Group's recommended benchmarks through 2011.
32. The application of a total portfolio indifference standard to MDL customers who do not pay a DWR power charge is inconsistent with the intent of D.03-07-028 to avoid cost shifting and also conflicts with the affirmation in D.05-12-045 that ongoing CTC is calculated on a "statutory" basis.
33. Calculating a separate credit for individual customer groups who depart to MDL status would be administratively complex and inconsistent with the manner in which DA customers are treated.
34. The proposals in the Report concerning the administration of CRS exemptions for transferred load among MDL customers, as summarized in Appendix 4 of this decision, are reasonable.
35. The proposals in the Report concerning the administration and conversion of the 80 MW cap for MDL exemptions are reasonable.
1. The consensus recommendations reached by parties concerning the level of CRS undercollections for each of the IOUs as of December 31, 2005 reasonably balance the divergent views of affected interests and should be adopted.
2. The parties' consensus recommendations concerning the adoption of revised procedures for deriving the market benchmark proxy for purposes of computing CRS indifference on a prospective basis are reasonable and should be adopted.
3. The parties' proposal is reasonable for purposes of deriving a sales forecast for CRS indifference calculations to utilize data from the IOUs' ERRA proceedings, as modified by the 2006 Annual Electric True-Up for PG&E. Any modifications to the ERRA sales forecast that PG&E may make in its annual electric true-up advice letter, however, must have been previously authorized by a Commission order.
4. A negative indifference charge may be used to offset any existing positive CRS undercollection until such time as the CRS undercollection is eliminated for each IOU, but a negative indifference charge should not result in a net payment to customers that have left utility service.
5. PG&E should file an advice letter to adjust its bundled customer power charges to reflect the overpayment of $325 million by noncore bundled customers to be amortized over a 30-month period.
6. SCE should file an advice letter to adjust its bundled customer power charges to reflect the overpayment of $95 million by noncore bundled customers.
7. SDG&E should file an advice letter to adjust its bundled customer power charges to reflect the applicable overpayment by noncore bundled customers.
8. Based on the payoff dates for the CRS undercollections, the 2.7¢/kWh CRS should be terminated immediately for SDG&E. The CRS undercollection reached zero for PG&E on June 30, 2006, and the 2.7¢/kWh CRS should be terminated as of August 31, 2006 for PG&E. For SCE, the 2.7¢/kWh CRS should continue until the CRS undercollection is paid off, currently estimated to occur before the end of 2008.
9. Effective September 1, 2006, for PG&E and consistent with the timing set forth in D.06-06-067 for SCE, the DWR power charge should be replaced with a PCIA, according to the terms proposed by the Working Group, as set forth in Ordering Paragraph 15.
10. On a prospective basis, the PCIA should be updated by each IOU through its annual ERRA filing process.
11. The Undercollection Charge (UC) for returning DA customers should be calculated on the same basis as applies for continuing DA customers, consistent with the provisions of D.03-05-034. The resulting UC is approximately 1.2¢ per kWh (i.e., 2.7¢ less 1.0¢ for the HPC, less 0.5¢ for the DWR bond charge) applied toward the CRS undercollection reduction for SCE during 2006. The UC will be prorated based on the number of months that such customers received DA service while the DA CRS undercollection was being accumulated.
12. The same market benchmark adopted for calculating the DA CRS obligations should also be used on a consistent basis for calculating MDL CRS obligations.
13. The methodology for calculating CRS for MDL customers exempt from the DWR power charge should not incorporate a total portfolio indifference standard.
14. The application of a total portfolio indifference standard to the CRS obligation of MDL customers exempt from a DWR power charge conflicts with the requirement that a ongoing CTC applies on a uniform statutory basis to all customers.
15. MDL customers should not receive separate credits against the CRS obligations for departure to MDL status prior to the full repayment of the DA CRS undercollection.
16. The indifference charge should remain nonnegative after the CRS undercollection is eliminated, and negative rates should not be used to offset other CRS components once past CRS undercollections have been paid off.
17. The proposals in the Report concerning the administration of CRS exemptions for transferred load among MDL customers, as summarized in Appendix 4 of this decision should be adopted.
18. The proposals in the Report concerning the conversion of the 80 MW cap into a MWh figure for MDL exemptions should be adopted.
IT IS ORDERED that:
1. Direct Access Cost Responsibility Undercollections as of December 31, 2005 for each of the following investor-owned utilities (IOUs) are hereby adopted as follows. For Pacific Gas & Electric (PG&E), the cost responsibility surcharge (CRS) undercollection is $30 million and the California Department of Water Resources (DWR) bond charge Undercollection is $30 million. For Southern California Edison (SCE), the CRS undercollection is $522 million and the DWR bond charge undercollection is $55 million. For San Diego Gas & Electric Company, the CRS undercollection is zero.
2. Effective for periods beginning on or after January 1, 2006, the CRS Indifference calculation shall be modified to incorporate the benchmark power determined as prescribed in Appendix 1. However, the utilities' already adopted ongoing CTC rates for 2006 are not intended to be modified as a result of this decision.
3. For 2006, the Resource Adequacy Generation Capacity (RA/capacity) cost adder will be $8/megawatt-hours (MWh) for SCE and $4/MWh for PG&E, which will be added to the average strip price.
4. The Energy Division is directed to coordinate a meeting of the Working Group within 30 calendar days from the effective date of this order to develop a record as to the level of the RA/capacity cost adders for years after 2006 as more information concerning the cost of generation capacity and/or resource adequacy becomes available.
5. For PG&E, the market benchmark for 2006 will be $90.12/MWh. For SCE, the new market benchmark for 2006 will be $95.17/MWh.
6. On an annual basis the revised benchmark power cost, as prescribed in Appendix 1, will be compared to the average cost of the utilities' total portfolio, including both utility retained generation (URG) power and allocated DWR power costs, to determine the level of the indifference charge for each year. The utilities shall file an advice letter prior to the end of each year or update their testimony in their Energy Resource Recovery Account (ERRA) proceedings to reflect the applicable CRS indifference charge for the subsequent year. The utilities shall produce the data required as set forth in Appendix 2 for calculating DWR charges.
7. The ongoing CTC figure adopted on an annual basis in PG&E's ERRA proceeding will be used in conjunction with the CRS indifference charge calculation such that the DWR power charge component of CRS for direct access (DA) customers not exempt from that charge will be the residual of the indifference charge less the ongoing CTC. The PCIA component of DA CRS may be a negative number in those instances in which ongoing competition transition charge (CTC) is larger than the indifference charge, so that overall indifference is maintained.
8. Once the DA CRS undercollection balance is fully paid off, the overall indifference charge shall not be permitted to be a negative number. Negative amounts will not be carried forward to a future year.
9. In the event the benchmark in a given year exceeds the level of a utility's total portfolio power cost for that year, and to the extent there remains a DA CRS undercollection balance for such utility, the negative indifference charge shall be reflected in calculating the accruals to the undercollection balance for such year. In no event shall such a negative indifference charge result in any net payment to customers who have left utility service. However, any accumulated negative indifference amount shall continue to be tracked, and applied to any future positive indifference amounts that may accrue in later years of the applicability of the DA CRS.
10. SCE shall track accruals to the CRS undercollection balance and shall file an advice letter in anticipation of such undercollection balance reaching zero to reduce the CRS to the level dictated by the remaining individual CRS elements.
11. Since PG&E's CRS undercollection is deemed to reach zero as of June 30, 2006, PG&E will not be required to track further the CRS undercollection balance thereafter.
12. On July 1, 2006, the DA CRS undercollection balance for PG&E DA customers will be deemed to be paid down to zero.
13. Effective within 30 days from the effective date of this decision, PG&E shall file an advice letter to remove the 2.7¢/kWh cap from its CRS tariff beginning September 1, 2006. The components of the CRS shall thereafter be calculated separately. The DWR bond charge, the Energy Cost Recovery Amount rate, and the ongoing CTC will not be changed on that date, however, nor will the basis for the calculation of the Franchise Fee Surcharge currently paid by DA customers. PG&E shall apply interest at the applicable 3-month commercial paper rate for the effects of CRS revenues received during July and August 2006.
14. For SCE, the 2.7¢/kWh cap shall remain in effect until the CRS undercollection is paid down to zero, currently estimated to occur by the end of 2008.
15. If the Commission decision in an IOU's general rate case or similar base revenue requirement proceeding changes the IOU's generation revenue requirement by more than 2% in mid year, the IOU shall promptly file an advice letter to update the DA CRS to reflect that change in generation base revenue requirement.
16. Within 30 days after the effective date of this order, each of the IOUs shall file an advice letter to revise the DWR power charge component, currently identified separately on direct access non-exempt customers' bills, to be renamed the Power Charge Indifference Adjustment (PCIA) charge. The tariff revisions to implement the PCIA shall be subject to the following provisions:
a. The PCIA charge shall preserve the indifference concept adopted in Decision (D.) 02-11-022 for those direct access customers who pay the DWR power charge component of DA CRS.
b. The PCIA charge shall recover an amount to reflect the franchise fees associated with the DWR revenues collected from direct access customers for the DWR bond charge and the DWR power charge.
c. The cost responsibility under the sum of the ongoing CTC and the PCIA charge for direct access customers who pay the DWR power charge component of DA CRS shall equal their responsibility under the indifference charge concept, plus for PG&E, an amount to reflect the franchise fees associated with the DWR revenues collected from direct access customers for the DWR bond charge and the DWR power charge. Once the CRS undercollection is paid, the overall indifference charge shall not be permitted to be a negative number. However, any accumulated negative indifference amount shall continue to be tracked and applied to any future positive indifference amounts that may accrue in later years of the applicability of the DA CRS.
d. The revenue requirement for the PCIA charge is the difference, positive or negative, between direct access non-exempt customers' share of the indifference amount and these customers' share of the ongoing CTC revenue requirement, plus for PG&E, the amount necessary to reflect the franchise fees associated with the DWR revenues collected from direct access customers for the DWR bond charge and the DWR power charge component of DA CRS. For PG&E, no amount for franchise fees associated with DWR revenues will be assessed on direct access customers who pay the DWR bond charge, but do not pay the DWR power charge component of the DA CRS.
e. If direct access non-exempt customers' share of the indifference amount exceeds these customers' share of the ongoing CTC revenue requirement, then the difference is these customers' DWR power cost obligation. The PCIA charge is positive, and has the effect of decreasing bundled customers' DWR remittance rate, and therefore, for PG&E only, of decreasing bundled customers' Power Charge Collection Balancing Account rate.
f. If direct access non-exempt customers' share of the indifference amount is less than these customers' share of the ongoing CTC revenue requirement, then these customers' DWR power cost obligation is zero. The PCIA charge is negative, and has the effect of increasing bundled customers' ERRA costs (for PG&E) or URG rates (for SCE). The PCIA charge (including DWR franchise fees) will be set in proportion to the ongoing CTC.
g. The 2006 DWR revenue requirement for the determination of the indifference amount shall be the amount adopted in the 2006 DWR revenue requirement decision, D.05-12-010. The 2006 revenue requirement for old world resources is the amount adopted in the utilities' 2006 ERRA proceedings and/or in the most recent general base revenue requirement proceeding. The sales forecast used to determine the direct access non-exempt customers' share of these costs will be the sales forecast presented in the utilities' 2006 ERRA proceedings, as modified in the 2006 Annual Electric Tue-Up for PG&E. If the 2006 DWR revenue requirement or utilities' 2006 ERRA/Ongoing CTC revenue requirement is modified, then the calculations described above shall be modified to reflect such changes.
h. The market benchmark used to determine the direct access non-exempt customers' share of PCIA costs is $90.12/MWh ($95.52 at the meter) for PG&E and $95.17/MWh ($100.22 at the meter) for SCE in 2006. These benchmarks represent the 30-day average, over the period from November 15, 2005 to December 15, 2005, of 12 month forward prices for 2006 at North Path 15 and South Path 15, respectively, to which is added a "resource adequacy" amount of $4/MWh for PG&E and $8/MWh for SCE. The average PCIA charge for 2006 for PG&E is negative 0.306¢ per kilowatt per hour (kWh) and for SCE is negative 1.805¢ per kWh. This negative 1.805¢ may be affected by the treatment of administrative costs in Edison's Test-Year 2006 general rate case.
17. In its advice letter filing in compliance with this decision, PG&E shall adjust bundled customer power charges to reflect the overpayment of the CRS loan by noncore bundled customers in the amount of $325 million, to be recovered from core bundled service customers and credited against noncore bundled customers rates over a 30-month period as directed in the following ordering paragraph. The corresponding annualized increase to core bundled customers is $130 million with an equivalent decrease to noncore bundled customer by the same amount.
18. Effective September 1, 2006, January 1, 2007, January 1, 2008, and January 1, 2009, respectively, adjustments shall be made to the allocation among customer groups by increasing or decreasing energy related (i.e., per kWh) generation rate components by an equal cents per kWh. In the residential class, consistent with current practice, the increase will be allocated by proportional increases to the Tier 3, Tier 4, and Tier 5 surcharges such that the revenue allocated to the residential class is fully collected from the residential class. On March 1, 2009, this differential adjustment to core and noncore bundled rates shall be discontinued.
19. The Municipal Departing Load (MDL) CRS obligation shall be determined on a prospective basis in a manner consistent with the findings and directives in this decision, as set forth in the findings of fact and conclusions of law above.
20. The protocols for administering MDL CRS transferred load exemptions as set forth in Appendix 4 are hereby adopted.
21. The Commission's Energy Division shall convene a subsequent meeting of the Working Group within 30 days of the effective date of decision for the purpose of seeking consensus on the calculation of the Market Benchmark for 2007 consistent with the principles of this order, and also to finalize the calculation of MDL CRS accrual charges and obligations consistent with this order, and to develop protocols for new load CRS exemptions.
22. Any prospective CRS issues concerning DA obligations shall be addressed in each IOU's respective ERRA proceeding or by advice letter, as appropriate.
23. Rulemaking 02-01-011 is closed.
This order is effective today.
Dated July 20, 2006, at San Francisco, California.
MICHAEL R. PEEVEY
President
GEOFFREY F. BROWN
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
Commissioners
D0607030 Attach 1-5 to R0201011
