IV. Comments on Proposed Decision

The proposed decision of the ALJ in this matter was mailed to the parties in accordance with Pub. Util. Code § 311 and Rule 14.2(a) of the Commission's Rules of Practice and Procedure. Comments were filed on April 19, 2007, and reply comments were filed on April 24, 2007. We have reviewed the comments in finalizing this order.

In its comments on the Proposed Decision, PG&E repeats its argument that the 2.7 cents/kWh surcharge in effect through June 30, 2006 was not intended to be "subject to retrospective adjustment later," and that it would be "illogical and unreasonable" to do so. PG&E characterizes the Proposed Decision as requiring such "retrospective adjustment."

PG&E's arguments ignore the conceptual framework within which the 2.7 cents/kWh CRS applied, as explained in the Proposed Decision. PG&E fails to reconcile its opposition with the principle that non-bundled customers' cost responsibility obligations are predicated on bundled customer indifference. This goals is ultimately achieved when under/overcollections in CRS obligations are balanced to zero. Contrary to PG&E's claims, the Proposed Decision is consistent with past decisions in requiring an accurate accounting of CRS obligations.

PG&E argues that the Proposed Decision will result in treating non-bundled customers in an inconsistent manner with respect to the applicable DWR power charges during the period up through June 30, 2006. We disagree. PG&E's argument is based on a faulty premise as to what constitutes consistency in determining CRS obligations. Non-bundled customers are treated consistently only when they pay their fair share of costs and bundled customer indifference is achieved.

The CRS obligation for any non-bundled customer category is a function of two variables: (1) the magnitude of the per-kWh surcharge and (2) the duration of the collection of that surcharge. The Commission adopted the Working Group recommendation to terminate the 2.7 cents/kWh CRS as of June 30, 2006 based on the consensus that CRS undercollections had reached zero as of that date, as applicable to direct access load. The Working Group did not reach consensus, however, concerning the point in time when CRS obligations applicable to other categories of non-bundled customers reach a zero-point undercollection. Therefore, there is no basis to assume that the CRS undercollection necessarily reached zero as of June 30, 2006 applicable to other non-bundled customers subject to DWR power charges. To achieve consistency among non-bundled customers, a further process is required to adjust the surcharges applicable to periods subsequent to June 30, 2006, and the duration of such surcharges to reach a zero-point under/overcollection. Contrary to PG&E's argument, the Proposed Decision promotes consistency by providing a process for under-or-overcollections of CRS obligations for non-bundled customer groups to be brought to zero.

PG&E disputes the statement in the Proposed Decision that PG&E "could significantly overcollect CRS funds" unless it complies with the directive to meet and confer to determine the appropriate adjustments to balance out any under-or-overcollections. PG&E disputes the possibility of overcollections based on the claim that "DWR maintains specific balancing accounts so that the amount collected from each utility, across time, is the required amount, neither more nor less." DWR's balancing accounts, however, do not prevent cost shifting between categories of customers. Thus, PG&E could still overcollect funds applicable to a particular category of customer even though DWR's balancing accounts may have no overcollections.

PG&E also argues there is no overcollection for any non-bundled customers relative to other non-bundled customers as long as the 2.7 cents/kWh CRS applies to all non-bundled customers up through June 30, 2006, with no subsequent adjustment. In making this claim, PG&E again fails to acknowledge that the 2.7 cents/kWh was a mere placeholder, not based upon any calculation of actual cost obligations required to achieve total portfolio indifference for non-bundled customers.

PG&E also disagrees with the Proposed Decision disposition relating to future tracking of negative indifference amounts. PG&E argues that the Proposed Decision, in finding that negative indifference amounts should be tracked, is inconsistent with the Working Group recommendation. Even assuming that the intent of the Working Group parties was to eliminate tracking of negative indifference on a prospective basis, the intent of the Working Group is not the proper basis to resolve the issue. The Commission must comply with statutory directives and prior Commission orders to avoid cost shifting with respect to the allocation of indifference charges. By eliminating any requirement to track negative indifference amounts prospectively, the effects of potential cost shifting could not be identified or prevented. To the extent that the Working Group intended to eliminate any requirement to avoid cost shifting, such an intent would be contrary to statutory requirements and thus unenforceable. Accordingly, to the extent that the Working Group intended such a result, we explicitly reject that aspect of their proposal.

PG&E argues that tracking and offsetting negative indifference amounts prospectively "makes no sense." PG&E characterizes the accounting for such offsetting effects as "artificially induced." PG&E seems to imply that it is "artificial" to recognize multi-year cumulative effects in measuring or ascertaining indifference, and that the calculation of indifference should apply only when the amounts are positive while ignoring offsetting negative effects from previous periods. While making such characterizations, PG&E offers no logical basis to conclude that the symmetrical accounting for offsetting positive and negative amounts is "artificial."

With respect to the principles, protocols, and calculation metrics for determining indifference up until CRS undercollections reach zero, PG&E acknowledges that it was proper to net positive and negative indifference amounts, recognizing multi-year cumulative effects. PG&E provides no convincing rationale as to why such an approach was reasonable while undercollections existed, but "makes no sense" on a prospective basis. The requirement for bundled customer indifference was not eliminated once the CRS undercollections reached zero. While D.06-07-030 changed the mechanics by which the indifference amount is calculated, that change did not eliminate the principle that the indifference is measured on a cumulative basis. As such, the only accurate measure of the indifference amount is one which tracks both positive and negative indifference amounts. If only positive amounts were recognized while negative amounts were ignored, the resulting calculation would be inconsistent and would not achieve indifference.