COM/MP1/jt2 Date of Issuance 9/7/2007
Decision 07-09-016 September 6, 2007
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Southern California Edison Company (U 338-E) for Approval of Economic Development Rates. |
Application 04-04-008 (Filed April 5, 2004) (Rehearing Granted May 25, 2006) |
Application of Pacific Gas and Electric Company to Modify the Experimental Economic Development Rate (Schedule ED). (U 39 E) |
Application 04-06-018 (Filed June 14, 2004) (Rehearing Granted May 25, 2006) |
Application of Southern California Gas Company (U 904 G) for Approval of Long-Term Gas Transportation Agreement with Guardian Industries Corp. |
Application 05-10-010 (Filed October 7, 2005) (Discount Issues) |
DECISION REJECTING DISCOUNTING PUBLIC PURPOSE PROGRAMS
TABLE OF CONTENTS
Title Page
DECISION REJECTING DISCOUNTING PUBLIC PURPOSE PROGRAMS 11
1.1. The Beginning of the California Alternate Rates for Energy (CARE)
and EDR Programs 33
2. Positions of the Parties 88
3.1. Applicability of § 740.4 1717
3.2. The Gas Public Purpose Program Surcharge 2020
3.3. D.06-05-042 Issues and Answers 2525
4. Comments on Alternate Proposed Decision 3333
5. Assignment of Proceeding 3434
DECISION REJECTING DISCOUNTING PUBLIC PURPOSE PROGRAMS
In Application (A.) 04-04-008, Southern California Edison Company (SCE) requested approval of its proposed economic development rate (EDR) tariffs. In A.04-06-018, Pacific Gas and Electric Company (PG&E) requested approval of its proposed electric EDR tariffs. On August 30, 2004, the Commission consolidated those two applications and the utilities subsequently submitted a joint EDR proposal (Joint Proposal). In Decision (D.) 05-09-018, the Commission approved the Joint Proposal, with modifications, for uniform EDR discount tariffs for SCE and PG&E. In D.06-05-042, the Commission granted limited rehearing to consider whether the floor price under the utilities' Joint Proposal should include public purpose program surcharges. The issue was: Could nonbypassable charges be discounted?
In D.06-04-002, in A.05-10-010, the Commission approved a long-term gas transportation agreement between Southern California Gas Company (SoCalGas) and Guardian Industries Corp. In that decision, one issue was whether gas public purpose program surcharges (G-PPPS) could be discounted to a ratepayer under Pub. Util. Code § 740.41 to prevent the ratepayer from relocating out of state or to encourage a prospective ratepayer to locate within the state. The decision noted the conflict between § 890, imposing a G-PPPS, and § 740.4(a), requiring an economic development program which permits rate discounts. The Commission ordered the application to remain open to consider whether the G-PPPS can be discounted.
By Administrative Law Judge's ruling on July 25, 2006, these three dockets were consolidated for decision.
The Division of Ratepayer Advocates (DRA), The Utility Reform Network (TURN), Aglet Consumer Alliance (Aglet), Consumer Federation of California (CFC), Utility Consumers' Action Network (UCAN), National Consumer Law Center (NCLC), the Greenlining Institute (Greenlining), Latino Issues Forum (LIF), Disability Rights Advocates, the California Citizens for Health Freedom, and the Environmental Center of San Luis Obispo (ECOSLO) (collectively the "Coalition to Protect Public Purpose Funding" or "Coalition") filed joint opening comments. Opening comments were filed by PG&E, the California Manufacturers and Technology Association (CMTA), the Merced and Modesto Irrigation Districts (the Irrigation Districts), SCE, and SoCalGas. All parties submitting opening comments submitted reply comments. In addition, the Alliance for Retail Energy Markets (AReM) submitted reply comments.
1. Background2
1.1. The Beginning of the California Alternate Rates for Energy (CARE) and EDR Programs
In 1988, the Legislature amended § 739 to require the Commission to institute a Low-Income Ratepayer Assistance (LIRA) program to provide financial assistance to the California utilities' low-income electric and gas customers to help them afford essential utility services. In D.89-09-044, 32 CPUC 2d 406,417, the Commission provided that the utilities recover LIRA costs through a surcharge on volumetric rates (e.g., on an equal cents per kilowatt hour (kWh) basis), because the statute required that program costs not be borne by a single ratepayer class. In 1989, the Legislature added § 2790, which required low-income energy efficiency (LIEE) assistance, as well.
In 1991, § 740.4 was added, which authorized the Commission to approve economic development programs by the California utilities to benefit certain industries or business entities within boundaries of economic enterprise zones or incentive areas. Pursuant to § 740.4(g), the Commission may authorize rate discounts for such industries or businesses. However, in order for the Commission to approve the EDR discounts, § 740.4(h) requires the utility to demonstrate that the ratepayers of the utility will derive a benefit from the economic development programs.
In 1993, the Legislature changed the name of the LIRA program to the CARE program and authorized the energy utilities to offer discounts to "eligible facilities" where low-income ratepayers might be located. (See D.94-12-049, 58 CPUC 2d 278, 279.) These CARE program requirements are set forth in §§ 739.1 and 739.2.
When the California utilities first implemented EDR programs, which gave certain large business customers rate discounts pursuant to § 740.4, the utilities did not discount the LIRA or CARE surcharge. (See, e.g., D.95-05-035, 59 CPUC 2d 717, 719, "Applicable federal, state, and local governmental agency fees or surcharges, including ... the low-income surcharge ..., are not subject to the rate discount.")
1.2. The Restructuring of the California Electric Market
In 1994, when the Commission began considering restructuring the electric industry in California into a more competitive market, it considered two alternative funding arrangements for the CARE program and other public benefit programs: using an end-user surcharge, which would subject all electricity consumers to the fee, or funding these types of programs through the state's general fund. (See D.94-12-029, 58 CPUC 2d at 287.) By the end of 1995, the Commission recognized that the CARE program, energy efficiency programs, and renewable energy programs would continue to be needed. However, subjecting the utilities to the costs of those programs in a more market-based electric services industry would not be a sustainable strategy if competitors did not bear those costs. (See D.95-12-063, 64 CPUC 2d 1, 69.) The Commission recommended a nonbypassable surcharge on all retail sales of electricity to fund those programs but deferred to the Legislature, since the programs had been created by statute. (See id., 64 CPUC 2d at 69.)
Shortly before the enactment of the electric restructuring legislation, the Commission continued its practice of not allowing the utilities' EDR programs to discount the CARE surcharges and other mandated surcharges. In D.96-08-025, 67 CPUC 2d 297, 307, the Commission approved, with modifications, SCE's new EDR options, which provided "five years of rate discounts ... applied to all charges on the customer's bill related to the eligible load, with the exception of mandated charges such as ... the California Alternative Rates for Energy (CARE) surcharge, and any future public goods surcharge."3
In 1996, the Legislature restructured the electric market, and, among other things, added §§ 381 and 382. Section 381(a) requires electrical corporations to charge customers a nonbypassable surcharge to fund certain PPPs described in § 381(b) (i.e., energy efficiency activities, research and development, and operation and development of renewable resource technologies) and § 382 (i.e., the CARE and LIEE programs). Section 367 provided the utilities an opportunity to recover their uneconomic costs (stranded costs) and certain other costs through a competition transition charge (CTC). In their cost recovery plans, the electric utilities were required to separately identify individual rate components, such as energy, transmission, distribution, public benefit programs, and recovery of stranded costs. (See Pub. Util. Code § 368(b).) This separation was required to ensure that customers purchasing power from suppliers other than the utilities (direct access customers, or DA customers) pay the "same unbundled component charges, other than energy, that a bundled service customer pays." (Pub. Util. Code § 368(b).) Section 368(b) further states, "No cost shifting among customer classes, rate schedules, contract or tariff options shall result from the separation required by this subdivision."
The Commission understood that under §§ 381 and 382, there was no discretion to discount the electric utilities' PPP surcharges. In D.97-09-047, 75 CPUC 2d 349, 353, the Commission stated, "Discounting of either the CTC or the public purpose program charge is precluded by AB 1890 which specifies that these charges are nonbypassable and must be recovered from all customers (§§ 371(a) and 381(a).)" (Emphasis added.)
In 2000, the Legislature enacted the Reliable Electric Service Investments Act, which added §§ 399-399.9. Section 399.8(c)(1) extended the electric PPP surcharges to 2012, and § 399.9 clarified that the surcharges for funding the CARE and LIEE programs, referenced in § 382, shall continue.
1.3. The Gas PPP Surcharges
During 1997, the Commission was considering a surcharge to fully fund the natural gas utilities' public purpose programs (PPPs). In D.97-06-108, 73 CPUC 2d 298, 300, we decided to pursue legislation "to require all end-use customers to pay a nonbypassable gas surcharge to fund PPPs, such as energy efficiency and low-income assistance programs."4
In 2000, the Legislature added § 890, et seq. which mandated: (1) an unbundled natural gas PPP surcharge on all natural gas consumed in California (§§ 890(a) and (b)); (2) that the Commission annually establish a surcharge rate for each class of customers of the natural gas utilities (§ 890(c)); and (3) that the Commission inform the State Board of Equalization of the surcharge rate so that it may collect the same surcharge rate from customers of interstate pipelines (§§ 890(e)(g)-(i)).5
1 All references to various statutes are to the Public Utilities Code unless otherwise noted.
2 We are indebted to the Coalition for its excellent review of the pertinent statutes, legislative history, Commission decisions, and chronology regarding discounting of public purpose programs.
3 The Commission found that a fair balance would be a 50-50 sharing between shareholders and ratepayers of net revenues from discounted sales. The Commission defined "net revenues" as revenues from increased sales, less all the costs of serving the increased sales customers, including "pass through costs." (See id., 67 CPUC 2d at 324.) These pass through costs included "the CARE surcharge, and any future public goods surcharges." (See id., 67 CPUC2d at 353, n.2.)
4 We recognized that the natural gas utilities' customers, who were wholesale customers or utility electric generation (UEG) companies, should be exempt from the nonbypassable gas surcharge to the extent that they had their own PPP surcharges charged to their customers. (See Id., 73 CPUC 2d at 303.)
5 There were also explicit exemptions from the natural gas PPP surcharge for certain specified customers (e.g., electric generators and municipalities, which have their own public purpose programs, and customers with grandfathered contractual arrangements). (See §§ 896 and 898).
