4. Payments Under the J-Power and Wellhead Agreements Treatment in SDG&E's ERRA
4.1 Recovery of Purchased Power Costs
The fundamental question that we must decide regarding the recovery of purchased power costs is whether to include these costs in SDG&E's ERRA, which provides recovery from bundled customers, or from all benefiting customers.
The purpose of the IOU ERRA accounts is to provide full recovery of the IOU's energy procurement costs associated with fuel and purchased power, utility retained generation, CAISO-related costs, and costs associated with residual net short procurement requirements to serve the IOU's bundled customers.25 SDG&E records in its ERRA revenues from its Electric Energy Commodity Cost rate schedule adjusted to exclude California Department of Water Resources purchases and commodity revenues assigned to the Non-Fuel Generating Balancing Account (NGBA).26
SDG&E has demonstrated through its testimony that the projects are being proposed for the benefit of meeting bundled customer demand, and not for providing capacity for other customers.27 Therefore it is appropriate for SDG&E to recover its purchased power costs through the ERRA.
4.2 Treatment of Lease Revenues
SDG&E will receive lease payment revenues from J-Power and Wellhead. The treatment of these revenues was one of the sources of discussion between SDG&E and DRA.28 In order to clarify this treatment, SDG&E filed Exhibit 5, which amended the testimony of Exhibit 4. The amended language reads that:
"SDG&E proposes to record revenues associated with lease payments to the Transition Cost Balancing Account (TCBA) equal to the revenue requirement costs associated with the land values recorded in rate base. The balance in the TCBA is amortized in the Competition Transition Charge (CTC) rate component, which is applicable to both bundled and DA customers. Any revenues associated with lease payments that exceed the revenue requirement associated with the land values in rate base will be recorded to the ERRA account."29
We agree that this is a prudent treatment of these revenues, which will allow any excess payments to offset the costs of bundled customers, while preserving the treatment of the payments below the revenue requirement in the TCBA, which will benefit both bundled and direct access customers.
25 See D.02-10-062 and D.02-12-074.
26 The NGBA became effective in January 1, 2004 to comply with D.03-12-063. See Exhibit 4, p.3, fn. 1.
27 See Exhibit 3, pp. 3 and 6, and Exhibit 4, p. 3.
28 Joint PHC Statement, p. 7.
29 Exhibit 5, replacing page 4 of Exhibit 4.
