COM/MP1/avs Date of Issuance 2/29/2008

Decision 08-02-033 February 28, 2008

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Rulemaking Regarding Whether, or Subject to What Conditions, the Suspension of Direct Access May Be Lifted Consistent with Assembly Bill 1X and Decision 01-09-060.

Rulemaking 07-05-025
(Filed May 24, 2007)

OPINION REGARDING COMMISSION AUTHORITY
TO LIFT THE DIRECT ACCESS SUSPENSION

TABLE OF CONTENTS

Title Page

OPINION REGARDING COMMISSION AUTHORITY TO LIFT THE DIRECT ACCESS SUSPENSION 2 2

1. Introduction 2 2

2. Background 3 3

3. Legal Basis for Commission Authority to Reinstitute Direct Access 6 6

3.1. Analytical Framework for Reviewing Legal Basis for Suspension Under Water Code § 80110 6 6

3.1.1. Relevant Provisions of AB1X 6 6

3.1.2. Parties' Position 7 7

3.1.3. Discussion 8 8

3.2. Interpretation of the Term: "No Longer Supplies Power"
Under AB1X1. Parties' Positions 12 12

3.2.1. Discussion 16 16

3.2.2. Can Direct Access Suspension Be Lifted
in Stages as Individual DWR Contracts Expire? 22 22

3.3. Parties' Positions 22 22

3.3.1. Discussion 25 25

4. Next Steps: Proceeding to Phase II of this Rulemaking 26 26

5. Comments on Proposed Decision 35 35

6. Assignment of Proceeding 35 35

Findings of Fact 35 35

Conclusions of Law 37 37

ORDER 39 39

OPINION REGARDING COMMISSION AUTHORITY
TO LIFT THE DIRECT ACCESS SUSPENSION

1. Introduction

Pursuant to Phase I of this rulemaking, we herein determine if the Commission has discretionary authority under applicable statutes to lift the suspension of direct access for retail electric service. The option for retail customers to purchase electricity on a direct access basis is currently suspended.

As explained below, we conclude that under the applicable statutory provisions, the Commission does not have authority to lift the suspension at present. Nonetheless, we remain committed to exploring proactive alternatives whereby the legal conditions allowing for the lifting of the suspension could be satisfied.¹

We disagree with parties that argue that this proceeding should not proceed forward. This proceeding shall move to Phase II to consider permissible steps to satisfy the statutory requirements for the Commission to lift the suspension of direct access. This rulemaking shall therefore proceed to Phase II as a forum for considering the appropriate conditions and market framework within which any renewed direct access program may ultimately be implemented.

As announced in opening this proceeding, we shall ensure that any program designed to reinstitute retail competition be guided by sound legal principles, carefully safeguarding relevant public policy interests. We will conduct this rulemaking in a sequential, careful, and balanced manner, taking into account any lessons to be learned from previous efforts to bring competition to electric retail markets.

¹ While we shall explore alternative means to remove any legal constraints on the Commission's authority to lift the suspension, we make no prejudgment in this decision concerning the substantive merits of how any reinstituted direct access market should function consistent with the public interest. Those issues will be addressed in Phase II.