Comments on Draft Decision

Public Utilities Code Section 311(g)(1) generally requires that the Commission's draft decision be served on all parties, and subject to at least 30 days of public review and comment prior to a vote of the Commission. The time for filing comments to the draft decision was shortened pursuant to Rule 77.7(f). SCE and DWR submitted comments to the draft decision. We have considered those comments and have made the changes we deem appropriate to the decision.

Findings of Fact

1. On June 25, 2001, SCE filed an application requesting that the Commission approve the servicing agreement that was entered into between DWR and SCE.

2. The servicing agreement provides a detailed methodology for the remittance of revenues to DWR, and revises and expands upon the methods set forth in D.01-03-081 and D.01-05-064.

3. The servicing agreement establishes various fees and charges that DWR shall pay to SCE to cover the utility's incremental costs of establishing necessary procedures, systems and mechanisms, and performing its services.

4. The servicing agreement enables the Commission to adjust SCE's rate to avoid double recovery of any costs paid by DWR which have already been included in SCE's rate.

5. The servicing agreement establishes data and communication procedures between DWR and PG&E concerning customer usage, utility-retained generation, and energy trade schedules.

6. DWR is selling electricity to customers in SCE's service territory because SCE is unable to supply the entire load for its service territory.

7. In order for DWR to perform its purchasing function, mechanisms must be in place to ensure that DWR's electricity is transmitted and distributed to these customers.

8. The remittance methodology in the servicing agreement establishes that SCE is acting as DWR's collection agent.

9. A separate line item for DWR charges is likely to cause customer confusion.

10. Water Code §80106 only authorizes DWR to contract with the utility or its successor for billing services.

11. Separate billing by DWR is not cost effective.

12. The Commission has the authority and the tools necessary to ensure compliance by the utilities with the servicing agreement provisions.

13. The rate agreement decision requires the Commission to ensure that SCE complies with this order.

14. To protect against double recovery of utility costs, Aglet proposes that DWR reimburse SCE for the embedded costs of certain services rather than incremental costs.

15. Aglet states that the determination of incremental costs is often disputed, subject to manipulation, and that the incremental cost calculation is not specified in the proposed servicing agreement.

16. Separating embedded costs between DWR and SCE would be time-consuming and laborious, and would result in cost accounting benefits that are negligible.

17. The embedded costs of certain services remain the same whether SCE provides that service to DWR or not.

18. Aglet acknowledges that the assignment of embedded costs to either the DWR charges or SCE's rate might not change the overall rates for bundled service.

19. TURN believes that the capital start up costs in Attachment G of the servicing agreement should be treated as CIAC or afforded similar ratemaking treatment.

20. The Commission should avoid any inference that the approval of the servicing agreement constitutes an approval of all, or even a part, of the MOU.

21. NewPower contends that it is unclear whether a utility default is required before DWR can use a non-utility revenue cycle service provider.

22. DWR can only switch to a non-utility revenue cycle service provider if SCE defaults on the servicing agreement.

23. DWR is providing electricity to all retail end-use customers in SCE's service territory, while ESPs provide electricity to only a limited number of customers.

24. The fees paid by DWR to SCE are based on lump sum costs provided for in the servicing agreement, while the rates paid by ESPs to SCE are based on the methodology adopted in D.98-09-070.

25. Existing law only refers to electrical corporations or their successors as the providers of billing, collection and other revenue cycle services for DWR.

26. DWR's role in providing electricity should cause the least possible increase in the total cost that electric end-use customers pay for billing and related services.

27. The public interest in approving the servicing agreement between SCE and DWR in time to facilitate the bond issuance clearly outweighs the public interest in having a full 30-day comment period.

Conclusions of Law

1. The Commission has the jurisdiction to resolve disputes between SCE and DWR concerning the reasonableness of costs charged to DWR.

2. SCE shall provide the Commission with the data it supplies to DWR concerning customer usage, utility-retained generation, and electric trade schedules.

3. The servicing agreement's requirement of a separate line item for DWR charges should be eliminated.

4. The provisions concerning dual billing should be deleted from the servicing agreement because it is too costly and unnecessary given the Commission's broad enforcement powers over regulated utilities.

5. Section 1 of Attachment E of the servicing agreement should be revised to reflect that the approval of the servicing agreement is not an endorsement of the MOU.

6. The Commission should establish a subsequent procedure to review the reasonableness of the incremental costs that SCE charges DWR.

7. Concerns about double recovery can be addressed in SCE's next General Rate Case.

8. Capital start up costs should be treated as CIAC or afforded similar ratemaking treatment.

9. Section 1 of Attachment E to the servicing agreement should make clear that the Commission's approval of the servicing agreement does not prejudge, endorse, or approve any component of the MOU.

10. NewPower's recommendation to direct the utilities to provide revenue cycle services to DWR at a higher level than the incremental cost provided in the servicing agreement should not be adopted.

11. The servicing agreement between DWR and SCE is approved, subject to the revisions described in this decision.

12. The servicing agreement between DWR and SCE is necessary to enable the issuance of the bonds as authorized in Water Code § 80130.

13. This decision construes, applies, implements, and interprets the provisions of AB1X.

ORDER

IT IS ORDERED that:

1. The servicing agreement that was executed between the California Department of Water Resources (DWR) and Southern California Edison Company (SCE), attached as Appendix A to this decision, is approved, with the revisions contained in Ordering Paragraphs 3, 4 and 5.

2. The $1.8 million in capital start up costs for SCE shall be treated as contributions in aid of construction or afforded similar ratemaking treatment.

3. The "Dual Billing Service" references in the servicing agreement shall be revised as follows:

a. Section 1.9 shall be revised to read as follows: "Billing Services - means Consolidated Utility Billing Service."

b. Sections 1.26, 1.27, and 3.2 shall be deleted.

c. The last sentence in Section 3.4, beginning with the words "Upon any election...," shall be deleted.

d. Subdivision (a) of Section 5.3 shall be revised to delete sub-section (ii), and sub-section (iii) shall be renumbered as sub-section (ii).

e. Subdivision (b) of Section 5.3 shall be deleted.

4. Subdivision (a) of Section 2.2 of Service Attachment 1 shall be replaced in its entirety with the following: "DWR charges shall appear on all Consolidated Utility Bills in the manner and at the time required by Applicable Law and Applicable Tariffs."

5. Attachment E of the Servicing Agreement shall be revised to add the following language to the end of Section 1:

"In the event the MOU is not approved as required by its own terms, the reference to the MOU in this Attachment E provides no independent basis for enforcement of the MOU."

6. SCE shall provide to the Director of the Energy Division all information transmitted to and received from DWR pertaining to utility-retained generation, and all information transmitted to and received from DWR pursuant to the Servicing Agreement pertaining to customer usage information and electric trade schedules.

a. This information shall be transmitted on a weekly basis, or on a more frequent basis if directed by the Director of the Energy Division.

7. SCE shall provide upon request by DWR, such additional information as may be reasonably necessary for DWR, at any point in time, to determine on a customer-by-customer basis the amount of DWR charges that have been billed to, or that have accrued with respect to, retail end use customers in the utility's service area.

a. SCE shall also maintain internal accounting records which identify, on a daily basis, the amounts to be remitted to DWR from each customer.

8. Within 20 days of the date of this decision, SCE shall file and serve in this docket, a motion seeking approval of the basis on which the incremental costs contained in the servicing agreement and charged to DWR were calculated.

a. DWR shall provide a written response as to whether it is DWR's view that SCE's incremental costs are reasonable.

This order is effective today.

Dated September 6, 2001, at San Francisco, California.

LORETTA M. LYNCH

President

CARL W. WOOD

GEOFFREY F. BROWN

Commissioners

I dissent.

HENRY M. DUQUE

Commissioner

I dissent.