2. Background

In A.00-10-045, SDG&E seeks approval of several proposed measures related to AB 265. These include converting the 6.5 cents per kWh ceiling for AB 265 customers to a frozen rate, establishing guidelines for SDG&E's energy procurement, and related matters. In A.01-01-044, SDG&E requests authority to assess a "Revenue Shortfall Surcharge" (RSS) of 2.3 cents per kWh on electric bills of its residential, small commercial, and street lighting customers in order to amortize balancing account undercollections that resulted from the energy rate ceiling. The applications were consolidated at the prehearing conference (PHC) held in San Diego on February 16, 2001. An Assigned Commissioner's Ruling (ACR) issued on April 30, 2001 scheduled hearings on the RSS and other issues. This decision does not address those issues.⁶

The April 30 ACR determined that this proceeding will consider rate stabilization measures, including consideration of possible rate increases, tiered rates, and other rate adjustments for large customers pursuant to ABX1 43. The ACR established an expedited procedural schedule leading to a Commission decision on June 28, 2001 and implementation of possible rate adjustments for large customers effective July 1, 2001. The April 30 ACR directed SDG&E to provide notice to its large electric customers of possible rate increases, tiered rate design, and other actions to implement ABX1 43. SDG&E was also directed to provide affected customers with notice of public participation hearings on large customer issues that were set by the ACR.

By D.01-05-060 dated May 14, 2001, the Commission implemented a portion of ABX1 43 by adopting an "initial frozen rate" of 6.5 cents per kWh for the energy component of bills for electricity supplied by SDG&E to its large customers. Pursuant to § 332.1(f), the initial frozen rate was made effective retroactive to February 7, 2001. D.01-05-060 also authorized SDG&E to establish a memorandum account to record any revenue shortfalls associated with the establishment of the initial frozen rate.

At the PHC held on May 10, 2001, SDG&E proposed expanding the expedited large customer phase in response to the May 2, 2001 determination by DWR of a revenue requirement applicable to SDG&E's customers. Specifically, SDG&E proposed that the hearings and decision on large customer issues be expanded to include possible rate increases and related rate design for small customers with respect to the DWR revenue requirement. There were no objections, and the Administrative Law Judge (ALJ) approved this expansion of the issues to be considered on an expedited basis. A ruling issued on May 25, 2001 set public participation hearings to take comment on the rate increases resulting from implementing DWR's revenue requirement for small customers and on proposals to establish new rate structures for small customers. The May 25 ruling directed SDG&E to provide notice to small customers that such rate changes were being considered by the Commission, as well as notice of the public participation hearings.

Evidentiary hearings were held in San Diego on May 22, 23, and 29, 2001, and in San Francisco on June 1 and 4, 2001. Briefs were filed by SDG&E, the Office of Ratepayer Advocates (ORA), the Department of the Navy on behalf of itself and all Federal Executive Agencies (collectively, FEA), Aglet Consumer Alliance (Aglet), the California Farm Bureau Federation (CFBF), the Alliance for Retail Energy Markets (AReM), and Enron Energy Services, Inc. (Enron). The same parties filed reply briefs. The record was reopened to take evidence pertaining to updated revenue requirement determinations which were communicated to the Commission by DWR on July 23 and August 7, 2001.