4. Scope and Issues

The purpose of this proceeding is to establish just and reasonable rates on an overall (total utility) revenue neutral basis using the Commission authorized 2006 revenue requirement. The three general subjects of this rate design window application are marginal costs, revenue allocation, and rate design. Based on SDG&E's statement of proposed issues³ in the application, Protests⁴ by Office of Ratepayer Advocates' (ORA), the Utility Consumers' Action Network (UCAN) and the Western Manufactured Housing Community Association (Manufactured Housing), plus the parties' statements at the prehearing conference, the 2006 issues can be reasonably identified as:

1) Adjust electric revenue allocations and rates toward cost-based levels addressing the asserted cross-subsidies included in non-residential customer classes' rates.

2) Account for DWR Above-Market Costs.

3) Allocation of Public Purpose Program Costs.

4) Application of Allocation Methodology.

5) Establish a Master Meter Discount where there is sub-metered service See D. 04-04-043, D. 04-11-033 and D. 95-02-090/D. 95-08-056.

6) Consider authorization of a new non-by-passable charge for costs associated with AB 1X - the proposed Total Rate Adjustment Component.

7) Analyze the Marginal costs of generation, distribution, and customer services.

8) Determine the allocation of Marginal costs of generation, distribution, and customer services and the imposition of a cap.

9) Consider changes to the residential service rates including: elimination of the distribution rate components in residential rates for usage above 130 percent of baseline, consolidation of residential tier 4 and tier 5 commodity rates; and changes to Schedule E-LI for CARE customers.

10) Consider the use of full equal-percentage of marginal cost for generation costs.

11) Consider changes to: small commercial customer charges; customer charge for Schedule PA; and Schedule S distribution charge.

12) Consider changes to summer/winter price differential for small commercial customers.

13) Consider closure and cancellation of Schedule AL-TOU-CP

14) Consider the cost allocation and rate design of the Day-Of Reliability Tariff (CPP-E) adopted in D. 05-04-053.

SDG&E suggests that the Public Purpose Program costs are more appropriately considered in either the Revenue Allocation Proceeding or the proceedings directly adopting Public Purpose Programs because "the appropriateness of who should be paying for these programs is very closely related with the nature of the activity that's being funded."⁵ We understand SDG&E's viewpoint, but we believe that these costs should be integral to the cost allocation and rate design we will adopt in this proceeding to accurately include the fullest array of costs imposed on ratepayers. We therefore include this issue.

Manufactured Housing proposes that we analyze the costs, benefits and feasibility for SDG&E to provide bill calculation services to mobile home park owners as a part of this proceeding. We agree with SDG&E⁶ that this issue has already been determined to be more appropriately considered in a general rate case proceeding. This is also consistent with the scope for rate design in Pacific Gas & Electric Company's PG&E) A.04-06-024.⁷ We therefore exclude this proposed issue.

The Commission required PG&E, Southern California Edison Company (SCE), and SDG&E to file applications in response to the December 8, 2004 Ruling by Assigned Commissioner Peevey and Administrative Law Judge (ALJ) Cooke in Rulemaking (R.) 02-06-001. That Ruling stated:

`We believe the time is now to consider adoption of a new default rate (or rates), tailored to customers with demand over 200 kW, that provides a critical peak price (CPP) signal distinct from the generic peak period. We direct PG&E, SCE, and SDG&E to file applications by January 20, 2005, for implementation by June 1, 2005, that propose new rate schedules for all customers over 200 kW that provide strong peak demand signals... The proposed tariffs should be designed to recover the total revenue, including transmission and distribution charges, currently allocated to customers 200 kW and larger and be class revenue neutral, compared to existing rates, based on current class load patterns." (Ruling pp. 2-3.)

In D.05-04-053⁸ the Commission determined it could not implement a program for the summer of 2005, so it directed SDG&E to develop a Critical Peak Pricing rate design proposal for 2006 that is in compliance with the decision in a second phase in A.05-01-017 that will address implementation of a 2006 Day-Ahead Critical Peak Pricing mechanism. D.05-04-053 did, however, adopt a Day-Of Reliability Tariff for 2005. ⁹ Like all other existing tariffs, rate schedule CPP-E is within the scope of this proceeding and is therefore included. We will exclude consideration of a Day-Ahead Critical Peak Pricing mechanism in this proceeding, deferring to A.05-01-017.

³ (See Rules 6.3.)

⁴ All three protests were timely filed on March 24, 2005, March 18, 2005, and March 23, 2005, respectively.

⁵ See Prehearing Conference transcript, p. 9, line 17, through p. 10, line 12., Quoted language, p. 9, lines 23-26.

⁶ SDG&E's April 4, 2005 Reply to Protests, citing D.04-11-033 at mimeo. p.31 and Ordering Paragraph 12 at mimeo. p.49.

⁷ ALJ Ruling dated March 10, 2005.

⁸ Adopted April 21, 2005.

⁹ D.05-04-053 adopts a new non-firm rate: "SDG&E, does not have a comparable non-firm rate to PG&E and SCE. For SDG&E we will adopt the Day-Of Reliability Tariff it proposed in this proceeding (CPP-E). This rate provides a high price critical peak price of $3.45/kWh for up to 6 hours a day, for a maximum of 80 hours per year over an entire year." (p. 61, CPUC01-#193687-v1-A0501016_etal_Cooke_Agenda_Dec_(1st_Rev_4_21_05). The published decision will control implementation.)