9. Comments
The proposed decision of ALJ Sullivan was mailed to the parties in accordance with § 311(d) of the Pub. Util. Code and Rule 77.1 of the Rules of Practice and Procedure. Opening comments were filed on October 15, 2002 by TURN, ORA, SCE, SDG&E, California Industrial Users (CIU), PG&E and CLECA. DWR provided a clarifying memo that responded to questions raised in the proposed decision.
ORA, SCE, SDG&E, PG&E, CIU, California Manufacturers and Technology Association (CMTA) filed reply comments on October 21, 2002.
A. Summary of Comments and Replies
ORA and TURN expressed support for the resolutions reached in this decision.
SCE argues that the Commission should not exclude residential usage up to 130% of baseline, medical baseline, and CARE customers from the bond charge, noting that it can apply the bond charge in a way that satisfies the requirements of Section 80110 of the Water Code. Further, SCE states that a "mismatch exists" between the allocation of "Net Borrowed Proceeds" and "the design of the Bond Charge in this proceeding."55 SCE requests that the Commission order correction of this mismatch in the true-up phase of the 2003 DWR revenue requirement. In addition, SCE states that it "should not be required to implement the Bond Charge by November 15, 2002."56 SCE states "the earliest time that SCE can implement the Bond Charge is December 23, 2002."57 Moreover, SCE claims that it is not necessary to implement the bond charges by November 15 to ensure that funds will flow beginning with the first of the year.
PG&E argues that there are three errors in the PD. First, PG&E objects to the identification and acceptance into the evidentiary record of Supplemental Testimony from DWR after the submission of the proceeding. Second, PG&E objects to certain statements contained in DWR's Preliminary Official Statement for the Bonds, and asks the Commission to order DWR not to use bond charges and related reserves for certain purposes.58 Lastly, PG&E argues that the PD should not exclude residential consumption below 130 percent of baseline from the calculation of the bond charge.
SDG&E similarly argues that the exclusion of consumption below of 130% of baseline, CARE, and medical baseline electricity use from the bond charge is wrong as a matter of equity, as a continuation of prior policy and as an interpretation of the statute. Further, SDG&E argues that it "cannot and should not implement the bond charge without commensurate rate relief."59 SDG&E also argues that the PD has not adequately addressed SDG&E's rate levelization proposal, and that it is inappropriate to use the comment process to explain anomalies in the Supplemental Testimony of DWR.
CLECA and CIU join SCE, SDG&E and PG&E in requesting that the Bond Charge apply to all bundled consumption, but add little to the arguments recited above.
The reply comments sound many themes, but for the sake of brevity we selectively summarize these filings. SCE argues that SDG&E's levelization proposal may fail to meet DWR's financing needs. ORA argues that the exclusions from the bond charge proposed herein are consistent with the legislative intent of AB1X. PG&E characterizes SCE's proposal to change the interutility allocation of revenue requirement, proposed in its opening comments, as a "bait-and-switch" tactic that the Commission should not reward. CMTA's reply comments support the opening comments of CIU. CIU opposes the arguments of TURN and ORA, and supports the voltage adjustments to bond charges. SDG&E reasserts the major themes of its opening comments in response to the opening comments of others.
B. Discussion of Comments
The objections of SCE, SDG&E, PG&E, CIU, and CLECA to the exclusion from the bond charge of residential consumption below 130% of baseline, CARE and medical baseline usage are not persuasive. Moreover, they do not identify errors of fact or law. Nevertheless, a few clarifying comments are in order. First, although consumers and consumption in the categories excluded from the bond charge did benefit from DWR's purchases, the fact that they benefited does not require that they pay the bond charge. As ORA (and previous Commission decisions) noted, many people migrating into California will pay the bond charge even though they received no benefit. Moreover, those leaving California who benefited from DWR's purchases will not pay for these bonds. Thus, the exclusion of these consumers and consumption from the bond charge is a matter of policy. Moreover, the policy adopted here is identical to that adopted in past Commission decisions, and clearly reasonable.
Second, this decision does not claim that statutes require the exclusion of this consumption and these consumers from the bond charge (as alleged by SDG&E). The decision simply finds that such an exemption is consistent with the legislative intent of Water Code § 80110, and clearly complies with its provisions. Furthermore, SDG&E's fails to explain how we would impose a bond charge on all bundled consumption without raising charges for customers protected by the provisions of Water Code § 80110. This failure to make a proposal that complies with the plain reading of the statute makes it imprudent for the Commission to choose a policy that applies the bond charge to all bundled consumption.
PG&E's and SDG&E's objection to the reception into evidence of DWR's "Supplemental Testimony" raises valid points. Indeed, even though we proposed to adopt it as Evidentiary Exhibit 1-a, our concern over DWR's provision of this material following the submission of the proceeding led us to assign no probative value to the information it contained. To reinforce this point, we have revised this decision to identify this late submission as Reference Exhibit 1-a. In addition, we note that DWR has filed this material in its own administrative proceeding to adopt its revenue requirement, and that is the appropriate forum for determining the probative value of this material.60 We will, however, continue to use the numbers supplied as illustrative of the range of potential bond charges. In light of the limited purpose for which we use Reference Exhibit 1-a, there was no legal error in limiting review of it to the comments and reply comments on the proposed decision.
PG&E's criticism of DWR's Preliminary Official Statement for the Bonds and its request that the Commission order DWR not to spend bond charges or reserves for certain purposes is outside the scope of this decision. The purpose of the decision is to establish a methodology for setting bond charges.
SDG&E's argument that the Commission must immediately increase SDG&E's rates is unpersuasive. SDG&E has not made any showing on this record as to how much its rates might need to be increased to accommodate the bond charge. Thus, there is no record that would permit the adoption of an increase for SDG&E at this time. Moreover, although SDG&E argues that its rates should be increased now, it acknowledges that the amount by which its rates will need to be increased depends upon the DWR Revenue Requirement proceeding. In light of this, we have adopted the only practical course - a balancing account for now, with charges to be determined in the Revenue Requirement Proceeding. We note that the balancing account adopted in this proceeding ensures that SDG&E will collect its own authorized costs, although recovery may be delayed (this delay is allowed under the Rate Agreement Decision and not prohibited by the Servicing Agreement). Thus, the balancing account and the Revenue Requirement Phase of this proceeding will allow SDG&E to seek a rate change, to the extent necessary, to permit recovery of its own authorized costs independent of these increased remittances to DWR. Therefore, this balancing account will not affect remittances to DWR at any time, but is simply an account to allow SDG&E to recover ultimately its own authorized costs from its own customers entirely independent of its remittances to DWR. Finally, the amount, if any, by which SDG&E's rates and charges should be increased to accommodate DWR charges will be decided in the Revenue Requirement proceeding.
Concerning SDG&E's argument that we have not adequately addressed their bond charge levelization proposal, we simply disagree. Indeed, SCE's reply comments make clear the very problem that SDG&E fails to address: If the 2003 revenue requirement exceeds that of 2004 by as much as $300 million, as is projected in Reference Exhibit 1-a, a levelization of the bond charges between 2003 and 2004 will fail to meet DWR's revenue requirement.
SCE's argument to allocate bond-related costs among utilities based on the benefits received from DWR's purchases is unpersuasive. As the discussion in this decision makes clear, all benefited from DWR's actions to stabilize the grid, and imposing the bond charge equally, except for explicit exclusions, is therefore appropriate.
Lastly, SCE now states that it cannot implement the bond charge by November 15 and that such an implementation will require October consumption to pay bond charges. SCE misunderstands this decision - the bond charge is implemented as of November 15, and applies only to consumption on or after November 15, not to October consumption. SCE should simply remit to DWR a bond charge on all non-exempt bundled consumption from and after Nov. 15th and include a bill message explaining this process until a line item is included on customer bills.61
Finally, we note that we have carefully read the opening and reply comments and incorporated changes as appropriate throughout the decision.
