Decision DRAFT DECISION OF COMMISSIONER DUQUE (Mailed 7/18/2000)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company for Authority to Establish Post-Transition Period Electric Ratemaking Mechanisms. (U 39-E)	Application 99-01-016 (Filed January 15, 1999)
Application of San Diego Gas & Electric Company for Authority to Implement Post Rate Freeze Ratemaking Mechanics (U 902-E) to Review and Recovery Transition Cost Balancing Account Entries from January 1, 1998 through June 30, 1998 and Various Generation-Related Memorandum Account Entries.	Application 99-01-019 (Filed January 15, 1999)
Application of Southern California Edison Company (U 338-E) to: (1) Propose a method to Determine and Implement the end of the Rate Freeze; and (2) Propose Ratemaking Mechanisms which would be in place after the end of the Rate Freeze Period.	Application 99-01-034 (Filed January 15, 1999)
Application of SAN DIEGO GAS & ELECTRIC COMPANY: (1) informing the Commission of the Probable Timing of the End of its Electric Rate Freeze, (2) for Authorization to Change Electric Rates Through Implementation of Interim Ratemaking Mechanisms Concurrent with Termination of the Electric Rate Freeze, and (3) for Authorization to Change Electric Rates by Adding New, and Revising or Terminating Existing, Rate and Revenue Mechanisms and Rate Designs. (U 902-E)	Application 99-02-029 (Filed February 19, 1999)

(See Decision 99-10-057 for Appearances.)

OPINION REGARDING EMERGENCY MOTION

FILED BY UTILITY CONSUMERS' ACTION NETWORK

Summary

In this decision, we grant, in part, and deny in part the Petition of the Utility Consumers' Action Network (UCAN) and modify Decision (D.) 99-05-031 and D.00-06-034. We reject UCAN's proposal to institute a rate freeze on customers of SDG&E because such an action will lead to higher rates. Instead, we approve SDG&E's program to amortize overcollections in its Transition Cost Balancing Account (TCBA), thereby reducing the average residential customer's bill by $17.25. In conjunction with the distribution of the Lump Sum TTA check, the average residential customer should end the summer $124 ahead of last summer.

We address the issue of bill volatility by ordering the automatic extension of SDG&E's Levelized Payment Plan (LPP) to all residential and small business customers, with the freedom to "opt-out" of this payment plan. We also plan to expedite consideration of SDG&E's energy efficiency programs.

To empower consumers and companies in the face of current market conditions, we expand SDG&E's participation in block forward power markets immediately. We support SDG&E's proposal to assist citizens in forming groups to solicit bids from power providers. Finally, we plan to reconsider in a September hearing our rejection of a settlement that would allow SDG&E to purchase power in bilateral markets

A long-term solution requires that we correct the current difficulties in energy markets. We direct the direct CPUC's Energy Division to investigate the summer price run-up. Recognizing our limited authority over wholesale markets, we request the Electricity Oversight Board to investigate the ISO and PX. Further, we request FERC to investigate the ISO, PX and Western energy markets. Finally, we agree to speed consideration of the deployment of real-time energy meters.

Background

D.00-06-034 in Applications (A) 99-01-016 et al., among other things, considered whether rate or price caps should be implemented post transition. Recognizing that there is a strong possibility for volatility in energy prices once the rate freeze has ended, Pacific Gas and Electric Company (PG&E) proposed that price caps be adopted in order to mitigate the volatility in energy prices once the rate freeze ends. Southern California Edison Company (Edison) and San Diego Gas and Electric (SDG&E )did not make similar proposals. With the exception of the California Street Lighting Association (Cal-SLA), all parties opposed price caps, stating that such devices would dilute market prices and distort market signals.

The parties differentiated between rate capping and rate leveling (e.g., Levelized Payment Plans or LPP). Under a rate-capping plan, as proposed by PG&E, commodity prices would be capped once prices reach a given level to insulate customers from high prices during times of high demand. The current month's charge is limited to the capped rate with recovery of the amount above the cap collected in the following month. The customer pays interest on the amount deferred to subsequent months and a balancing account is proposed for revenue tracking.

Under a Levelized Payment Plan, a customer incurs his or her actual commodity cost obligation each month but the utility allows the payment to be spread over subsequent months with a true up at year end. Under the LPP, the customer is conscious of energy prices and can act to adjust usage patterns. The primary distinction between rate capping and a LPP is the information a customer receives about prices. The utilities already have LPPs in place for residential customers. SDG&E, however, does not limit these plans to residential customers.

In A.99-01-016 et al., the Office of Ratepayer Advocates (ORA) recommended continued use of existing LPPs as a mechanism to limit volatility. The Utility Reform Network (TURN) supported retention and expansion of balanced payment options but opposed commodity price caps as proposed by PG&E. TURN pointed out that customers will still pay for higher rates under a rate cap but instead will have price signals dampened. TURN noted that dampening of price signals further encourages inefficient usage patterns. TURN suggested that rather than promoting rate caps, the utilities should instead spend their time developing programs that will allow consumers to see and respond to price signals. The UCAN argued that bill-smoothing activities, including LPPs, are outside of the utilities' core distribution services. UCAN argued that only if the market fails to provide this service should the Commission allow utilities to provide it.

In D.00-06-034, the Commission determined that consumers must be aware of the price signals provided by the market and rejected PG&E's rate capping proposals. The Commission agreed with TURN that Levelized Payment Plans, which each utility already has in place, offer a bill smoothing effect for residential customers and still allow these customers to be exposed to price signals. In D.00-06-034, we determined that consumers must be aware of the price signals provided by the market and rejected PG&E's rate capping proposal:

We prefer that customers understand the impact of the market and the accompanying price signals. We call for the utilities and ESPs to provide the necessary customer education and information and recommend that hourly interval meters be installed whenever feasible. We also continue the Levelized Payment Plan for residential and small commercial customers. We do not require that such plans be expanded to street lighting customers, but instead see this as an opportunity for the marketplace to offer solutions. (Id., mimeo. at p. 4.)

UCAN did not address whether its proposal required a modification to D.00-06-034. The ALJ's ruling specifically asked parties to comment on the need to modify that decision.

Unlike PG&E and Edison, SDG&E has completed recovery of San Diego Gas & Electric has completed recovery of its Competition Transitition Charge (CTC) and its rate freeze has ended. SDG&E customers, unique among California ratepayers, now confront real-time market prices for electricity in their bills each month. Simultaneously with this transition, electricity prices for power bought on the PX and ISO exchanges are at all time highs. Bills for electricity in San Diego are double those of just one year ago.¹ A combination of heat waves across the West, a drop in reserves, and a significant increase in demand has resulted in much higher wholesale energy costs. The Independent System Operator (ISO) has declared several emergencies this summer which have led to voluntary curtailments and rolling outages. The ISO Board of Governors recently voted to drop its price cap from $750 per megawatt to $500 per megawatt in an effort to control prices. Because ratepayers in SDG&E's service territory are no longer subject to a rate freeze, these consumers are subject to price volatility.

The resultant rising bills for electric service in San Diego have triggered UCAN to file on July 6, 2000 an Emergency Petition to Modify D.99-05-051 (Petition). On July 7, Administrative Law Judge Minkin issued a ruling shortening time for responses to the Emergency Petition. The ruling ordered parties to file and serve responses by 4:00 PM on July 14. The Commission received responses from SDG&E on July 11 and from the ORA, PG&E, the Federal Executive Agencies (FEA), the Cal-SLA, the Alliance for Retail Markets (ARM), the California Power Exchange Corporation (Cal-PX) and the California Manufacturers and Technology Association (CMTA) on July 14. In addition, on July 14 SDG&E filed and served a motion for leave to file a supplemental response to the petition, as well as the supplemental response itself. The City of San Diego (City) filed comments on July 17, 2000, as did Edison. We grant the motions to file supplemental responses, to intervene, and to file late-filed responses, respectively.

Positions of Parties

In this section, we summarize the policy positions, policy recommendations, and arguments of the petitioner and all respondents. A subsequent section describes and addresses the legal arguments raised by parties. We address each party's filing in turn.

UCAN's Emergency Petition

UCAN characterizes the high rates faced by consumers in SDG&E's service territory as "dire and unprecedented." UCAN requests that the Commission impose a summer rate freeze for residential, small commercial, and lighting customers for August, September, and October 2000 and allow SDG&E to establish a balancing account to track uncollected revenue.

UCAN also requests that a follow-up proceeding be initiated in November 2000. The follow-up proceeding would:

· assess the size and recovery of the uncollected revenue;

· reconsider D.00-06-034 and approve the settlement proposed by SDG&E, UCAN, and ORA to allow SDG&E to purchase power in the futures market;

· accelerate the process by which SDG&E can give residential and small business consumers who so request special meters that allow them to receive price credits for not consuming electricity during high-cost periods; and

· to redirect more of the $350 million in annual expenditures on energy efficiency programs to the San Diego area.

UCAN further requests that the Commission direct the Energy Division to conduct an investigation as to the cause of the summer price increase, with any generators or utilities found to have engaged in price gouging to be required to pay for a portion of the rate increase.

UCAN requests that this Petition be treated as an unforeseen emergency situation pursuant to Rule 81.

SDG&E's Response and SDG&E's Supplemental Response

SDG&E's Response of July 11 opposes UCAN's proposal of a summer rate freeze, but supports several of UCAN's other proposals. Further, SDG&E makes a series of new proposals to address the impacts on consumers of rising rates.

SDG&E states that the rate freeze sought by UCAN "is not the answer to high electric rates." SDG&E notes that it now serves as a company responsible for delivering energy to customers, and that "fixing" high PX prices through regulation of the deliver company would have negative effects on customers and the emerging market. In particular, SDG&E states that UCAN's rate freeze proposal would exacerbate normally high winter bills. SDG&E's preliminary analysis indicates that winter bills would likely be 70% higher than the summer bills that would result from UCAN's rate freeze proposal.

SDG&E also states that the rate freeze proposal rests on two unstated assumptions: "(1) a customer will be better off deferring their summer electric costs to later in the year; (2) SDG&E can be made whole for undercollection of summer PX prices." SDG&E argues that testing these assumptions requires hearings. SDG&E also notes that the Commission, after taking evidence on this issue, last month rejected retail rate caps, such as the rate freeze proposed by UCAN.

SDG&E also argues that if one takes into account the total picture, a rate freeze is not needed. SDG&E notes that starting next month SDG&E will distribute a Lump Sum TTA check. SDG&E will rebate $390 million to electric customers, about $260 per household. SDG&E notes that even after paying the current high electric bills, customers should end the summer $90 ahead of last summer. SDG&E also states that using existing discretion, it will allow customers to defer paying half of their electric bills until receiving the Lump Sum TTA checks and will not discontinue service to any customer pending receipt of the check.

SDG&E proposes several additional measures to provide rate relief. These include an expansion of its Level Payment Plan (LPP), a summer energy-assistance fund for low income customers, and a community outreach program to inform low-income citizens of assistance programs for bill payment and energy efficiency.

To empower citizens in the face of high electric prices, SDG&E supports UCAN's focus on energy efficiency programs. SDG&E states that it will request an expedited authorization of its energy efficiency program this year. SDG&E plans to mount an education campaign aimed at customers to alert them to developments in energy markets. SDG&E also proposes, after obtaining Commission approval, to aid customers in aggregating demand so that they can deal directly with generators to purchase power. SDG&E also supports UCAN's proposal to accelerate the regulatory process for the installation of time of day meters.

To correct market failures, SDG&E asks that the Commission accelerate the licensing/permitting process for new power. SDG&E joins UCAN in calling for an investigation by the Commission's Energy Division into summer price spikes. SDG&E asserts that it has witnessed "market irregularities" and states that it notified the ISO on June 23, 2000 of these irregularities.

In its Supplemental Response filed on July 14, 2000, SDG&E made further rate relief proposals and offered refinements of its earlier proposals. SDG&E noted that as a result of price spikes in electric power, the power plants that SDG&E still owns and its long-term power contracts have earned revenues that have resulted in an overcollection in the Transition Cost Balancing Account (TCBA). SDG&E estimates that the overcollection will reach $100 million on July 31, 2000 and proposes to amortize this amount over a two month period beginning in August. Such an amortization would result in a decrease of $17.25 in the average customer's bill for the next two months. Thus, the average August electric bill would fall from a projected $100.82 to $83.26 - a 17% reduction. SDG&E has filed an advice letter, which, if adopted, would implement this relief.

Finally, SDG&E's supplemental response refined its proposed "aggregator" role. SDG&E made clear that it does not plan to sign contracts as the agent of a group of customers. Instead, it plans only to act as a facilitator of the customer-generator relationship.

ORA's Response

ORA offers the following recommendations to the Commission:

· reject UCAN's rate freeze proposal;

· pursue an inquiry cooperatively with the Attorney General and other state agencies;

· proceed cautiously with real time meter installations;

· reject SDG&E's proposal to aggregate customer load; and

· provide more choices/education for consumers via rulemaking/investigation process.

ORA agrees that there is reason to be concerned with the sharply higher prices. Gas, a significant contributing factor in electricity commodity pricing, is currently double the prices of last winter. ORA agrees with SDG&E that adopting price caps now only create future s higher bills for San Diego customers and will create a larger rate problem in the winter months. ORA reviewed the calculations and estimates put forth by SDG&E in its July 11 response and concurs that San Diego ratepayers will be $90 dollars ahead of last year, attributable to the refunding of the excess rate reduction bonds.

ORA points out that the CPUC has limited authority over ISO and PX. An adequate review, ORA suggests, would require the coordinated efforts of the CPUC, other state agencies, and the Attorney General

ORA, mindful of long-term implications, warns the CPUC to proceed, but with caution toward real time metering policies. ORA raises the concern that expedited policies might preclude technological advances, constrain better market solutions, or create new stranded costs.

ORA asks the Commission to take a broader view of how to create better price responsiveness and demand responsiveness management programs. ORA wants action now, but not the "crash program" identified in the UCAN proposal. ORA, like SDGE, is concerned with the consumer's ability to respond to market signals by shifting demand (often called demand responsiveness), to conserve power, or pursue direct access. ORA, like UCAN, SDG&E and others, is questioning the market's operations and the resultant high electricity prices.

ORA points out the lack of rate options for customers and the lack of empirical data needed to create meaningful rate options for customers. ORA asks the Commission to examine two issues through a quasi-legislative rulemaking: 1) more stable rate options, and 2) rate design for default service. ORA postulates that market participants might do a better job of developing rate options which are driven by customer preferences.

PG&E's Response

PG&E offers the following considerations to the Commission:

· PG&E is not in a position to assess what relief/cap should be adopted for San Diego customers;

· PG&E's rate cap proposal in post transition ratemaking was not intended for the San Diego context; and

· PG&E urges investigation of problems and solutions in currently available dockets.

PG&E correctly points out that rate caps set too low will create deferred undercollections and rate caps set too high won't provide adequate customer relief. PG&E also points out that the TTA refund adds yet another layer of complexity. PG&E cautions the Commission against adopting a PG&E capping proposal that was not designed to address the issues identified by UCAN. Specifically, PG&E's 150% cap may or may not effectively address the procurement issues at hand in San Diego.

FEA's Response

FEA offers the following observations to the Commission:

· FEA opposes UCAN'S proposal; and

· if rate caps are adopted, FEA wants modifications to UCAN's rate cap proposals that specify, up-front, that customer classes not subject to the freeze or cap won't be responsible for the resultant undercollection.

FEA, who supported last summer's settlement, that was rejected in D.00-06-034 expressed opposition to UCAN's current proposal. Further, FEA was concerned with the lack of assurances for customers whose rates were not subject to the cap. FEA could not support a deficient proposal that left the recovery of uncollected revenues to an uncertain future. Additionally, FEA points out that the Commission does not have jurisdiction over generators and therefore will not be able to implement or enforce UCAN's proposal.

Cal-SLA's Response

Cal-SLA offers the following observations:

· Cal-SLA supports the UCAN petition for rate caps and redirecting energy efficiency dollars to San Diego; and

· Cal-SLA supports SDG&E's LPP and asks the Commission to modify D. 00-06-034 to authorize levelized payment plans for the residental, small commercial and Street Lighting customers of all three investor owned utilities.

Street lighting and traffic control customers' bills increased by more than 40%. They argue that, unlike other customer groups, they cannot respond to higher prices because public safety cannot be compromised. Additionally, Cal-SLA argues that the conversion to more energy efficient lamps takes local governments years to plan the necessary capital investments. Without meaningful choices,² Cal-SLA posits that rate caps³ and Levelized Payment Plans are reasonable for providing a smooth transition. Cal-SLA would like to see the "light emitting diode lamp conversion programs" expanded and would like to participate in additional energy efficiency programs. Interim relief, suggests Cal-SLA, also allows more time in which to communicate to customers the fact of price volatility and the need for better management of their electrical usage.

ARM's Response

ARM offers the following recommendations to the Commission:

· adopt SDG&E's balanced approach to the situation/reject UCAN's petition;

· be mindful of higher prices/supply shortages in the Western region;

· be mindful of the utilities' limited ability to procure power and hedge demand;

· be mindful of consumers' limited retail opportunities;

· give market participants a chance to mitigate these concerns;

· do not modify D. 99-05-051 and D. 00-06-034 without an evidentiary process; and

· resist establishing a precedent of encouraging "self-styled emergency petitions."

ARM is confident that a complete review of the package of remedies that SDG&E has proposed will ameliorate any need to establish a price freeze for San Diego cutomers.

ARM concurs with SDG&E and ORA that customers will pay about $90 less than last summer because of the return of funds collected in the TTA. ARM concurs with SDG&E and ORA that offering a bill smoothing plan via levelized payment plan, gives customers a choice in payment arrangements without hiding usage information and damaging price responsiveness to the degree experienced by rate capping. ARM supports many of the other short-term initiatives proposed by SDG&E as palliatives to the current prices borne by customers (deferrals, low income assistance and hedging). ARM urges rejection of the "borrow now pay later" proposal of UCAN.

Cal-PX's Response

PX offers the following observations to the Commission:

· the PX supports the objective of developing market solutions that mitigate the volatile/seasonal price fluctuations;

· it urges expeditious approval of SDG&E AL-1234E;

· it urges the utilities to participate in CalPX Trading Services and Block Forward Market to manage their risks; and

· it urger San Diego (and other IOUs) to seek CPUC approval for new products that have come along since prior Commission approvals.

CMTA's Response

CMTA offers the following recommendations to the Commission:

· CMTA will not oppose the UCAN rate proposal as long as both the costs and benefits are confined to the residential and small commercial, but they fail to see how this is better than Levelized Payment Plans. They express concern with a proposal that might not have customers pay for what they consume as legally worrisome let alone increasing the possibility of exacerbating an already bad situation.

· CMTA notes that the best way to encourage demand responsiveness to high prices is to let the prices shine through. Demand responsiveness, they urge should be enhanced through real time pricing.

· CMTA would not like to see the Commission reconsider the settlement rejected in D.00-06-034. CMTA would rather that the utilities be allowed to purchase from all qualified exchanges and on the bilateral market at the lowest possible costs and pass those through to customers.

CMTA views the budget bill language with overturned provisions of D.99-05-051 allowing purchases from exchanges other than the PX as unfortunate and contrary to the best interests of electric consumers.

CMTA supports the meter/credit proposal of UCAN but has numerous implementation issues that must be resolved before effective load reduction can operate. CMTA does not believe SDG&E should get an disproportionate share of the energy eficiency dollars. They should be returned in the same proportion as those funds were generated.

CMTA believes that the Commission should formally request the market monitoring committees of the PX and the ISO to conduct a study and to promptly issue a report. An objective assessment of the markets overall competitiveness and functionality is an essential first step. The Commission does have jurisdiction to investigate whether or not utilities procurement or alleged "underscheduling."

The competitive market outside the PX is exceedingly thin even for large users. But rather than re-regulate or legislate prices, the focus should be on further enhancing the competitive options to the PX.

Position of the City of San Diego

This filing arrived too late for incorporation in this draft.

Position of Edison

This filing arrived too late for incorporation in this draft.

Position of the City of San Diego

The City of San Diego recommends the following to the Commission:

· To take the leadership in developing solutions to solve the short and long term problems.

· To oppose the UCAN proposal as currently structured.

While the City of San Diego disapproves of the UCAN proposal, there are specific proposals within the UCAN petition that they would like to see the Commission undertake. Those are: improving the availability of time-of-use meters for residential and small commercial customers, and encouraging SDG&E to aggressively pursue development of new energy efficient programs in the San Diego area. While they agree with others that an investigation into the root causes of the high and volatile prices in California makes perfect sense, they also expresses concern with the repercussions of an investigative approach. They suggest that there may be the unintended effect of thwarting investment if this approach isn't handled well.

Position of Edison

Edison recommends the following to the Commission:

· To view this as a statewide concern.

· To oppose UCAN's immediate rate cap offer because it is only a temporary respite from high bills, at potentially greater cost later.

· To request that FERC initiate such an investigation.

Edison posits that any investigation that does not look at all the facts and all the market participants will be an incomplete and potentially ineffectual approach to solving the problem. They see a coordinated effort with EOB and FERC as a good start.

As for energy efficiency solutions, Edison would have the Commission accelerate the June 29th load profiling workshops and increase its emphasis on energy efficiency and load profiling. They would also suggest that we direct the use of the public goods charge funds into those programs which we determine have the most quantifiable and immediate impact on price volatility. Concurrently, the Commission should order a study to determine which customers will benefit from hourly metering, and it should act quickly on SDG&E's advice letter regarding the installation of more hourly meters.

Legal Issues

UCAN brings its petition to modify under Rule 47(d) of the Commission's Rules of Practice and Procedure.⁴ Citing recent unprecedented rate increases, UCAN also requests Rule 81 emergency treatment for the petition. PG&E agrees that UCAN's proposed expedited treatment is reasonable and permits the development of the necessary record, provided there is a full and open discussion among all stakeholders and policymakers.

SDG&E objects as to the purported absence of a hearing record. SDG&E alleges that implementing the proposed rate cap violates due process and conflicts with Pub. Util. Code⁵ § 1708, which requires notice and the "opportunity to be heard as provided in the case of complaints" before the Commission may "rescind, alter, or amend any order or decision made by it." SDG&E also alleges that implementing the proposed rate cap without a hearing record runs afoul of the filed tariff doctrine and violates the Supremacy Clause. SDG&E supports other UCAN proposals, such as accelerated installation of hourly meters and a renewed focus on energy efficiency programs.

ORA contends that SDG&E has raised legitimate legal objections to UCAN's petition, including concerns about due process considerations. ARM likewise contends that the petition is inappropriate from a procedural perspective.

As an initial matter, we find that UCAN's petition satisfies the requirements of Rule 47. Rule 47 requires the petition to be "filed and served within one year of the effective date of the decision to be modified." Yet Rule 47(d) permits a later filing where, as here, the petition could not have been filed in within one year. UCAN could not have filed within one year given the recent rate increases which underlie its petition. We note the jump since April in San Diego electricity prices from 3.2 cents per kWhr to 10.9 cents per kWhr. We also note the recent rise in natural gas prices from 21 cents per therm to 45 cents per therm.

Under these circumstances, we find that UCAN's petition is also appropriate for Rule 81 treatment. Rule 81 defines an "unforeseen emergency situation" as a matter that requires action or a decision by the Commission more quickly than would be permitted if advance publication were made on the regular meeting agenda. While the petition presents a "request for relief based on extraordinary conditions in which time is of the essence," (Rule 81(f)), we believe we can provide for some notice and opportunity to comment on this draft decision as discussed below.

We next address SDG&E's alleged due process violations. By this decision, we "rescind, alter or amend" two prior Commission decisions (D.99-05-051, D.00-06-034) pursuant to Section 1708. SDG&E is correct that Section 1708 requires notice and "an opportunity to be heard as provided in the case of complaints."

SDG&E is incorrect that Section 1708 confers an entitlement to an evidentiary hearing. As we explained in D.00-03-020, even a plaintiff in a complaint case has no absolute right to an evidentiary hearing. Regardless, the parties have been afforded the opportunity to file written comments, present oral argument, comment on the prior decisions and to offer sworn testimony of expert witnesses. SDG&E's comments acknowledge that "[p]arties to Phase 2 of the Post Transition Ratemaking proceeding litigated the issue of retail rate caps. " (SDG&E Comments, p. 7.)

Moreover, the purpose of evidentiary hearings is to resolve disputed facts. There are no such facts in dispute here. SDG&E's disputed facts relate to the implementation of the proposed rate cap, which we decline to adopt. For the same reasons, we need not address SDG&E's alleged Supremacy Clause violation. SDG&E's preemption argument similarly relates to the rejected rate cap proposal.

We thus see no legal requirement for additional hearings on the matters we decide today. Nevertheless, we will afford the parties a further hearing before issuing a final decision. This decision provides emergency relief and is interim in nature. A hearing will serve to promote a comprehensive and open discussion among all stakeholders and policymakers. We will therefore schedule a hearing in this docket for early September.

We note, however, that we desire to examine several suggestions by parties that will require record development through hearings. These matters are discussed below and assigned to appropriate proceedings.

Discussion

On June 29, 2000, the Independent System Operator (ISO) Board of Governors reduced price caps in the ISO real-time ancillary services, and intra-zonal congestion markets from $750 per megawatt (MW) to $500 per MW, effective July 1, 2000 through October 15, 2000. In addition, the ISO has identified several Stage 1 and Stage 2 emergencies thus far this summer. Under California's Electrical Emergency Plan, a Stage 2 emergency is defined as a period when the electric reserve margin (i.e., back-up generating capacity) drops below 5% but is above 1.5% of customer demand. A Stage 1 emergency exists when power reserves fall below 7%. High temperatures in the West have limited the amount of electricity that California can import and have caused periodic drops in the state's electric reserves. Electricity demand has surpassed 44,000 MW on certain days. The combination of heat waves across the western United States that deplete regional reserves and increased demand in California have resulted in significantly increased prices to consumers. With these price increases, many Electricity Service Providers (ESP) can no longer meet credit requirements to continue purchasing in these markets.

Ratepayers in PG&E's and Edison's service territories do not see the increases in energy prices (both commodity and ancillary services) because these utilities' electric rates remain frozen.⁶

SDG&E, however, ended its rate freeze on July 1, 1999 (D.99-05-051). Given the high costs of energy thus far this summer, the Commission shares the universal concern over the impacts of high bills and rates on the ratepayers in SDG&E's service territory.

Now that San Diegans directly confront the prices that we see in our flawed energy markets, it is critical that this Commission act to provide immediate rate relief and bill stability during this period of extreme price volatility. Further, the Commission should act to empower customers so that they can avoid this situation in the future. Finally, the Commission should takes steps, to the extent possible, to address the failings of current electricity markets.

We commend the parties for the constructive recommendations that they have made. As the summary of the positions of parties makes clear, the difficult situation has led to a portfolio of recommended approaches for the Commission to take. We especially commend UCAN for pushing the issue of high bills so forcefully onto the public agenda and SDG&E for the quality of its responses to UCAN's petition. Of the alternatives now before us, some we can adopt immediately, while other good ideas require us to set in motion processes that will yield results soon, but not in time to resolve this immediate crisis.

Relief from Current Rates through Immediate Amortization of TCBA

The most concrete proposal for providing rate relief consists of SDG&E's proposal to amortize the $100 million dollar balance in its TCBA over the next two months. The reasons for taking this action are both simple and clear. First, the excess accumulation in the TCBA results in large part from the high prices that Californians are now experiencing. It is therefore better to use this overcollection to reduce rates during this volatile period than to wait until the end of the year to amortize this account. Second, the amounts will provide substantial rate relief - a 17% reduction in the average bill over the next two months. For these reasons, we endorse this proposal as reasonable and adopt the tariff amendments proposed by SDG&E to implement this program. We therefore approve AL 1237-E.

Rate Relief through Expediting Energy Efficiency Programs

UCAN endorses the approach of using energy efficiency program to aid customers in reducing their electricity bills. We cannot, however, endorse the specific steps that UCAN recommends. In particular, we cannot endorse a redirection to San Diego of all the funds earmarked for energy efficiency programs throughout the entire state. Although Edison's and PG&E's customers do not see the rising costs of electricity, their bills will soon come due. These customers therefore have an equal need for energy efficiency funds. Further, the funds collected in rates by PG&E and Edison are intended to benefit customers in their service territory (Section 381(c)(1) of the Public Utilities Code).

In response, SDG&E proposes to file on July 21, 2000 an energy efficiency program that speeds funds to San Diego this year. SDG&E asks the Commission to expedite consideration of their proposal. We plan to do so. We will attach the highest priority to the timely review of this program as part of our summer initiative approved in D.00-07-017. We will approve energy efficiency programs no later than August 21, 2000, as discussed in that decision.

Rate Relief through a Summer Program to Assist Low-Income Customers

SDG&E proposes a low-income energy assistance summer program that uses shareholder funds. For this, they do not need our approval. In light of current circumstances, this is an appropriate action. We urge energy producers, who are benefiting from the current high prices, to assist in funding this program.

Avoiding High Rates

SDG&E also proposes to increase its communication with its customers to ensure that they are fully informed when rates are high and understand what steps that they can take to avoid consuming power. This program does not need our approval. In light of the current situation, this is an appropriate action. One way of obtaining relief from high rates is to avoid buying energy when rates are high. Customers, however, can only act if they know when prices are high. Communication is therefore essential, and we applaud this proposed step.

Providing Bill Stability via UCAN's Rate Freeze is not in the Public Interest

The proposal of UCAN to provide bill stability by freezing rates at 115% of the frozen electric rate levels while accruing revenue shortfalls into a balancing account attracted the most comment and controversy. Although this proposal directly provides bill stability now, the proposal has practical and policy flaws that require us to reject it. First, as pointed out by SDG&E, ARM and ORA, UCAN's rate freeze will lead to winter bills that dwarf the current bills. Second, as FEA points out, it in unclear how this Commission can implement or enforce UCAN's proposal that those engaged in price gouging should "foot the bills" for higher electric costs. FEA's comment further underscores the high likelihood that UCAN's rate freeze proposal will only replace high summer bills with even higher winter bills. Although only an evidentiary hearing would permit the Commission to develop a refined estimate of bill impacts, the facts and estimates available today make it clear that such a hearing would only be determining with more precision how much higher winter bills will rise. There is no doubt, however, that winter bills will rise substantially. For these practical reasons, we must reject UCAN's rate freeze proposal.

We also reject UCAN's rate freeze proposal for sound policy reasons. First, under UCAN's rate freeze proposal, even as SDG&E purchases expensive power for customers, the customers would be kept unaware of the liabilities incurred because of their use of electricity. These liabilities come due later and will be unavoidable. If prices are known and costs appear on bills, on the other hand, consumers can act - even if only to reduce consumption or to demand that government investigate the sources of these high prices. We note that although some ESPs have left California, ARM states that others are rushing into the market to meet demands for reasonably priced power and stable rates. These ESPs are ready to demonstrate their responsiveness to customer needs. Using such market-based solutions to price volatility and customers' needs is preferable to institution of a rate freeze which will obscure market function rather than facilitate it.

Second, and perhaps most importantly, a key part of UCAN's proposal is to blend these high electric prices and costs into a "balancing account." This serves only to obscure the problems that are emerging in the ISO, the PX, and in the broader Western energy market. This Commission believes that government must solve this problem, not hide it. For this important policy reason, we must reject UCAN's proposed rate freeze.

Expand SDG&E's LPP to all Customers with an "Opt Out" Provision

SDG&E, in response to UCAN, proposes to expand its currently tariffed LPP through advertising. This LPP enables both residential and small commercial customers to level their bills over several months while permitting them to see the electricity costs that their usage incurs. For participants, the LPP offers all of the benefits of UCAN's rate freeze proposal without the drawbacks. Like the rate freeze proposal, the LPP spreads the payment for this summer's high electric prices over the entire year. Unlike the rate freeze proposal, the LPP lets each customer see the costs accrued by the use of electricity. Most importantly, unlike the rate freeze proposal, the LPP carries no risk of increasing winter bills because the payment plan is developed though an examination of each customer's bill.

Both SDG&E and ARM argue that relying on the currently available LPP will be adequate to the current problems faced by SDG&E's customers. SDG&E points out that following the distribution of the Lump Sum TTA checks, the average customer will receive a check of $260 and end the summer $90 ahead of last summer. ARM's analysis echoes SDG&E's point. In addition, ARM notes that ESPs are developing market plans to serve SDG&E's customers. These are important arguments, and they serve to place the current problem in a fuller perspective.

Although the current price spikes in summer electric prices clearly require the Commission to keep its eye on the larger perspective, we do not agree with SDG&E and ARM that no further action is needed to address high summer bills. Over the years, consumers of electricity have grown accustomed to stable electric prices, and stable electric bills. Clearly, the volatility of electricity markets has shattered the ability of customers to achieve any semblance of stable prices if they purchase power on a pay-as-you-go basis. For this reason, absent the appearance of any overwhelming obstacle in the comments on this draft decision, we plan to order, on an interim basis, the expansion of this LPP to all SDG&E customers as soon as possible. Each customer who desires should be able to opt out of the LPP, just as each customer is now free to opt in. Both the distribution of the Lump Sum TTA checks and the TCBA rate amortization over the next two months (bills) should, however, be unaffected by the implementation of this "opt-out" version of the LPP.

We will also authorize SDG&E to expand the LPP to streetlighting customers. We believe the record supports this modification to D.00-06-034 without evidentiary hearings. SDG&E's LPP is available to both residential and non-residential customers and in hearings on the underlying issues, SDG&E offered to expand these programs to lighting customers. Because we have held hearings on these underlying issues, it is reasonable to modify D.00-06-034 to expand these programs to streetlighting customers.

Bill Payment Relief

SDG&E offers to await the distribution of its Lump Sum TTA check before taking action to discontinue service to customers for non-payment of their bills. We endorse this offer, but note that it requires no action on our part.

Empower Customers to Purchase Power from the Lowest Cost Provider

SDG&E states that it is willing to act as an aggregator for willing customers to bid their load to the lowest price energy service provider. SDG&E would help the aggregated group become a customer of the energy service provider, thus hedging the group's exposure to fluctuating Cal-PX prices. This can occur because ESPs are under no obligation to purchase from the Cal-PX (although many choose to do so) and have the opportunity to use other exchanges, bilateral contracts and various hedging and related mechanisms to limit volatility and reduce exposure to peak prices. In addition, it is possible that ESPs can offer overall lower prices to aggregated groups than SDG&E, either through shrewd market activities or from available subsidies such as the renewable credits offered through the California Energy Commission.

SDG&E's offer is welcome and helpful. SDG&E is recognizing that customer choice - a key element of this Commission's and the Legislature's restructuring efforts - is crucial to providing opportunities for lower prices and greater consumer value. SDG&E recognizes that an alternative energy provider may be the appropriate choice for many customers at this time, and that aggregation provides the greatest chance for achieving market benefits and attracting the interest of ESPs. Further, there may be a number of customers who would like to aggregate, but need assistance in aggregating and choosing an ESP. SDG&E's access to customers and knowledge of the market puts it in a good position to provide this assistance. However, we do not want to see such a program used to benefit SDG&E's affiliated ESP within the Sempra family, as ORA suggests could occur, and we would require competitive protections to guard against this advantage.

Overall, SDG&E's proposal in its initial comments is useful, but a bit vague. SDG&E provides some clarification in its supplemental comments, but not enough to allow conclusive judgment at this time. We are favorably inclined to approve some type of program of this type, with competitive neutrality included. We will consider this issue and the necessary details associated with it as soon as SDG&E files a specific proposal, which may be filed as an Advice Letter.

Empower SDG&E to Participate in Block Forward Markets

Just as aggregation can provide access to various hedging and other mechanisms that can limit both high prices and volatility, there are actions that SDG&E (and potentially the other electric utilities, especially after the end of the rate freeze) can undertake itself for those customers who choose to stay with SDG&E as their energy provider (or do not make an affirmative choice and thus stay by default). We have provided PG&E and Edison with the opportunity to utilize block forward markets (BFM) provided by the PX, which those utilities claim would provide useful alternatives to the day-ahead and hour-ahead PX markets in certain circumstances. While we noted ARM's concerns about transparency and the effects on the overall marketplace -- and intend to study the question further (see Resolution E-3638, July 6, 2000, pp. 6-8) -- we have agreed to allow these utilities into these markets. SDG&E has not until recently requested similar authority, perhaps not seeing the need up until now.

SDG&E filed Advice Letter 1234-E on July 10, 2000. In that Advice Letter, SDG&E seeks to make certain revisions to Schedule PX- Power Exchange Energy Cost, which would authorize the utility to participate in the BFM offered by the CalPX. This Advice Letter not only addresses issues that relate to high prices in the spot markets, but also ensures a high degree of price transparency. ARM supports the SDG&E Advice Letter, as it addresses their concerns about transparency. This is due to SDG&E's proposal to publish on its website, by no later than 5 p.m. each business day, information about its prior day BFM transactions. The published information will include the product, point of delivery, time period of delivery, quantity in MWs and MWhrs, contract price, contract commitments and date of transaction. We appreciate SDG&E's willingness to ameliorate the concerns of ESPs.

Cal-PX suggests that SDG&E be given BFM authority now. We believe it is appropriate that SDG&E have the same BFM authority as Edison and PG&E. In this way, should SDG&E find it does desire to use these market options, there will be no delay in it its ability to participate in them.

SDG&E's BFM participation can mitigate price spikes, provides direct access customers with comparative information about prices, and is consistent with our interest in retaining price transparency in PX markets. Comments have been taken, the Advice Letter is unprotested, and it would normally go into effect in 45 days (on August 24, 2000) if Energy Division does not bring a Resolution before us. We believe the issues are of sufficient importance to decide at this time and that this docket is an appropriate place to do so. Therefore, we will use this opportunity to approve SDG&E's Advice Letter 1234-E.

The Commission Should Reconsider the Proposed SDG&E Procurement PBR Settlement Rejected in D.00-06-034

UCAN, in its Petition, suggests the Commission reconsider its decision in D.00-06-034 to reject a settlement proposed by SDG&E, UCAN and ORA and others (including the Cal-PX) to allow, with consumer protections, SDG&E to purchase power in the futures market so as to hedge against a summer 2001 price run-up. The proposed settlement, and the rationale for our rejection of it at the time, are discussed at length in D.00-06-034 (mimeo, pp. 18-24, 31-35).

A major factor in rejection of the proposed settlement was that it limited SDG&E's ability to make purchases beyond the Cal-PX markets through 2004. "In addition, we decline to fix an end-point of 2004 for maintaining 80% of SDG&E's procurement through the Cal-PX. Instead, as noted infra, the end point is much sooner than 2004." (mimeo, p. 34) In D.00-06-034, we adopted a plan that would have allowed SDG&E and the other electric utilities to purchase power through alternative exchanges approved by the Commission through March 31, 2002, and remove all purchase limitations thereafter. However, the Legislature added budget control language to the 2000-2001 Budget Bill which was intended to overturn the alternative exchange portion of D.00-06-034 through June1, 2001.⁷

The proposed settlement must now be viewed in the light of the Legislature's actions. If we knew at the time that we could not allow multiple qualified exchanges until at least June 1, 2001, we might have considered the proposed settlement more favorably. The proposed settlement accomplishes some of what D.00-06-034 intended, but with both greater and fewer restrictions. The proposed settlement only applies to SDG&E, while D.00-06-034 applied to three utilities. The proposed settlement lasts through 2004, while the qualified exchange portion of D.00-06-034 lasted only into 2002. The proposed settlement allows purchases from any market through March 31, 2001 (as well for its full term), while D.00-06-034 only allowed purchases through approved qualified exchanges through March 31, 2002 (but lifted all restrictions thereafter). Without the qualified exchange proposal as an option, the proposed settlement appears to provide as much benefit as possible.

In light of new legislation, as well as the severe market dislocations that may recur in the future, we believe that a modified version of the settlement should now be considered. There are two modifications we will propose for consideration. First, in accordance with the budget control language cited above, we will propose that SDG&E may not purchase from exchanges other than the Power Exchange prior to June 1, 2001. Second, we will propose that the provisions of the settlement have an end date of March 31, 2002. This is because D.00-06-034 provides that all restrictions on purchase end after that date.

If the settlement is approved as we suggest it be modified, we tentatively believe it will provide SDG&E with flexibility in purchasing from alternative markets, such as bilateral markets. Along with the ability we are granting SDG&E today to purchase from various Cal-PX markets, SDG&E would be able to search much wider to find deals and devices to protect bundled ratepayers from market dislocations. Further, SDG&E would have the incentives provided in the PBR portion of the settlement to do just this.

Thus, we will reconsider the proposed settlement and the suggested modifications in the hearing we will hold in September 2000 in this docket.

Consider Allowing SDG&E to Opt-out of the Default Provider Role

We have discussed various techniques in this section for allowing SDG&E and its customers to find protection from the vagaries of the market. To this point, each mechanism starts with the assumption that SDG&E is the default provider for energy for customers in its territory. Indeed, this assumption was made explicit in D.00-06-034: "Therefore, we will order that all three utilities continue to purchase power from the Cal-PX or a mixture of the Cal-PX and any qualified exchange at least until the last utility has ended its rate freeze and ceased collecting generation-related transition costs." (mimeo, p.52) Thus, it was our intention that the utilities continue as default providers through March 31, 2002.

However, we take note that SDG&E's offer to assist customers in aggregating and moving to ESPs is part of a larger concept: that SDG&E need not be the default provider in order to allow customers access to the lowest market prices and/or minimal volatility. Elsewhere in this decision we note that ESPs may offer level payment plans, or similar plans, to minimize rate volatility. Similarly, ESPs may search for deals in markets that SDG&E cannot enter even under the procurement PBR settlement approved herein, and may search more widely in these markets than SDG&E now can.

Therefore, we must provide an opportunity for SDG&E to apply to withdraw from its role as default provider. We still intend to look at this issue generically in our upcoming "role of the utility" proceeding. However, we will allow SDG&E, if it chooses to do so, to apply for a change in default provider role in advance of any decision in that proceeding. This would allow us to consider whether an experiment is appropriate and/or whether the unique circumstances faced by customers in San Diego would be better served by a different market structure. Any such application and subsequent decision will be consistent with P.U.Code Section 365.5, which states: "Nothing in this chapter shall prevent the Commission from exercising its authority to investigate a process for certification and regulation of the rates, charges, terms, and conditions of default service. If the commission determines that a process for certification and regulation of default service is in the public interest, the commission shall submit its findings and recommendations to the Legislature for approval."

Direct Energy Division to Investigate the Summer Price Run-Up

UCAN's request that the Commission direct the Energy Division to conduct its own investigation into the summer price run-up is an excellent suggestion, and is supported by SDG&E. ORA, however, notes that the Commission has limited legal authority in this area since it has no jurisdiction over merchant generators, and recommends that the Attorney General lead an investigation.

Whatever the Attorney General does, we believe that the Commission needs to know more about the recent functioning of energy markets. For this reason, we will direct the Energy Division to conduct its own investigation and to prepare a public report on the current summer price run-up no later than September 15, 2000. Thereafter, we will consider opening our own formal investigation, if warranted

Request the Electricity Oversight Board (EOB) to Investigate the Functioning of the ISO and PX

In examining the situation now before us, we note that SDG&E has transmitted a letter to the ISO charging market manipulation. Others have noted that the ISO's focus on system reliability may cause it to choose especially high-cost solutions to California's power needs. Some have pointed to large levels of power engaged as reserves. Others point to power planning that yields expensive prevention strategies to avoid unlikely transmission failures.

A review of the ISO's enabling statutes shows a focus on power scheduling and grid reliability, but exhibits little focus on operating the system in ways that lower power costs for Californians. Our Preferred Policy Decision did not envision the market making activities in which the ISO engages. A substantial percentage of electric power purchases has shifted from Cal PX markets to the ISO ancillary services markets. Further, our review of statutes makes it clear that it is the California Energy Oversight Board that has the authority and responsibility for ensuring the proper operation of the ISO and the PX.

Therefore, we direct the Executive Director of this Commission to write a letter to the EOB on behalf of the Commission urging it and its Market Surveillance Committee each to conduct a broad investigation into:

1) the causes of the summer price run-ups;

2) whether allegations of market manipulation require action or warrant a referral to the Attorney General; and

3) whether the ISO's organizational structure and enabling statutes require modification to promote grid operating practices that lower the cost of power to Californians.

We also urge the Market Surveillance Committee of the ISO to conduct its own study of market conditions and issue a report as soon as possible.⁸

Request FERC to Investigate the Functioning of the ISO, the PX, and Western Wholesale Markets

We further note that the run-up in electric prices occurred at the level of wholesale power markets. Moreover, the price run-up affected not only California, but the entire Western power grid. Both wholesale electric power and interstate power markets fall squarely under the jurisdiction of the Federal Energy Regulatory Commission. For this reason, we embrace the suggestion of SDG&E and direct the Executive Director, on behalf of the commission, to ask FERC to investigate:

1) the summer price run-ups;

2) the functioning of the ISO and PX energy markets, with particular attention to allegations of market manipulation; and

3) the functioning of Western energy markets.

Empower Citizens through Deployment of Real-Time Energy Meters

SDG&E will shortly file a proposal to expand its installation of hourly electric meters in its service territory. ORA cautions against expedited treatment of this matter, alleging that expedited regulatory action could harm emerging competition in the meter business.

We will consider these objections more fully in that docket. We note, however, that all affected parties may freely participate in the upcoming proceedings to represent their interests. Moreover, the Commission has shown itself fully capable of supporting emerging competition in the telecommunications industry, and this experience should prove directly transferable to this developing market. The benefits to consumers of these meters are potentially large, and we are therefore confident of the Commission's ability to address this matter.

Speed Licensing and Permitting Process for New Generation and Transmission

A logical solution to power shortages is to increase the supply of power. SDG&E notes that Senators Peace and Brulte have asked Governor Davis to accelerate the licensing and permitting process for new generation and new electric and gas transmission facilities.

Although this Commission is only one of many state agencies that play a role in permitting of generation and transmission facilities, this Commission should do all it can to speed its review.

Comments on Draft Decision

Rule 77.7 of the Commission's Rules of Practice and Procedure provides for public review and comment for draft decisions, consistent with the provisions of § 311(g). Normally, draft decisions are subject to a 30-day "sunshine" period and the same public review and comment period that is required for proposed decisions. Rule 77.7(f) allows the Commission to reduce or waive the period for public review and comment for draft decisions under various circumstances.⁹ Rule 77.7(f)(9) specifically provides for an exemption:

For a decision where the Commission determines, on the motion of a party or on its own motion, that public necessity requires reduction or waiver of the 30-day period for public review and comment. For purposes of this subsection, "public necessity" refers to circumstances in which the public interest of the Commission adopting a decision before expiration of the 30-day review and comment period clearly outweighs the public interest in having the full 30-day period for review and comment. "Public necessity" includes, without limitation, circumstances where failure to adopt a decision before expiration of the 30-day review and comment period would place the Commission or a Commission regulatee in violation of applicable law, or where such failure would cause significant harm to public health or welfare. When acting pursuant to this subsection, the Commission will provide such reduced period for public review and comment as is consistent with the public necessity requiring reduction or waiver.

Pursuant to Rule 77.7(f)(9), we determine that public necessity requires a reduced period for public review and comment. Comments on the draft decision must be filed and served by July 27, 2000. No reply comments will be allowed.

Findings of Fact

1. Electricity prices for power bought on the PX and ISO exchanges are at all time highs.

2. The ISO has declared several emergencies this summer which have led to voluntary curtailments and rolling outages.

3. On June 29, 2000, the ISO reduced price caps in the ISO real-time ancillary services and intra-zonal congestion markets from $750 to $500 per MW, effective July 1, 2000 through October 15, 2000.

4. Bills for electricity in San Diego are approximately double those of just one year ago. Ratepayers in Edison's and PG&E's territories do not see the increased energy prices because their rates remain frozen.

5. Given the recent San Diego rate increases, UCAN could not have filed its petition within one year of the issuance of D.99-05-031. UCAN's petition was filed within one year of the issuance of D.00-06-034.

6. UCAN's proposal to re-institute the rate freeze for SDG&E for the months of August, September, and October could lead to unintended consequences and higher winter bills.

7. UCAN's proposed rate freeze keeps customers unaware of the liabilities incurred because of electricity use.

8. UCAN's proposed rate freeze will obscure market function rather than facilitate it.

9. The excess accumulation in SDG&E's TCBA will approximate $100 million by the end of July.

10. Excess accumulation in the TCBA results in large part from the high prices that Californians are now experiencing.

11. An amortization of the TCBA would decrease the bill of a typical customer using 500 kwh of electricity per month by $17.25 for each of the next two months.

12. In August and September of this year, SDG&E will be distributing $390 million in excess TTA funds to residential and small business customers as a result of the early end of SDG&E's "rate freeze."

13. As a result of the TTA distribution, the average customer using 500 kwh will end the summer approximately $90 ahead of last summer.

14. The amortization of the TCBA and the distribution of the lump sum TTA funds will mitigate the immediate impact of the summer rate spikes.

15. SDG&E's LPP is available to both residential and non-residential customers.

16. On July 10^th, SDG&E filed Advice Letter 1234-E which would authorize participation in the BFM offered by the CalPX.

17. SDG&E's BFM participation can mitigate price spikes, provide customers direct access to comparative information about prices and is consistent with our interest in retaining price transparency.

18. Aggregation can provide access to various hedging and other mechanisms that can limit high prices and volatility.

19. A major factor in our rejection of the proposed SDG&E procurement PBR settlement was the limitation on SDG&E's ability to make purchases beyond the CalPX markets through 2004.

20. SDG&E need not be the default provider in order to allow customers access to the lowest market prices and/or minimal volatility. ESPs may offer level payment plans and search for deals in the market that SDG&E cannot enter into even under the procurement PBR.

21. SDG&E transmitted a letter to the ISO alleging market manipulation.

22. We call for FERC, which oversees wholesale markets, and the Electricity Oversight Board, which oversees the PX and ISO, to investigate market irregularities.

23. We endorse SDG&E's proposals for expanded outreach and customer assistance, as described in this decision.

Conclusions of Law

1. Pursuant to Rule 77.7(f)(9), we determine that public necessity requires a reduced period for public review and comment.

2. Pursuant to Rule 81, UCAN's petition presents a request for relief based on extraordinary conditions in which time is of the essence.

3. UCAN's petition satisfies the requirements for Rule 47.

4. Granting UCAN's proposal would require a modification of both D.99-05-051 and D.00-06-034 that is not consistent with the requirements of Section 1708.

5. UCAN's proposed rate freeze is not in the public interest.

6. Section 1708 requires that parties be given notice and opportunity to be heard in the manner of a complaint. Section 1708 does not confer on SDG&E an absolute right to an evidentiary hearing.

7. It is reasonable to grant SDG&E's request to amortize the overcollection in the TCBA over a two-month period to all customers.

8. Because we have previously held hearings on the underlying issues, it is reasonable to modify D.00-06-034 to expand LPPs to lighting customers.

9. SDG&E's LPP should be extended to all its customer on an interim basis is needed to address high summer bills. Each customer should be able to opt out of the LPP just as each customer is able to opt in.

10. Advice Letters 1234-E and 1237-E should be approved in this decision.

11. It is reasonable to grant SDG&E the same expanded authority to participate in the CalPX Block Forward Market that is available to PG&E and Edison.

12. It may be reasonable for SDG&E to act as an aggregator for willing customers to bid their load to the lowest price energy services provider, provided SDG&E files a specific proposal via an Advice Letter.

13. Given the Budget Bill language intending to overturn the alternative exchange portion of D.00-06-034, a modified version of the proposed SDG&E procurement PBR settlement should be reconsidered.

14. It is reasonable to direct the Energy Division to investigate these market problems and to issue a public report that includes findings and recommendation on what must be done to protect small customers in the future.

15. Pursuant to Rule 73, we officially notice that bills for electricity in San Diego are double those of just one year ago. We also officially notice that the ISO has declared several emergencies this summer which have led to voluntary curtailments and rolling outages.

16. Allowing SDG&E to apply for a change in default provider role is consistent with Section 365.5.

17. The California Energy Oversight Board has the authority and responsibility for ensuring the proper operation of the ISO and PX.

18. This order should be effective today, so that these provisions may be implemented expeditiously.

FINAL ORDER

IT IS ORDERED that:

1. The Emergency Petition to Modify Decision (D.) 99-05-051 Filed by The Utility Consumers' Action Network (UCAN) is granted in part and denied in part, as described in this decision.

2. San Diego Gas & Electric Company's (SDG&E) request to amortize the overcollection in its Transition Cost Balancing Account (TCBA) is granted. Advice Letter 1237-E is approved.

3. SDG&E is granted expanded authority to participate in the California Power Exchange's Block Forward Market. This authority is consistent with that granted to Pacific Gas and Electric Company and Southern California Edison Company. Advice Letter 1234-E is approved.

4. SDG&E shall expand its Levelized Payment Plan program to all eligible customers subject to opt-out provisions as described herein. SDG&E should file tariffs within 14 days to implement this change.

5. SDG&E shall expand its Levelized Payment Plan program to streetlighting customers and shall ensure that all customers can easily enroll in such a plan.

6. Energy Division is to conduct its own investigation and to prepare a report no later than September 15, 2000.

7. Consistent with this Decision, the Executive Director shall transmit a letter to the EOB urging a broad investigation into the causes of the summer price run-ups, market manipulation allegations and modification of the ISO's organizational structure.

8. Consistent with this Decision, the Executive Director shall transmit a written request to FERC to investigate the summer price run-ups, market manipulation allegations and functioning of the Western energy markets.

9. There should be a further hearing in this proceeding no later than September 2000 as described herein.

This order is effective today.

Dated ___________________, at San Francisco, California.

¹ In contrast, SCE and PG&E customers are incurring similar high costs now. The legislative "rate freeze" adopted in conjunction with the CTC causes the bills to become due later. Insead of raising rates, these price increases slow recovery of the CTC. Thus, these customers do not see these escalating costs and obligations in the same way.

² Commonwealth Energy no longer supplies energy to the power purchase pool to which SLA belongs.