STATE OF CALIFORNIA GRAY DAVIS, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
January 8, 2002 Item 1
2/7/2002
TO: PARTIES OF RECORD IN APPLICATION 00-11-038 ET AL.
This is the proposed decision of Administrative Law Judge (ALJ) Pulsifer, previously designated as the principal hearing officer in this proceeding. It will be on the Commission's agenda at the next regular meeting, which is scheduled for February 7, 2002. This matter was categorized as ratesetting and is subject to Pub. Util. Code § 1701.3(c). Pursuant to Resolution ALJ-180 a Ratesetting Deliberative Meeting to consider this matter may be held upon the request of any Commissioner. If that occurs, the Commission will prepare and mail an agenda for the Ratesetting Deliberative Meeting 10 days before hand, and will advise the parties of this fact, and of the related ex parte communications prohibition period.
The Commission may act at the regular meeting on February 7, 2002, or it may postpone action until later. If action is postponed, the Commission will announce whether and when there will be a further prohibition on communications.
When the Commission acts on the proposed decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.
Parties to the proceeding may file comments on the proposed decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Consistent with Rule 77.2, comments are due on the proposed decision within 20 days of its date of mailing. No extensions of this comment period will be granted, nor will any late-filed comments be accepted. Pursuant to Rule 87, we will reduce the reply comment period provided for in rule 77.5 to four days. Because the fifth day following opening comments falls on a weekend, good cause exists for shortening the reply period to four days to provide sufficient time for review of reply comments. Therefore, comments must be filed and served by January 28 and reply comments must be filed and served by February 1. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service. Comments and reply comments should be served on the ALJ electronically at trp@cpuc.ca.gov.
/s/ LYNN T. CAREW
Lynn T. Carew, Chief
Administrative Law Judge
LTC: hkr
ALJ/TRP/hkr DRAFT Item 1
2/7/2002
Decision PROPOSED DECISION OF ALJ PULSIFER (Mailed 1/8/2002)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Southern California Edison Company (E 3338-E) for Authority to Institute a Rate Stabilization Plan with a Rate Increase and End of Rate Freeze Tariffs. |
Application 00-11-038 (Filed November 16, 2000) |
|
Emergency Application of Pacific Gas and Electric Company to Adopt a Rate Stabilization Plan. (U 39 E) |
Application 00-11-056 (Filed November 22, 2000) |
|
Petition of THE UTILITY REFORM NETWORK for Modification of Resolution E-3527. |
Application 00-10-028 (Filed October 17, 2000) |
(See Appendix D for List of Appearances.)
TABLE OF CONTENTS
Title Page
II. Regulatory and Statutory Mandates Relating to DWR Power Procurement 55
III. Joint Roles of CPUC and DWR in Implementation of DWR Requirements 99
IV. Procedural Summary of DWR Revenue Requirement Implementation 1111
V. DWR's Representations Concerning the Reasonableness of Its Revenue Requirement 1515
VI. Elements Comprising the DWR Revenue Requirement 2020
VII. Miscellaneous Considerations Relating to DWR Revenue Requirement 3030
VIII. Allocation of Aggregate DWR Revenue Requirement
Among the Utility Service Areas 3535
2. Parties Supporting the Pro Rata Allocation Approach 4141
3. Parties Supporting Geographically Differentiated Cost Allocations 4343
1. Statutory Basis for Allocation Methodology 5252
2. Cost-Based Principles as a Basis for DWR Allocation Methodology 5353
3. Allocation of Administrative and Financing Costs 5555
4. Allocation of Power Procurement Commodity Costs 5555
a. Supply Portfolio Criterion 5656
b. Transmission Congestion Criterion 5757
c. Distinctions in the Allocation of Fixed Price Versus
Short Term Purchases 6565
d. Allocation Based on Monthly Versus Hourly Cost Data 6767
IX. Implementing Annual DWR Update Proceedings 7575
X. Implementation of DWR Revenue Remittance Procedures 8282
XI. DWR Revenue Requirement Implications for Utility Rate Needs 9090
XII. Comments on the Proposed Decision 9191
I. Overview
This decision implements cost recovery of the revenue requirements of the California Department of Water Resources' (DWR) relating to its power purchase program pursuant to Assembly Bill 1 of the First Extraordinary Session (Stats. 2001, Ch. 4), hereafter referred to as AB1X. On November 5, 2001 DWR submitted to the Commission its most recent revenue requirement of $10,003,461,000, representing the total to be collected from utility customers of the three major California utilities covering the period from January 17, 2001 through December 31, 2002.
In this decision, we determine how DWR revenue collections are to be allocated among the customers of the three major California electric utilities: Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E), and we establish procedures to implement the collection process. DWR will collect its revenue requirements through charges remitted from billings to retail customers of the three major electric utilities based on designated per-kWh charges as set forth in this decision. We allocate the total DWR revenue requirement among each of the three major utilities' service territories as follows:
($000's)
Utility Revenue Allocation % Allocation
PG&E |
$ 4,765,407 47.6% |
SCE |
$ 3,674,066 37.7% |
SDG&E |
$ 1,563,989 15.6% |
Total |
$ 10,003,461 100% |
As described below, we agree with the goal of allocating DWR costs in relation to the costs of providing service. We do not believe, however, that attempts to segregate disproportionately higher priced DWR power for allocation exclusively to northern California consumers is a proper or fair application of traditional cost-based ratemaking policies. The primary purpose of the Public Utilities Act is to insure the public adequate service at just and reasonable rates without discrimination. (Pub. Util. Code § 451 et seq., 761; see also United States Steel Corp. v. Public Utilities Com., 29 Cal. 3d 603, 610 (1981), quoting Pacific. Tel. & Tel. v. Public Utilities Com. 34 Cal.2d 822, 826 (1950).) The allocation proposed by SCE and SDG&E would unreasonably discriminate against customers served by PG&E by charging the latter a disproportionately high cost per kWh.
The allocation issue here, involving costs incurred by single entity (i.e., DWR) purchasing power on behalf of customers in three separate utility service territories is novel, and is not addressed by traditional cost-based ratemaking procedures as typically applied. Nonetheless, the allocation approach we adopt is consistent with the philosophy underlying traditional cost-based ratemaking. Our adopted approach allocates DWR costs in relation to the relevant cost driver, namely the net short position by utility.
Our statewide pro rata allocation recognizes the integrated nature of power procurement undertaken by DWR for California utility customers, but also adjusts for utility-specific differences, where applicable, as proposed by TURN. As a basis for the utilities to remit revenues to DWR in accordance with these allocations, we adopt a per-kWh charge for customers in the service territory of each utility of 10.047 cents/kWh for PG&E, 10.309 cents/kWh for SCE and 9.947 cents/kWh for SDG&E. These adopted DWR charges form the basis for the utilities to remit funds to DWR that they are currently collecting. We do not, however, change the overall level of retail rates for PG&E, SCE, or SDG&E in today's order. We will address the need for any change in rates for SDG&E customers in order to meet DWR's costs of serving SDG&E customers in a separate docket (Application (A.) 00-10-045 et al). 1 For SCE and PG&E customers, any need for a change in overall rates charged to customers as a result of this decision cannot be addressed until we after we issue our decision on utility retained generation (URG) issues.
We note that the high DWR contract prices now in effect in California reflect the exorbitant wholesale electricity costs caused by the crisis manufactured by wholesale electricity sellers and traders over the past year. These rates measure, in part, the terrible price California has had to pay to restore stability. Individual Commissioners and Governor Gray Davis have previously endorsed contract renegotiations to reduce prices that were set when market prices were at or near their peak. (Exhibit 160, Weil, p. 4.) DWR now forecasts that from October 1, 2001 through the end of 2002, average DWR contract prices will be 3.3 times average residual net short prices. (Reference Item C, DWR, November 5 revenue requirement document, p. 16, Table 6; compare DWR contract costs to residual net short costs for Q4 2001 and all of 2002.) DWR assumes that residual net short energy will be purchased in spot markets.
It is our hope that the actions of DWR and the utilities, as well as the efforts of public and private parties involved in cases at the Federal Energy Regulatory Commission (FERC) and in the courts to reduce costs will be successful, and that we will be able to revisit the DWR's revenue requirement to lower these charges in the future.
