5. Should the Commission Exclude Specific Bundled Customers or
Electricity Consumption from the Bond Charge?
A central issue to the development of a surcharge to recover bond-related costs is determining who should pay these costs. As noted above, R.02-01-011 is determining whether and how DA and departing load (DL) customers should bear responsibility for bond-related costs. This proceeding, in contrast, will set the methodology for calculating a bond charge that those responsible for bond-related costs should pay. As a consequence, legal and policy arguments concerning whether DA or DL customers should pay bond-related surcharges fall outside the scope of this proceeding.
We do address whether certain bundled customers should pay for bond-related costs. In particular, we must determine the responsibility of CARE-eligible customers, residential customer usage below 130% of baseline, and medical baseline customers for the payment of bond charges.
Currently, these customers (and associated usage) are exempt from the 3 cents/kWh surcharge the Commission adopted for PG&E and SCE customers23 and from the 1.46 cents/kWh rate increase the Commission adopted for SDG&E customers.24 Furthermore, California Water Code Section 80110 states:
" . . . In no case shall the commission [California Public Utilities Commission] increase the electricity charges in effect on the date that the act that adds this section becomes effective for residential customers for existing baseline quantities or usage by those customers of up to 130 percent of existing baseline quantities, until such time as the department has recovered the costs of power it has procured for the electrical corporation's retail end use customers as provided in this division. . ."
As the July 26 ALJ Ruling noted, the interpretation of this statute may be critical to determining the size of the bond charges and the methodology for setting such charges. The ALJ Ruling also set the issue for briefing and resolution in this proceeding.
We therefore turn to the question of whether to exclude this usage from bond charges, and whether this exclusion rests on policy or legal grounds.
A. Positions of Parties
SCE, ORA, and TURN urge the Commission to exempt residential sales below 130% of baseline, medical baseline, and CARE customer usage from the bond charge.25
Concerning the interpretation of Water Code Section 80110, SCE, PG&E, CLECA and EPUC state that it would be possible to assign responsibility for the bond charge to residential sales below 130% of baseline as long as some other charge is reduced. SCE and PG&E note that it would be possible to dedicate a revenue stream within their current rates to pay for the bond charge and to adopt offsetting rate decreases, thereby complying with the statute. CLECA and EPUC argue more broadly that all utilities can accommodate a bond charge within their current rates. PG&E, CLECA, and EPUC argue that the bond charge should apply to all usage.
SDG&E also argues that the bond charge should apply to all residential usage, but it does not argue that it can accommodate such a policy within its current rates. Instead, SDG&E concludes that Water Code § 80110 no longer applies:
"Once the bonds are sold, DWR will have recovered those costs, to wit, the costs of power it has procured for the electrical corporation's retail end use customers. Buyers of the bonds will have provided the costs of power procured by DWR. Thus, this provision of Water Code 80110 will no longer restrict the Commission after the bonds are sold."26
SDG&E then states that exempting customers using less than 130% of baseline has no basis in costs. SDG&E further argues that such a policy will cause "an additional $16 million in annual residential commodity shortfalls."27 SDG&E concludes that such a policy may increase the existing business to residential subsidy "to well over $50 million per year."28
ORA, TURN and SCE take exception to SDG&E's interpretation of Water Code § 80110. SCE argues:
"Paying back the general fund and interim loan from bond proceeds is not `recovery' of those amounts; collection from end-use customers of the Bond Charge is the actual `recovery.' SDG&E thus incorrectly interprets Water Code Section 80110, when it concludes that issuance of bonds is tantamount to DWR's recovery of the cost of power it procured and will continue to procure for electrical corporations' retail end-use customers."29
Then, in a case of rhetorical convergence, ORA, TURN and SCE each develop an analogy with the purchase of a home and the obtaining of a mortgage. ORA succinctly argues "[a]nyone knows that the house is not owned until the mortgage is paid off."30
B. Discussion: Exempt Residential Sales Below 130% of Baseline, Medical Baseline, and CARE-Eligible Customer Usage from Bond Charges
Section 80110 of the Water Code became effective on February 1, 2001. On May 15, 2001, the Commission both interpreted and discussed at length how to implement rate design changes consistent with this statute:
"This statute exempts from additional rate increases all residential electricity usage that falls within 130% of "baseline" usage. Baseline usage is defined in Section 739(a). That section requires the Commission to establish a quantity of natural gas and electricity that is necessary to supply a "significant portion of the reasonable energy needs of the average residential customer." The "baseline quantity" is defined to be between 50 and 60 percent of average residential consumption, with allowances for seasonal and climatic variations, Section 739(d)(1). The Commission is further directed to require the utilities to file residential rate schedules that provide for the baseline quantity to be the first or lowest block in an increasing block rate structure. Section 739(c)(1). In addition, the Commission is directed to "establish an appropriate gradual difference between the rates for the respective blocks of usage." Section 739(c)(1). In 1986, the Commission determined the initial baseline quantities in D.86087, 80 CPUC 182. Subsequent revisions and updates to the baseline quantities and applicable rates have been made in the utilities' general rate cases." 31
As it interpreted this statute, the Commission noted that the statutory exemption sharply constrained its freedom to design rates:
"Taken together, new Water Code § 80110 and Pub. Util. Code § 739, exempt over 60% of residential sales from the 3 [cents] /kWh rate surcharge we authorized March 27th. The resulting shortfall is significant: 64% of all Edison residential sales are exempt, and 62% of all PG&E residential sales are exempt. These use exemptions result in half of all residential customers--those who use less than 130% of baseline--being protected by statute from further rate increases."32
Subsequently, the Commission adopted a rate design that allocated the substantial revenue shortfall that arises from the exemption to all other consumption. In D.01-09-059, the Commission adopted a similar approach to allocating a rate increase for SDG&E's customers.
We plan to once again follow the policy of excluding from new charges residential sales below 130% of baseline, medical baseline, and CARE-eligible customer usage from the bond charge. First, the equity considerations that led us to exclude this usage from previous charges continue to apply. These exclusions are consistent with our own recent actions in D.01-05-064 and D.01-09-059, our last actions involving rates in response to California's electric crisis. Moreover, the actions to exclude these customers from new charges were taken only a year ago, and it makes little sense to reverse policy and impose a new charge now.
Further, we believe that continuing to exclude this customer usage from the exceptional charges that have resulted from the electricity crisis is in the public interest. Excluding consumption up to 130% of baseline creates incentives for residential customers to conserve power. Excluding from new charges electricity usage by those with medical disability and low income simply continues previous pricing plans that serve the public interest.
Second, although it may prove possible to impose a bond charge on all usage consistent with the requirements of Water Code § 80110, excluding this usage from the bond charge is clearly consistent with the legislative intent behind this statute and inherently reasonable.
Third, although SCE and PG&E have stated that it is possible to dedicate a portion of some existing charge to the bond charges, there is no similar certainty that we can do so for SDG&E. In particular, there is no record on whether and how the Commission could impose a bond charge out on endusers in SDG&E's territory without raising the electricity charges all customers must pay.
As noted above, in response to this dilemma, SDG&E claims that the law does not preclude raising charges on any customers. SDG&E's proposes a novel legal theory - that Water Code § 80110 will not apply once the bond sale is complete because at that time DWR will have recovered the costs of the power it has procured. In rebuttal, ORA and SCE convincingly argue that a house is not paid for until the mortgage is paid off, and that DWR will not have recovered its costs until the bonds are repaid. Further, CLECA, SCE, and PG&E, and EPUC state that the Commission could apply a bond charge to all customers as long as this action does not lead to an increase in rates for the consumption excluded from electricity charge increases by Water Code § 80110.
We find that SDG&E's interpretation does not comport with a reasonable reading of the statute. Thus, we do not believe that we can legally allocate a bond charge that applies to all residential customers without also adopting some offsetting adjustment to ensure that charges do not increase on usage by residential customers up to 130% of baseline. Moreover, there is no record in this proceeding as to how we could to so for customers in SDG&E's service territory.
In summary, for policy reasons and to ensure compliance with AB1X, and the Legislature's intent for its enactment, we exclude residential sales below 130% of baseline, medical baseline, and CARE-eligible customer usage from the bond charge. First, we use the same policy reasoning and equity considerations contained in D.01-05-064 and D.01-09-059 and thereby find it reasonable to exclude this consumption from additional charges. Second, we find that this outcome is consistent with the legislative intent of AB1X and inherently reasonable. Third, we note that even if it was possible to craft some other policy that applies a bond charge to all customers in a way that complies with AB1X, the record in this proceeding does not show how we could accomplish this for consumers in SDG&E's service territory.
