VIII. Tracking Mechanism to Ensure Proper
Allocation of DA Default Between Core
and Noncore Classes

A. Parties' Positions

ORA recommends that the Commission adopt a tracking mechanism as set forth in Attachment A of its testimony to facilitate reallocating the defaulted unpaid balances of DA customers that terminate utility service altogether to other DA customers. This tracking mechanism is intended to allow those defaults to be shared by all DA customers. Defaults from non-core DA customers would be allocated partly to core direct access customers, and vice versa.

ORA's proposed CRS tracking account would contain two subaccounts. One would track debts owed by core DA to core bundled customers, and the other would track debts owed by non-core DA to non-core bundled customers. This debt is paid down primarily through the credit entries in line 2. If direct access load decreases, the credit entries in line 2 will be reduced, potentially extending the repayment period. However, if the decrease in direct access load is caused by a direct access customer moving to bundled service, there is a credit entry for the CRS make-up charge in line 3. That entry should be sufficient to compensate for the smaller future credit entries in line 2, thus leaving the repayment period unchanged, assuming the CRS itself does not change.

If, on the other hand, a direct access customer terminates utility service altogether without paying the required make-up charge, then the repayment period is extended. But the impact of that extension is allocated between the core and non-core class in lines 4 and 5. Thus, for example, if a core direct access customer defaults on the make-up charge, part of that responsibility is reallocated to the non-core class through a credit entry in line 4 (corresponding to the debit entry in line 5 of the non-core subaccount), reducing the otherwise applicable debt owed by the core direct access to core bundled customers. Thus, though the repayment period is extended because of smaller credits on line 2, the credit entry on line 4 reduces this extension somewhat. Line 5 in the core subaccount is a debit entry (corresponding to the credit entry on line 4 of the non-core subaccount) that would increase the repayment period in the event of default by a non-core customer.

A potential downside of this mechanism is that defaults by non-core direct access customers will increase the length of the loan for core customers, increasing risk to bundled core customers. ORA believes that the increased protection of having more direct access customers bear the default risk more than compensates for the reduced protection associated with allowing defaults to cross classes.

ORA recommends that the Commission adopt accounting provisions similar to those presented in Attachment A of its prepared testimony. While an accounting mechanism that clearly tracks the obligations of direct access customer will facilitate accurate repayments, the existence of such a system will not necessarily mitigate default risk.

PG&E agrees with ORA that the shortfall associated with the DA CRS cap must be tracked, and proposes the title of the "Direct Access Shortfall Account."

B. Discussion

Since we do not adopt ORA's proposal to create core and non-core categories for allocating the DA CRS shortfall, we do not approve ORA's specific accounting proposal. However, we agree with ORA that an accounting and tracking mechanism is useful to ensure proper allocation of undercollections. ORA proposes that the Commission hold a workshop to further develop the record on how to account for the growth and repayment of the CRS undercollection, and ensure appropriate allocation to classes. ORA believes such a workshop is appropriate particularly now that a settlement in A.03-01-019 has partially resolved the allocation of the CRS undercollection to classes. We agree that a workshop is appropriate to address these accounting implementation and coordination issues in more detail. We shall therefore direct the ALJ to schedule a workshop for this purpose.