XII. Assignment of Proceeding
Carl W. Wood and Geoffrey F. Brown are the Assigned Commissioners and Thomas Pulsifer is the assigned Administrative Law Judge in this proceeding.
1. D.02-03-055 determined that as a condition of retaining the DA suspension date of September 21, 2001, a surcharge must be imposed on DA customers sufficient to make bundled customers economically indifferent between a DA suspension date of July 1 versus September 21, 2001.
2. By D.02-11-022, an interim DA CRS cap of 2.7 cents per kWh was adopted pending further study and possible revision effective on and after July 1, 2003.
3. A reasonable criterion for purposes of preserving bundled customer indifference with respect to DA load migration is to ensure full payback of the DA CRS undercollection no later than the end of the DWR contract term expected to occur in 2011, and preferably sooner.
4. To provide a framework for analysis of potential future DA CRS obligations and the resulting effects of alternative caps, Navigant produced a range of 24 separate modeling scenarios, incorporating the "total portfolio indifference" approach.
5. The Navigant scenarios are based upon three sets of resource assumptions, comprising a low, high, and base case in which the sensitivities of the undercollection and payback period are tested with respect to changes in key variables relating to DA load, natural gas prices, new generation, and CTC levels.
6. While certain parties support use of the base case for evaluating DA CRS payback periods, no support was provided to show that the assumptions underlying the base case have a greater overall likelihood of occurrence relative to the low or high case.
7. No party supported the high case as offering more reliable forecast assumptions than either the low or base case.
8. Although Navigant's initial runs did not identify a single actual 2001-2002 recorded undercollection applicable to DA CRS, it subsequently submitted revised calculations that identified values for the actual undercollection applicable to each utility.
10. The substitution of the updated data regarding actual 2001-2002 recorded undercollection values submitted by Navigant reflect the continuing varying outcomes.
11. In order to remain indifferent with respect to the DA CRS undercollection, bundled customers must be fairly compensated for the time value of money through an appropriate interest rate.
12. Bundled ratepayers will pay for the undercollection using their capital, which is a mix of equity and debt.
13. Because the DA CRS undercollection is long term in nature, the most appropriate indicator of the cost of money is the long-term utility weighted cost of capital, which include both a debt and an equity element
14. The broadest based measure of the cost of capital relevant to bundled ratepayers is the utilities' after-tax weighted cost of capital
15. A reasonable proxy for bundled customers' cost of money for the financing of the DA CRS undercollection is an interest rate based on the approximately 9.25% utility after-tax weighted cost of capital
16. The after tax weighted cost of capital has been used in a number of prior Commission decisions as the appropriate proxy for ratepayers' time value of money.
17. Use of the utility after-tax weighted cost of capital as the interest rate on the DA CRS undercollection is will fully compensate ratepayers for their time value of money, and leave bundled customers indifferent to the imposition of the DA CRS undercollection.
18. The Commission has a stated policy of seeking to preserve the viability of DA.
19. Deferring recovery of costs from DA customers into the future will jeopardize the future viability of DA.
20. Because of the diversity of DA contracts and customers, no single cap will necessarily preserve viability of every DA customer, or prevent the return to bundled service, business failure or relocation outside California.
21. No party justified that any cap lower than 2.7 cents is required to maintain of DA viability.
22. The record does not support that for certain DA customers, particularly in energy intensive industries, increases in the cap will increase the risk of DA becoming unviable.
23. ORA's proposal to allocate between two broad classes, core and noncore, significantly modifies the approach to implement the intent of the Commission expressed in D. 02-11-022 concerning the assignment of the undercollection among different categories of bundled customers.
24. Under ORA's proposal, core would include residential and small commercial under 20 kW and large agricultural customers.
25. ORA proposals for allocating the DA CRS undercollection among non-core customers would shift much of the costs from industrial to commercial and governmental customers.
26. Periodic reevaluations of the DA CRS cap level will mitigate the risk of future DA CRS forecast error, and assure timely bundled customer payoff of undercollections.
27. Determination of final figures for the 2001-2002 undercollection and 2003 prospective revenue requirement for DA CRS have yet to be implemented in coordination with the DWR proceeding in A.00-11-038 et al.
28. The revised order of collection of DA CRS elements with CTC collected second and DWR power charge collected third will simplify the accounting and administrative process.
1. This phase of the proceeding is focused on evaluating the DA CRS cap subsequent to July 1, 2003 rather than adopting total DA CRS revenue requirement elements.
2. The determination of the total authorized DA CRS level of the 2003 DWR power charge and 2001-2002 undercollections should be made in parallel with the overall determination of the total DWR revenue requirement in A.00-11-038 et al.
3. The adoption of a total authorized level of the CTC element comprising the DA CRS should not be finalized in this phase of the proceeding because further scrutiny of the utilities' proposed CTC calculations is warranted.
4. The task of finalizing CTC levels should be addressed in the ERRA proceeding for each utility.
5. SDG&E should amend its CTC calculation to be consistent with the total portfolio approach adopted in D.02-11-022, such that below-benchmark resources are included with above-benchmark resources.
6. The purpose of the DWR and CTC calculations presented in this phase of the proceeding is to provide a range of forecasts to evaluate the sensitivity of variances in key resource inputs and cap levels in relation to DA CRS undercollections and resulting payback periods.
7. The Commission should determine the level of DA CRS cap that balances the criteria of preserving bundled customer indifference and maintaining DA viability.
8. The criteria for preserving bundled customer indifference should provide assurance that CRS undercollections resulting from the cap will be repaid in full to bundled customers, with compensatory interest, over a reasonable period of time.
9. A reasonable time period for full repayment of the DA CRS undercollection should not exceed the term of the DWR contracts, due to expire in 2011, and should preferably be shorter.
10. The modeling scenarios of forecast DA CRS levels prepared by DWR/Navigant provide an appropriate framework for evaluating the potential cumulative undercollections and time period required to achieve full pay back to bundled customers for each utility.
11. A cap of 4.0 cents per kWh for PG&E, SCE and SDG&E should be adopted during the period on and after July 1, 2003 subject to possible revision in the next scheduled DA CRS cap review proceeding in order to balance the dual goals of preserving bundled customer indifference and maintaining DA viability.
12. In each annual DA CRS cap review proceeding, the cap should be subject to adjustment, to the extent necessary to maintain that the goal of full bundled customer payback by the end of the DWR contract term in 2011.
13. In order to preserve bundled customer indifference, an interest rate must be applied to the DA CRS undercollection that reasonably compensates bundled customers for the time value of money.
14. An interest rate corresponding the utility long-term after-tax weighted cost of capital of approximately 9.25% as referenced in the testimony of ORA offers a reasonable approximation of the cost of money associated with the DA CRS undercollection.
15. The proposal of ORA to allocate the DA CRS undercollection based upon a core and noncore segregation of customers should not be adopted as it significantly shifts the burden of bearing the DA CRS undercollection onto residential and commercial customers
16. The proposal of ORA to conduct a workshop to establish an accounting mechanism to track the DA CRS should be adopted.
17. In order to simplify the administrative and accounting process, PG&E's proposal to revise the order in which the respective DA CRS are deemed collected should be adopted so that CTC is collected second with the DWR power charge collected third.
IT IS ORDERED that:
1. The Direct Access (DA) cost responsibility surcharge (CRS) shall be capped at 4.0 cents per kWh for Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas and Electric Company (SDG&E) to remain in effect for the period beginning on and after July 1, 2003. The cap shall be subject to possible future adjustment, as deemed necessary to pay off the DA CRS undercollection by 2011, through periodic review in annual DWR revenue requirement proceedings.
2. The final recorded confirmation of the DA CRS undercollection for 2001-2002, together with the adoption of the final adopted allocation of 2003 DWR power charges to the DA CRS shall be determined and implemented on a parallel basis in coordination with the implementation of the 2003 DWR revenue requirement redetermination in Application (A.) 00-11-038. The Administrative Law Judges in both this docket and in A.00-11-038 shall coordinate as necessary to ensure the timely implementation of this process in connection with the DWR 2003 revenue requirement redetermination.
3. The proposal of the Office of Ratepayer Advocates (ORA) for allocation of the DA CRS undercollection on a core versus noncore basis is denied.
4. The proposal of ORA to hold a workshop to establish an accounting mechanism to track the DA CRS undercollection is adopted
5. The ALJ shall schedule a workshop to address in further detail how to implement the accounting for growth and repayment of the undercollection in accordance.
6. The interest rate on DA CRS undercollections shall be applied based upon the utility long-term after-tax weighted cost of capital, as authorized by the Commission.
7. The interest rate on DA CRS shall be applied equally to all DA CRS undercollected amounts.
8. The proposal of Pacific Gas and Electric Company to revise the order of collection of the DA CRS elements is hereby adopted. Accordingly, the CTC element shall be deemed to be collected second in order after the DWR bond charge. The DWR power charge shall be deemed to be collected third in order after the CTC element.
9. The finalization of the CTC element shall be addressed in the ERRA proceeding.
10. The DA CRS cap shall remain subject to annual reevaluation in connection with the ongoing annual redetermination of DWR revenue requirements. The caps shall be subject to adjustment at that time to ensure the goal is preserved of full bundled customer reimbursement no later than the end of the DWR contract term.
This order is effective today.
Dated , at San Francisco, California.
