III. Request

This cost of capital application is Sierra's first filing in five years since the Commission approved a proposed merger between Sierra and the Washington Water Power Company in which Sierra reduced its rates to California customers by $3.1 million and froze those rates through December 31, 1999. As a result of a second decision on the merger, D.96-05-059, Sierra reduced rates by an additional $2.3 million effective June 1, 1996 and froze those rates through 1999. Because the merger collapsed in June 1996, Sierra and Office of Ratepayer Advocates (ORA) petitioned the Commission for an order affirming the provisions of D.96-05-059 and extending the rate freeze through 2000. In D.96-12-084, the Commission approved the joint petition and ordered Sierra to file a cost of capital application by May 8, 2000 for implementation on January 1, 2001.⁴ This application is timely filed.

Sierra seeks authority to increase its 2001 test year ROE from 11.60% to 12.00% for its electric utility distribution operations. Approval of Sierra's 2001 requested ROE would result in a decrease in its overall California rate of return on rate base by five basis points from 9.60% to 9.55% for its electric distribution operations. Sierra also seeks authority to establish an automatic trigger mechanism to adjust its ROE on an annual basis.