XIII. ROE Implementation

Sierra recommended that the revenue requirement change being authorized by this decision be combined with the results of its cost of service and PBR application into one decision so that changes can be implemented in 2001. Sierra's rates were first by D.96-12-084 pending the implementation of a new ROE and a PBR on January 1, 2001.¹⁷ Subsequently, D.97-12-073¹⁸ modified the rate freeze to conform with Assembly Bill 1890, which sets forth the framework under which California's electric corporations will move toward and function within a restructured electric industry.

It is not feasible to pass on to Sierra's ratepayers the benefit of a revenue requirement reduction while Sierra's rate freeze remains in effect. Absent a revenue requirement reduction, Sierra's energy charges to ratepayers would now be based on an excessive revenue requirement and violate the Bluefield and Hope cases which entitles Sierra the opportunity to earn a fair and reasonable, not an excessive, ROE. Until such time that Sierra's rate freeze ends, Sierra should adjust its authorized revenue requirement to reflect the ROE being adopted in this decision and adjust its rate components associated with the change in revenue requirement by an advice letter filing.