STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

September 27, 2004 Agenda ID #3929

TO: PARTIES OF RECORD IN APPLICATION 03-10-022

This is the proposed decision of Administrative Law Judge (ALJ) Fukutome, previously designated as the principal hearing officer in this proceeding. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. This matter was categorized as ratesetting and is subject to Pub. Util. Code § 1701.3(c). Pursuant to Resolution ALJ-180 a Ratesetting Deliberative Meeting to consider this matter may be held upon the request of any Commissioner. If that occurs, the Commission will prepare and mail an agenda for the Ratesetting Deliberative Meeting 10 days before hand. When an RDM is held, there is a related ex parte communications prohibition period.

The Commission may act at the regular meeting, or it may postpone action until later. If action is postponed, the Commission will announce whether and when there will be a further prohibition on communications.

When the Commission acts on the proposed decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the proposed decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:jva

Attachment

181029

ALJ/DKF/jva DRAFT Agenda ID #3929

Ratesetting

DecisionPROPOSED DECISION OF ALJ FUKUTOME (Mailed 9/27/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Southern California Edison Company (U 338-E) For Approval of its 2004 Revenue Requirement and Related Estimates Under the Energy Resource Recovery Account (ERRA); And For a Commission Finding that its Procurement-Related and Other Operations were Reasonable for the Record Period September 1, 2001 Through June 30, 2003.

Application 03-10-022

(Filed October 3, 2003)

Daniel W. Douglass, by Gregory S.G. Klatt, Attorney at Law,

Alcantar & Kahl LLP, by Nora Sheriff, Attorney at Law,

and Robert B. Keeler, Attorney at Law, for

Southern California Edison Company, applicant.

William H. Booth, Attorney at Law, interested party.

Regina DeAngelis, for Office of Ratepayer Advocates, protestant.

OPINION RESOLVING THE REASONABLENESS PHASE OF

SOUTHERN CALIFORNIA EDISON COMPANY'S

ENERGY RESOURCE RECOVERY ACCOUNT APPLICATION

1. Summary 2 2

2. Procedural History 2 2

3. SCE's Showing 3 3

4. ORA Recommendations 3 3

5. Scope of Review for Least Cost Dispatch under SOC 4 4 4

5.1. Positions of the Parties 5 5

5.2. Discussion 7 7

6. Standard of Review for Least Cost Dispatch under SOC 4 9 9

6.1. Positions of the Parties 9 9

6.2. Discussion 11 11

7. Forum for Review of Spot Market Transactions 15 15

8. Other Least Cost Dispatch Issues 16 16

9. Contract Administration and Costs 20 20

10. Cogeneration QFs and Renewable Contract Administration and Costs 22 22

11. Master Data Request 23 23

12. Audit Issues 25 25

12.1. CDWR Settlement Payment Authorization 25 25

12.2. ISO Expense Adjustment 26 26

12.3. Refinancing Transaction Fees 26 26

12.4. Employee Related Costs 26 26

13. Uncontested Costs 28 28

13.1. Generation 28 28

13.2. Special Contracts 28 28

13.3. Cost of Collateral 28 28

13.4. ISO-Related Costs 29 29

13.5. Fuel Oil Inventory Carrying Costs 29 29

13.6. Electric Vehicle Costs 30 30

13.7. Discussion 30 30

14. Confidential Information 30 30

15. Comments on Proposed Decision 32 32

16. Assignment of Proceeding 32 32

Findings of Fact 32 32

Conclusions of Law 34 34

ORDER 36 36

OPINION RESOLVING THE REASONABLENESS PHASE OF

SOUTHERN CALIFORNIA EDISON COMPANY'S

ENERGY RESOURCE RECOVERY ACCOUNT APPLICATION

1. Summary

This decision adopts a joint Southern California Edison Company (SCE) and Office of Ratepayer Advocates (ORA) recommendation to reduce the Energy Resource Recovery Account (ERRA) by a net amount of $3,574,000 to reconcile certain audit issues. In all other respects, the decision finds SCE's procurement related and other operations were reasonable for the record period September 1, 2001 through June 30, 2003.

The scope of least-cost dispatch review in the ERRA is defined to be the review of decisions, actions, and estimates related to the dispatch of all resources, for up to a year prior to the dispatch day. The standard of review for least-cost dispatch is compliance with Standard of Conduct #4 (SOC 4), which is an element of SCE's procurement plan.

SCE and ORA are ordered to develop and implement a master data request process to be used in future SCE ERRA filings.