STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
November 16, 2004 Agenda ID #4068
and
Alternate Proposed Decision
Agenda ID #4070
Ratesetting
TO: PARTIES OF RECORD IN APPLICATION (A.) 04-05-021 AND A.04-05-023
This is the proposed decision of Administrative Law Judge (ALJ) Galvin, previously designated as the principal hearing officer in this proceeding and the alternate proposed decision of Commissioner Brown. They will not appear on the Commission's agenda for at least 30 days after the date they are 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 beforehand. 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 and alternate 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 proposed decision and alternate proposed decision become binding on the parties.
Parties to the proceeding may file comments on the proposed decision and alternate 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, ChiefAdministrative Law Judge
ANG:sid
ALJ/MFG/sid DRAFT Agenda ID #4068
Ratesetting
Decision PROPOSED DECISION OF ALJ GALVIN (Mailed 11/16/2004)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
|
Application of Southern California Edison Company (U 338-E) for Authorized Capital Structure, rate of return on Common Equity, Embedded Cost of Debt and Preferred Stock, and Overall rate of Return for Utility Operations for 2005. |
Application 04-05-021 (Filed May 10, 2004) |
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Application of Pacific Gas and Electric Company for Authority to True-up its Cost of Capital for 2004 and to Establish its Authorized Cost of Capital for 2005. (U 39 M) |
Application 04-05-023 (Filed May 12, 2004) |
William Harn, Attorney at Law, for Southern California Edison
Company; and Shirley Woo, Attorney at Law, and Darcy
Morrison, for Pacific Gas and Electric Company, applicants.
James Weil, for Aglet Consumer Alliance; Robert Finkelstein,
Attorney at Law, for The Utility Reform Network;
Norman J. Furuta, Attorney at Law, for the Department of the Navy; Jeffrey M. Parrott and James Ozenne, Attorneys at Law, for San Diego Gas & Electric Company; Alcantar & Kahl, LLP, by Rod Aoki and Donald Brookhyser, Attorneys at Law, for Cogeneration Association of California; and Davis Wright Tremaine LLP, by Steven F. Greenwald and Jeffrey P. Gray, Attorneys at Law, for Calpine Corporation, interested parties.Laura J. Tudisco, Attorney at Law, for the Office of Ratepayer Advocates.
OPINION ON TEST YEAR 2005 RETURN ON EQUITY AND
ON PACIFIC GAS AND ELECTRIC COMPANY'S TRUE UP YEAR 2004
TABLE OF CONTENTS
Title Page
OPINION ON TEST YEAR 2005 RETURN ON EQUITY AND
ON PACIFIC GAS AND ELECTRIC COMPANY'S TRUE UP YEAR 2004 3
I. Summary 3
II. Jurisdiction and Background 4
III. Debt Equivalence 5
A. Utilities Proposed Solution 8
1. Debt Equivalence Impact 8
2. Annual ROE Proceeding 11
3. S&P's Debt Equivalence Formula 14
4. Debt Equivalence Policy 15
IV. Capital Structure 15
V. Long-Term Debt and Preferred Stock Costs 17
VI. Return on Common Equity 23
A. SCE's Return on Equity 25
1. SCE and ORA's Position 25
2. Aglet-TURN's Position 27
3. Discussion 29
B. PG&E's Return on Equity 34
1. PG&E's Position 35
2. Aglet-TURN's Position 36
3. ORA's Position 37
4. Discussion 37
VII. Implementation 41
VIII. Comments on Proposed Decision 42
IX. Assignment of Proceeding and Procedural Matters 42
Findings of Fact 43
Conclusions of Law 46
ORDER 48
APPENDIX A - Test Year 2005 Credit Ratios
APPENDIX B - SCE's Results of Financial Models
APPENDIX C - PG&E's Results of Financial Models
I.
