STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

May 17, 2005 Agenda ID #4618

TO: PARTIES OF RECORD IN RULEMAKING 02-01-011

This is the draft decision of Administrative Law Judge (ALJ) Pulsifer. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft 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 draft 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/PUBLISHED/RULES PRAC PROC/44887.htm. 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

ALJ/TRP/jva DRAFT Agenda ID #4618

Ratesetting

Decision DRAFT DECISION OF ALJ PULSIFER (Mailed 5/17/2005)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking Regarding the Implementation of the Suspension of Direct Access Pursuant to Assembly Bill 1X and Decision 01-09-060.

Rulemaking 02-01-011 (Filed January 9, 2002)

OPINION RESOLVING PETITION TO MODIFY DECISION 04-12-059 AND RELATED DECISIONS REGARDING MUNICIPAL DEPARTING LOAD ISSUES

I. Introduction

This order grants, in part, and denies, in part, the California Municipal Utilities Association (CMUA) Petition to Modify Decision (D.) 04-12-059 and related decisions, filed February 16, 2005, in Rulemaking (R.) 02-01-011 (Petition). CMUA concurrently filed a Petition to Modify D.04-11-015 in Application 04-07-032, and a Petition to Modify D.04-02-062 in Investigation (I.) 02-04-026. We resolve those Petitions in a separate companion order.

The CMUA Petition concerns certain issues relating to the applicability of the Municipal Departing Load (MDL)¹ "cost responsibility surcharge" (CRS) within the service territories of California's three major electric utilities:

Southern California Edison Company (SCE), Pacific Gas and Electric Company (PG&E), and San Diego Gas & Electric Company (SDG&E). D.04-12-059 resolved applications for rehearing of D.04-11-014, and D.03-08-076 resolved applications for rehearing of D.03-07-028.

The CRS was assessed on MDL customers to provide recovery of a fair share of costs as prescribed in D.03-07-028 and related decisions. The CRS incorporates costs incurred by the investor-owned utilities and by the California Department of Water Resources (DWR) pursuant to legislative directive, as set forth in Assembly Bill (AB) 1 from the First Extraordinary Session (AB 1X ). (See Stats. 2002, Ch. 4) and Pub. Util. Code § 366.2(d).

In its opening comments in the MDL billing and collection phase of this proceeding, CMUA described what it considered to be certain ambiguities and conflicts that require clarification, and requested that the Commission issue a ruling or decision clarifying these issues. These issues were discussed at the January 31 billing and collection workshop, subsequent to which CMUA received direction from Administrative Law Judge (ALJ) Pulsifer to file a formal pleading so that all parties may have an opportunity to specifically address the issues raised by CMUA. Accordingly, CMUA filed its Petition for Modification.

CMUA claims in its Petition that there are certain ambiguities and conflicts within the Commission's decisions addressing MDL CRS applicability, and requests that the Commission issue a ruling or decision that "clarifies the scope" of CRS exemptions for categories of MDL, in the manner specified in the CMUA Petition.

Responses to the CMUA Petition were filed on March 17, 2005. Comments in support of the Petition were filed by the Merced Irrigation District (ID), Modesto ID, South San Joaquin ID and the Northern California Power Agency. Comments in opposition to the Petition were filed by PG&E and SCE. Based on review of the parties' pleadings, we reach the following conclusions, as set forth below.

¹ As used herein, the term "Municipal Departing Load" refers to departing load served by a "publicly owned utility" as that term is defined in Pub. Util. Code § 9604(d).