STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

March 26, 2001

TO: PARTIES OF RECORD IN APPLICATION 00-11-038 ET AL.

This is the alternate proposed decision of Commissioner Lynch. It will be on the Commission's agenda at the next regular meeting. The Commission may act then, or it may postpone action until later.

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.

Rule 77.7(f)(9) provides for reduction of the 30-day period for public review and comment when public necessity requires such reduction. We must balance whether the public necessity of adopting an order outweighs the public interest in having the full 30-day review and comment. We are convinced that this alternate proposed decision falls under Rule 77.7(f)(9), and for that reason, we are holding expedited Final Oral Argument in lieu of comments on the alternate proposed decision.

/s/ ANGELA K. MINKIN for

Lynn T. Carew, Chief

Administrative Law Judge

LTC:eap

Attachments

COM/LYN/abw DRAFT Item 5b

3/27/2001

Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER LYNCH (Mailed 3/26/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Southern California Edison Company (E 3338-E) for Authority to Institute a Rate Stabilization Plan with a Rate Increase and End of Rate Freeze Tariffs.	Application 00-11-038 (Filed November 16, 2000)
Emergency Application of Pacific Gas and Electric Company to Adopt a Rate Stabilization Plan. (U 39 E)	Application 00-11-056 (Filed November 22, 2000)
Petition of THE UTILITY REFORM NETWORK for Modification of Resolution E-3527.	Application 00-10-028 (Filed October 17, 2000)

(See Appendix A for List of Appearances.)

INTERIM OPINION REGARDING PROPOSED RATE INCREASES

I. Summary

This decision grants Southern California Edison Company (SCE) and Pacific Gas and Electric Company (PG&E) authority to increase rates by adding to their current rates a three-cent per kilowatt-hour (kWh) surcharge in response to the current emergency in the electric industry.

After an independent accounting review, an evidentiary hearing and a full opportunity to comment and testify provided to all parties, we conclude that the utilities have established the need for additional revenues on a going-forward basis in order for those utilities to comply with their statutory duty to provide adequate electric service to their customers. Today's decision does not address recovery of past power purchase costs and other costs claimed by the utilities.

The increase will be added to the utilities' currently controlled rates and will be in addition to the emergency surcharge approved on January 4, 2001 and made permanent by with this decision. It will cost the customers of the utilities approximately $2.5 billion dollars annually.¹ The California Department of Water Resources has yet to provide the Commission with either its revenue requirement or with detailed data regarding its net short needs. We will allocate a portion of this surcharge directly to the California Department of Water Resources (CDWR) when CDWR provides this Commission a revenue requirement that documents its need for revenues in excess of those allocated by D.01-03-__.

The Federal Energy Regulation Commission (FERC) has determined that current wholesale power rates are not just and reasonable. However, both the utilities and CDWR in large measure are subject to those wholesale rates in order to assure adequate electric service. An increase in retail electric rates is necessary because without it the state's electricity system and its economy will be severely jeopardized. We adopt this increase effective today, but we seek parties' comments on the amount of the increase and on rate design proposals for its collection, including that which the assigned commissioner set forth in the Assigned Commissioner's Ruling issued contemporaneously.

We recognize that this rate increase will impose expense on California's citizens and businesses; in this decision we also take steps to mitigate this pain somewhat. This decision modifies accounting rules which apply to the utilities, in response to a proposal made by TURN, so that we will be able to evaluate the full consequences of the accounting rules set up to implement AB 1890 and to adjust rates in the future, if warranted. In addition, we adopt a proposal that specifically shelters low-income households eligible for the California Alternative Rates for Energy (CARE) program for the electric customers of PG&E and Edison by expanding the eligibility criteria from 150% to 175% of federal poverty guidelines.²