STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

August 27, 2001 9/6/2001

TO: PARTIES OF RECORD IN APPLICATION (A.) 00-10-045 AND A.01-01-044

This is a proposed decision of Administrative Law Judge (ALJ) Wetzell. It will be on the Commission's agenda at the meeting of September 6, 2001. 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.

This proposed decision is being served pursuant to Rule 77.1. Comments on the proposed decision are permitted. Those comments are to be electronically served on the service list (for those who have electronic addresses) no later than 10:00 a.m. on September 4, 2001, and shall be filed with the Commission by 5:00 p.m. on that date. Electronic service of the comments shall also be made on lss@cpuc.ca.gov and msw@cpuc.ca.gov. For those who have not provided electronic addresses, printed copies of the comments shall be served by mail or other expeditious mode of delivery. No reply comments will be permitted.

/s/ LYNN T. CAREW

Lynn T. Carew, Chief

Administrative Law Judge

LTC:sid

Attachments

ALJ/MSW/sid DRAFT 9/6/2001

Decision PROPOSED DECISION OF ALJ WETZELL (Mailed 8/27/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of San Diego Gas & Electric Company (U 902-E) for an Order Implementing Assembly Bill 265.	Application 00-10-045 (Filed October 24, 2000)
Application of San Diego Gas & Electric Company (U 902-E) for Authority to Implement an Electric Rate Surcharge to Manage the Balance in the Energy Rate Ceiling Revenue Shortfall Account.	Application 01-01-044 (Filed January 24, 2001)

(See Appendix A for a list of appearances.)

OPINION ADOPTING RATE INCREASES TO IMPLEMENT THE CALIFORNIA DEPARTMENT OF WATER RESOURCES' REVENUE REQUIREMENT

1. Summary

In accordance with Assembly Bill (AB) 1X (Stats. 2001, Ch. 4), we authorize a system-average rate increase of 1.46 cents per kilowatt-hour (kWh), or 12.1% for electric customers served by San Diego Gas & Electric Company (SDG&E). The increase will take effect on or after September 15, 2001, and not later than October 1, 2001, and will be used solely to provide additional funds to the California Department of Water Resources (DWR), which is currently procuring more than half of the electric power supplied to SDG&E's retail end use customers.

This decision also meets certain obligations created by recent rate stabilization legislation applicable to SDG&E.¹ Pursuant to Public Utilities Code, Section 332.1(b),² as first enacted by AB 265 and as amended by ABX1 43, residential, small commercial, and street lighting customers are subject to a rate ceiling of 6.5 cents per kWh on the energy component of their bills. Pursuant to § 332.1(f), as amended by ABX1 43, customers not subject to subdivision (b), i.e., larger commercial and industrial customers, and all agricultural customers regardless of size or consumption pattern, are subject to a frozen energy rate component that was initially set at 6.5 cents per kWh but may be adjusted subsequently, as provided in the statute. For purposes of this decision, customers listed in § 332.1(b) are referred to as "small" or "AB 265" customers. Customers subject to § 332.1(f) are referred to as "large" or "ABX1 43" customers. The energy rate ceiling applicable to small customers and the frozen energy rate applicable to large customers are subject to different statutory requirements requiring consideration in this decision. Among other things, we determine that neither the cap nor the frozen rate requirement affects the requirement to increase rates to implement the DWR revenue requirement. As we respond to our obligations with respect to the DWR revenue requirement and the rate stabilization legislation, we exercise our ratemaking authority in this decision, both in the assignment of revenue responsibility to the various customer classes and in the establishment of specific rates and rate structures.

By our companion decision regarding the DWR revenue requirement issued today in Application (A.) 00-11-038, et al., we directed the major electric utilities to begin disbursements of proceeds to DWR on a monthly basis. (D.01-09-___, Ordering Paragraph 3.) We directed SDG&E to use a system-average charge of 9.02 cents per kWh for each kWh sold by DWR to SDG&E's customers. (Id.) These charges are intended to fund the allocated DWR revenue requirement implemented by that decision. (Id.)

Our companion decision provided that we would consider the rate increases that might be necessary for SDG&E in this order. Taking into account the relative amounts of power supplied by DWR and by SDG&E's utility retained generation (URG), we determine that a system-average increase of 1.46 cents per kWh is required to implement the DWR revenue requirement for SDG&E's customers.³ Based on the revenue allocation principles adopted herein, and the exemptions from rate increases and other mitigation measures that we apply to certain customer categories, the average rate increases by customer class are as shown below.

Average Rates by Customer Class *

Customer Class	Current Cents/kWh	Adopted Cents/kWh	Percent Increase
Residential - with usage up to 130% of baseline quantities	12.96	12.96	0
Residential - with usage above 130% of baseline quantities	14.80	16.65	12.49
Small commercial	13.48	15.90	17.94
Medium/large commercial **	10.40	12.31	18.41
Street lighting	13.16	15.07	14.55
Large commercial/industrial	10.06	11.97	19.03
Agricultural	13.25	15.16	14.45
System Total	12.06	13.52	12.10
* Does not reflect subsidies for medical baseline customers ** Certain of SDG&E's "medium/large commercial" customers are classified as "small commercial" customers for purposes of AB 265

For SDG&E's residential customers, we establish a five-tier rate structure that is generally similar to the residential rate structure that we recently adopted in Decision (D.) 01-05-064 for customers of Southern California Edison Company (Edison) and Pacific Gas and Electric Company (PG&E). Rates for customers eligible for the California Alternative Rates for Energy (CARE) program are exempt from the increases adopted by this order.⁴ Electric consumption by residential customers falling within 130% of their respective baseline allowances, which is approximately 59% of consumption by non-CARE customers, is exempt from today's rate increases.⁵ Finally, we exempt medical baseline customers from the adopted increases and direct SDG&E to recalculate rates in order to spread the minor cost of this subsidy among other customers. The current and adopted rates for non-CARE residential customers are shown in the following tables.

Adopted Residential Rate Increases

(Not Applicable to CARE or Medical Baseline; Does Not Reflect Cost of Subsidies to Medical Baseline Customers)

Summer

Tier	Percent of baseline	Current Rate (Cents/kWh)	Adopted Rate (Cents/kWh)	Percent Increase
1	Up to 100%	12.83	12.83	0
2	100-130%	15.28	15.28	0
3	130-200%	15.28	16.20	6.04
4	200-300%	15.28	17.11	12.00
5	Over 300%	15.28	18.69	22.29

Winter

Tier	Percent of baseline	Current Rate (Cents/kWh)	Adopted Rate (Cents/kWh)	Percent Increase
1	Up to 100%	12.83	12.83	0
2	100-130%	14.57	12.83	0
3	130-200%	14.57	15.45	6.05
4	200-300%	14.57	16.32	12.00
5	Over 300%	14.57	18.12	24.37

For a residential customer using 500 kWh per month, these rate increases result in monthly bill increases as shown in the following table. As also shown in the table, a residential customer using 1,000 kWh per month will generally face substantially larger increases. This is due to the tiered rate structure which assigns increasing revenue responsibility to increasingly larger consumption amounts. The bill increases vary by baseline zones, by season, and by whether the customer is an all-electric customer. Baseline Zone 1 covers the western portion of SDG&E's service territory from the Pacific Ocean extending roughly 20 miles inland. Zone 2 is the central part of SDG&E's service territory, and Zone 3 covers the eastern region of its service territory. Most of SDG&E's residential customers reside in Zone 1. Data provided by SDG&E in the rate stabilization proceeding (A.00-11-038, et al.) show that in calendar year 2000 nearly 99% of SDG&E's approximately 1.1 million residential customer accounts were in Zone 1, about 1% were in Zone 2, and about 0.1% were in Zone 3.

Residential Bill Impacts (Not Applicable to CARE
or Medical Baseline Customers); Does Not Reflect Cost of Subsidies to Medical Baseline Customers

Basic Allowance

Season	Baseline Zone	Increase ($/Month) 500 kWh/ 1000 kWh Month Month		Percent Increase 500 kWh 1000 kWh Month Month
Summer	1	$1.60	$14.51	2.3%	9.9%
	2	$1.01	$10.76	1.5%	7.4%
	3	$0.46	$ 7.87	0.7%	5.5%
Winter	1	$1.51	$ 14.59	2.2%	10.3%
	2	$0.96	$ 10.55	1.4%	7.5%
	3	$1.51	$ 14.59	2.2%	10.3%

All Electric Allowance

Season	Baseline Zone	Increase ($/Month) 500 kWh 1000 kWh Month Month		Percent Increase 500 kWh 1000 kWh Month Month
Summer	1	$1.05	$10.99	1.5%	7.6%
	2	$0.00	$4.94	0.0%	3.5%
	3	$0.00	$2.13	0.0%	1.5%
Winter	1	$0.00	$6.01	0.0%	4.4%
	2	$0.00	$0.00	0.0%	0.0%
	3	$0.00	$2.62	0.0%	2.0%