II. Background

In D.00-12-067, we determined that expedited action is necessary to fulfill our statutory obligations to ensure that the utilities can provide adequate service at just and reasonable rates. We consolidated the Rate Stabilization Plan Applications (A.) 00-11-038 and A.00-11-056, which were filed by Edison and PG&E, on November 16 and 22, 2000, respectively, and A.00-10-028, the Petition to Modify Resolution E-3527 which was filed by The Utility Reform Network (TURN) on October 17. A.00-10-028 proposes a modification to our accounting mechanisms that should be considered as we move forward in addressing the Rate Stabilization Plan applications. We also ordered emergency hearings in this matter to begin on December 27 that would enable the Commission to issue orders at its January 4, 2001 business meeting.

In D.00-12-067, we stated that the hearings should be held to (1) determine when the rate freeze will end; (2) determine any necessary adjustments to current cost recovery plans⁵ (filed pursuant to § 368); (3) if the rate freeze has ended, determine what adjustments to rates are appropriate to maintain the utilities' ability to provide adequate service under § 451; (4) address the notice required by § 454(a); (5) evaluate whether it is in the public interest for the utilities to divest remaining generation facilities; and (6) evaluate whether power produced from retained generation assets should serve native load and the ratemaking such actions entail.⁶

As described in the Assigned Commissioner's Scoping Memo,⁷ we planned to focus on the following issues in the initial hearings:

1. To what extent can the Commission find that the rate freeze has ended in order to ensure that safe and reliable service is provided at just and reasonable rates, as is required under Pub. Util. Code §§ 451 and 761?

2. If the current balances of PG&E's and Edison's generation memorandum accounts (GMA) are credited to their respective TCBAs as of December 31, 2000, what is the effect on the rate freeze?

3. If the Commission finds that the rate freeze has ended, consistent with the law, at what level should rates be set, and under what conditions?

4. How can residential and small business consumers be protected? What issues need to be addressed to protect low-income consumers? For example, should the CARE discount be increased?

5. What is the most effective method to provide notice of rate increases, if any are adopted on January 4, 2001?

6. Is it in the public interest to allow PG&E and Edison to divest remaining generation assets? If not, should the power produced from retained assets serve native load? What ratemaking will this entail on an initial basis?

Evidentiary hearings have focused more narrowly on the applicants' prima facie cases that current rates do not yield revenues sufficient to meet current obligations, including power purchases, and that cash resources are being rapidly depleted. We commit to addressing the other issues before us expeditiously. We have directed the utilities to send out appropriate notices of potential rate increases as soon as possible, after conferring with and approval by the Public Advisor. The Commission engaged independent auditors to evaluate the liquidity and cash flow position of the utilities immediately. We have asked the independent auditors to evaluate the utilities' Transition Cost Balancing Account (TCBA) reports, balances in the Transition Revenue Accounts (TRA), and TURN's proposal, among other issues. The audit will also thoroughly assess the utilities' claims, the revenues and costs accrued by the utilities, their affiliates, and parent companies over the entire rate freeze period.

We incorporated the record developed in the post-transition ratemaking proceedings (Phase 3 of A.99-01-016 et al.) in our consideration of the Rate Stabilization Plan Applications.