V. Certain Accounting Entries Should be Reversed Pending Further Determination

Generally, until the utilities collect their uneconomic transition costs and the rate freeze ends, as the Commission has found for SDG&E, rates are fixed or frozen at the June 10, 1996 levels. The difference between frozen rates and the authorized costs of providing service (i.e., revenue requirements and Commission-approved costs and obligations such as those associated with the electric distribution system, public purpose programs, transmission costs, and the costs of procuring electricity for its customers) is referred to as headroom. The Commission has established two major accounting mechanisms to track the costs and revenues associated with transition cost recovery: the Transition Cost Balancing Account (TCBA) and the Transition Revenue Account (TRA).

We are considering modifying the accounting mechanisms by crediting the year-end excess revenues accrued in the generation memorandum accounts to the TRA rather than to the TCBA. We do not take action today, but wish to preserve our ability to take this action in the future after we consider additional testimony and evidence on the implications of this approach. Therefore, to the extent the utilities have credited these accounts to the TCBA as of December 31, 2000 or earlier, this entry should be reversed and these funds should be separately identified and segregated within the generation memorandum accounts. We are interested in exploring this approach, because it may allow the proper matching of generation costs incurred by the utilities with the generation revenues accrued by the utilities. Indeed, PG&E assumes that this approach is in place on a going-forward basis, as explained by witness Campbell. We will consider these accounting issues more broadly as we address the accounting proposal proffered by TURN in A.00-10-028.