VII. Issuance of the Alternate Proposed Decision
Both the proposed decision and this proposed alternate decision were issued on March 26, 2001. Parties' appeared for final oral argument (FOA) before a quorum of the Commission on Monday, March 26, 2001. Pub. Util. Code § 311(e) requires that an alternate item to a proposed decision shall be subject to public review and comment before it may be voted upon. Rule 77.6(f) provides that the assigned Commissioner or ALJ may waive or reduce the comment period in any of the circumstances described in Rule 77.7(f)(1-9). In this case, Rule 77.7(f)(9) is applicable. For an alternate decision, the Commission may shorten the public review and comment period where it determines that public necessity so requires.
In this matter, the public interest in the Commission adopting a decision before expiration of the 30-day review and comment period outweighs the public interest in having the full comment period. We will hold oral argument on March 26th in lieu of providing for written comments on the alternate decision. In addition, we will allow for comment on the rate design discussed herein.
Findings of Fact
1. Edison and PG&E seek additional rate increases to improve cash flow and pay fo future costs of power for their customers. We consider these requests in the context of current state law and the state's dysfunctional wholesale markets that have led to unconscionable, unlawful wholesale prices and an increasingly unstable supply situation.
2. The current industry structure evolves from AB 1890 passed in 1996 to promote competition in California's electric market by opening generation markets.
3. AB 1890 turned over operation of the state's transmission system to the Independent System Operator (ISO) and the pricing of unregulated generation to the Power Exchange (PX), both private nongovernmental corporations regulated by the Federal Energy Regulatory Commission (FERC), not the State of California.
4. AB 1890 required the utilities to file with this Commission rate plans that set electric utility rates at June 10, 1996 levels, except that bills for residential and small commercial customers were discounted by 10% from those levels, through the issuance of Rate Reduction Bonds approved by the Commission.
5. The frozen rate levels were initially high enough to allow PG&E, SCE, and SDG&E an opportunity to recover uneconomic generation costs within a specified period.
6. The original expectations of California decision-makers that competitive markets would reduce generation prices have not been fulfilled. Rather than dropping in response to competitive market forces, wholesale electricity prices in California have risen by staggering proportions since the beginning of 2000.
7. The uncontrolled price increases in wholesale markets have created enormous outstanding liabilities for PG&E and SCE.
8. SCE's and PG&E's continued financial viability and ability to serve their customers has been seriously compromised by the dramatic escalation in wholesale prices since November 1.
9. On February 1, 2001, the California Legislature enacted and the Governor signed AB1X, which authorizes DWR to purchase power and sell it to retail customers of PG&E, Edison and SDG&E.
10. AB1X directs the Commission to designate a portion of existing generation rates as the CPA.
11. In describing the calculation of the CPA, AB1X refers to the rates that are in effect as of January 5, 2001 as the beginning point for the calculation. In accordance with the Legislature's clear intent, we therefore make permanent the one-cent rate surcharge that the Commission authorized in D.01-01-018, which was included in the rates in effect as of January 5, 2001.
12. The Barrington-Wellesley Group, Inc. (BWG) conducted an independent review of PG&E, and KPMG LLP (KPMG) conducted an independent review of Edison focusing on their cash liquidity, credit capacity, and solvency.
13. The BWG and KPMG report findings regarding the utilities' cash flow difficulties and inability to obtain additional credit, generally confirm that the financial problems facing the utilities are serious in nature, and could potentially lead to bankruptcy proceedings for the utilities.
14. PG&E's debt principal and interest payments due in 2001 total $3.2 billion. BWG reports that PG&E has exhausted its borrowing capability under existing lines of credit and is one the verge of default under the provisions of many of its loan agreements.
15. Credit ratings downgrades in January 2001 by Standard & Poor's and Moody's below minimum investment grade ratings for PG&E and PG&E Corp constitute an event of default under the PG&E Corp. bank lines of credit agreements and under one of PG&E's bank line of credit agreements.
16. BWG's update indicates that PG&E's cash balance increased significantly from $827 million on January 31, 2001 to$2.508 billion as of March 8, 2001. During the same period, its outstanding obligations due and in default increased from $1.542 billion on January 31, 2001 to $3.324 billion on March 8, 2001.
17. KPMG reports that SCE has exercised all available lines of credit and has been unable to extend or renew credit as obligations become due. SCE's share of secured and unsecured debt that is due in 2001 is $242 million. SCE's loan agreements provide for specific clauses with respect to default whereby the underlying debt becomes immediately due and payable. Credit rating agencies downgraded SCE's credit ratings on most of its rated indebtedness to below investment grade during January 2001.
18. Since the KPMG Report was released, several creditors have formed an informal credit committee that threatens to force SCE into involuntary bankruptcy. To help alleviate liquidity concerns, SCE suspended payment of certain obligations, including payments for electric power, and has not declared dividends on its preferred stock that normally would have been paid in February and March 2001.
19. KPMG's update indicates that SCE's cash balance improved slightly from $1.5 billion at the end of January 2001 to $1.6 billion as of March 8, 2001. The amounts in default increased from $1.24 billion to $1.77 billion over the same period.
20. Even with the emergency increase in rates and the actions of DWR to procure a substantial portion of energy for their loads, the utilities' financial condition remains unstable.
21. Pressure on utility finances will increase when the utilities' begin to segregate revenues applicable to DWR purchases from existing rates and remit these revenues directly to DWR, as required by AB1X and our decisions.
22. Requiring the utilities to resume payments to QFs on a going forward basis will also increase pressure on utility finances.
23. Additional ratepayer money must be provided to protect the taxpayers' commitments through DWR purchases and to prevent utility financial collapse.
24. SCE and PG&E's financial problems have compromised the integrity of the state's electrical system. The utilities are increasingly in debt to the ISO and to power sellers that will not or cannot sell additional power into California's grid.
25. The state's energy supply system is further compromised because some suppliers have also refused to sell natural gas to PG&E, which it needs to purchase on behalf of its natural gas customers.
26. Blackouts across the state on March 19 and 20 were attributable in part to the refusal of energy suppliers, including QFs, to sell electricity to the ISO and the utilities because of concerns that they might not be paid.
27. Although the state's wholesale markets continue to permit power sellers to receive extraordinary prices for the power they sell, the recent passage of AB1X has provided some financial relief to the utilities by reducing the volume of the power purchases they must make at unjust and unreasonable prices.
28. Although CDWR has assumed responsibility to purchase significant portions of the utilities' requirement, it has not stated a commitment to purchase all net short power requirements.
29. CDWR must be paid for the electricity it provides, some of which is likely to be expensive.
30. While there may be many logical places to turn for additional cost savings or cash, our evaluation of resources necessary for continued power purchase cannot rely solely on uncertain future possibilities.
31. In the future we can refund revenues that exceed costs, but a bankruptcy or financial collapse of the state's energy system would cause wide-ranging, undesirable consequences.
32. Revenue generated by the rate increases will be applied only to electric power costs that are incurred after the effective date of this order. The revenues will be subject to refund if, at a later date, we determine that the utilities failed to use the funds to pay for future power purchases.
33. The revenues the utilities have collected and continue to collect from the one-cent per kilowatt-hour rate increase authorized on January 4, 2001 must be used to pay for power purchases and not for any other costs incurred by the utilities.
34. Upon receipt of and comment on DWR's revenue requirement, which has yet to be provided to this Commission, we will act promptly to further allocate a portion of these increases to CDWR.
35. As AB1X requires, the rate increase approved today will not apply to residential usage below 130% of baseline rates.
36. We expect the utilities to join with the State and take any and all actions necessary to assure that California and its utility customers realize refunds for or repayment or disgorgement of power seller overcharges.
37. The utilities possess market information and expertise that place them in a unique position to understand market behavior and to pursue legal remedies.
38. To date, the utilities appear to have been hesitant to take legal action against the generators and sellers who are responsible for, and have profited by, the utilities' financial distress.
39. To the extent that generators and sellers make refunds for overcollections, those refunds should either be passed through ratepayers or applied to unrecovered power purchase costs.
40. To the extent that any administrative body or court denies refunds of overcollections in a proceeding where recovery has been hampered by a lack of cooperation from a utility, today's rate increases will also be subject to refund.
41. The action we take today does not end the AB 1890 rate controls.
42. AB 1890 set up a mechanism under which utility-submitted cost recovery plans that included frozen rates would remain in effect until the Commission found that certain conditions existed or until March 31, 2002, whichever is earlier.
43. We will require SCE and PG&E to "true-up" their operating costs and profits for the period of the AB 1890 rate controls, as proposed by TURN. SCE and PG&E have not recovered all of their stranded costs under any scenario put forth by any party, given the accounting adjustment we are requiring.
44. The Commission established the TCBA to track the accelerated cost recovery of generation assets and other authorized transition cost, and also established the TRA to track the residual calculation of the CTC and to ensure that headroom is properly calculated and credited to the TCBA.
45. Three sources of revenue originally flowed into and were tracked by the TCBA account: "headroom," or the revenues remaining from customers' bill payments after a utility's authorized operating costs were paid; revenue from sales of utility power plants to private owners, and revenues from the sales of electric power provided by remaining utility-owned generation.
46. In Resolution E-3527, the Commission allowed unrecovered operating costs to be carried over in the TRA from month to month, and allowed revenues to be applied to these accumulated undercollections first before being transferred to the TCBA. Our current rules provide that to the extent that after the rate freeze ends (i.e., transition costs are fully collected and final market valuation is established by the Commission), any undercollection in the TRA cannot be recovered.
47. In A.00-10-028, TURN recognizes the interaction of the TRA and the TCBA and focuses on Resolution E-3527, which prohibits the transfer of any TRA undercollection to the TCBA on a monthly basis. TURN proposes that this ratemaking be revised to allow such a transfer.
48. At its essence, the AB 1890 rate control allowed rates to remain higher than they would have been in order to allow the utilities the opportunity to recover costs associated with moving from cost-of-service regulation to a competitive regulatory scheme.
49. The utilities' assertions regarding potential violations of the filed rate doctrine are premature. FERC was aware of the rate freeze concept when it approved California's restructuring plan, FERC, in fact, authorized market-based rates based on utilities' claims that the California "rate freeze" would mitigate the utilities' incentive to raise PX prices.
50. PG&E and Edison understood that the ability to fully collect their transition costs was tied directly to their operating costs, including wholesale electricity costs.
51. Adopting the accounting true-up that TURN proposes in A.00-10-028 corrects an anomaly that was adopted in Resolution E-3527. By requiring that either the debit or credit balance determined through the TRA calculation be recorded in the TCBA, we give full effect to the rate freeze principle, properly apply the matching principle, and adhere to the requirements of § 368(a). This approach also properly offsets generation revenues and costs of procurement.
52. Resolution E-3527 incorrectly characterized the nature of transfers of debits in the TRA to the TCBA. Applying the principles set forth in D.99-10-057 and upheld in D.00-03-058 requires that we take a closer look at the accounting anomalies caused by the treatment provided for in Resolution E-3527, as TURN requests.
53. The transfer of TRA undercollections to the TCBA does not transform energy procurement costs into transition costs, but merely reduces the prior revenues recorded in the TCBA.
54. Adopting the accounting treatment proposed in A.00-10-028 will properly recognize the risks that variable energy costs may create.
55. Transferring the TRA balance to the TCBA each month allows us to consider the net impacts of operating cost recovery and transition cost recovery. This adjustment will delay transition cost recovery. The restated TCBA for Edison will show unrecovered costs of approximately $3.7 billion. The restated TCBA for PG&E would show approximately $6.3 billion in unrecovered costs.
56. Under TURN's proposed accounting mechanism, the utilities would achieve full recovery of their PX costs and any other FERC-approved costs incurred during the rate freeze.
57. We have consistently stressed that if we were to allow the utilities to recover procurement costs incurred during the rate control period after rate controls end, the utilities' rates during the rate freeze period would have effectively exceeded those in effect on June 10, 1996. This action would result in recovery of excess transition costs, an outcome inconsistent with AB 1890.
58. Although TURN has proposed an accounting change, the effect of this change is to carry out the original intent of AB 1890, that the utilities are at risk for recovery of transition costs during the transition period.
59. The Commission established the TRA and TCBA based on our authority as an administrative agency to implement the provisions of AB 1890.
60. Our consideration of the proposed accounting true-up is a timely exercise of our ratemaking authority.
61. We accept TURN's contention that current accounting treatment negates the neutrality of the rate reduction bond (RRB) transactions since the utilities' TRAs are undercollected.
62. Since the TRA undercollections began to accrue, there has been no transition recovery from rate revenues.
63. Because of the adopted RRB transactions and the Commission's current accounting mechanism, the utilities continue to impute into the TCBA revenues related to the RRBs. Consequently, residential and small commercial customers continue to contribute to transition cost recovery by the amount of the imputed revenues, despite the lack of headroom.
64. The utilities have recorded a greater amount of transition cost recovery than they would have had absent the RRB transaction and the residential and small commercial customers are paying a disproportionate share of the utilities' transition cost recovery, an outcome that contradicts the objectives of the Financing Order.
65. Adopting the proposed accounting true-up therefore has the additional advantage of ensuring that ratepayers are made indifferent as to how the revenues associated with the RRBs are treated.
66. In D.01-01-018, we ordered the utilities to segregate the generation memorandum account balances, which otherwise would have been credited to the TCBA at year-end 2000.
67. Because we are now transferring the balance in the TRA to the TCBA on a monthly basis, we will also now require the utilities to restate and record overcollected generation memorandum account balances to the TRA before any transfer to the TCBA. This should be done on a monthly basis. This is appropriate because it will match the costs of procuring power on a monthly basis with the revenues resulting from generating that power.
68. We will consider any adjustments needed, including addressing GMA monthly undercollections, as we consider the interaction of AB 6, AB 1X, and § 367(c) on appropriately recording the monthly balance.
69. Low-income ratepayers tend to be renters rather than owners, reside in older housing stock that is less energy efficient, and who may have larger families or live in multi-family households.
70. Low-income households are struggling now to meet the cost of utility energy services, which includes both their electric and gas usage bills.
71. Greenlining/LIF has demonstrated that the poor (as defined by Federal Poverty Level Guidelines) bear a disproportionate energy burden; i.e., the percentage of household income devoted to energy services is far greater for low-income households.
72. We will increase the CARE eligibility levels from 150% of federal poverty guidelines to 175% for electric customers of PG&E and Edison.
73. By adopting these new guidelines, we increase the number of households who may be eligible for this important program. As we expand the eligibility for this important program, it is crucial to increase penetration.
74. Consumer education and notice becomes imperative in order to notify eligible customers.
75. We do not increase the CARE discount from 15% to 25% at this time. While we propose to adopt a very significant rate increase, we wish to consider the increased discount for both electric and gas customers in A.00-11-009 et al.
76. We adopt Greenlining/LIF's proposal to exempt eligible CARE customers from this rate increase.
77. While we adopt a rate increase today, we decline to adopt a specific residential tiering approach in the absence of an overall rate design proposal. The assigned Commissioner's companion ACR issued concurrently sets forth a proposal for tiered rate design for review.
78. Conceptually, we agree it is time to adopt a tiered approach for those customer classes that do not have rates structured on a time-of-use (TOU) basis.
Conclusions of Law
79. AB1X refers to rates that are in effect as of January 5, 2001. We therefore make permanent the rate increase the Commission authorized in D.01-01-018.
80. The Commission's first duty is to assure that customers of California public utilities receive reliable, safe service at reasonable rates.
81. The emergency in the electric industry affects more than the utility finances. The Commission must protect the state's energy system, which is essential to the continued health of the state's economy and the welfare of individuals and businesses.
82. AB1X expressly continues the utilities' of their obligation to serve their customers. We cannot and will not relieve them of that fundamental obligation.
83. The Commission cannot assume that CDWR will purchase all net short electricity requirements for the purpose of setting rates; this action would be the equivalent of ordering CDWR to procure all net short electricity requirements. We do not have such authority.
84. We are not prepared in this decision to find that the requirements of AB 1890 for ending the rate control period have been met.
85. This rate increase is within our authority in light of existing financial conditions, and in response to more recent legislation, such as AB1X and AB6X.
86. Since AB1X requires the Commission to provide for recovery of DWR's revenue requirement, it necessarily authorizes the Commission to impose an increase on customers' electric bills, whether that increase is described as an increase in "rates" payable to utilities or an increase attributable to DWR's delivery of electricity.
87. The legislation enacted in January and February 2001 addresses electricity market conditions and utility financial distress that AB 1890 neither anticipated nor provided for. These new laws respond to the current emergency and provide enhanced authority for this Commission to set retail rates for electric power to provide for the recovery of revenues expended by CDWR for power purchases that it makes, despite the fact that the AB 1890 rate controls remain in effect.
88. While the rate control provisions of AB 1890 provide certain consumer protections that we continue to recognize, we must supplement these consumer protections with our response to immediate circumstances and the potentially dire consequences of inaction. Nothing in AB 1890 provides that if, for unforeseen reasons, in response to additional legislation, the Commission increased rates to prevent the collapse of the electric system, all limits on utility rates are ended.
89. It is reasonable to order emergency relief to both utilities in order to assure the continued viability of California's electric system and to minimize the effects of the dysfunctional energy market on utility customers, both today and in the longer term.
90. It is reasonable to grant a rate surcharge of not more than three cents per kWh to SCE and to PG&E with several conditions.
91. It is reasonable that revenue generated by the rate increases will apply only to power costs that are incurred after the effective date of this order.
92. It is reasonable to direct the utilities to enter the revenues from the rate increases into balancing accounts and the revenues will be subject to refund if at a later date we determine that the utilities failed to use the funds to pay for future power purchases.
93. It is reasonable that a certain amount of the revenues from the rate increases will be provided to DWR for its power costs, once DWR provides us with its revenue requirement.
94. Residential customers whose usage is below 130% of baseline are now statutorily exempt from rate increases not in effect as of January 5, 2001. CARE customers should be exempt from the additional surcharge we impose today.
95. To the extent that generators and sellers make refunds for overcharges, it is reasonable to require that those refunds should either be passed onto ratepayers or potentially could be applied to stranded costs.
96. To the extent that any administrative body or court denies refunds of overcollections in a proceeding where the Commission has been hampered by the lack of cooperation from utilities, it is reasonable to make the proposed rate increases subject to refund.
97. It would not be reasonable to authorize a rate increase for the purpose of remedying the adverse consequences or utilities financial distress and at the same time ignore another potential source of funding that would remedy such distress; therefore, if utilities do not actively seek to relieve themselves of their financial burden by pursuing refunds we will not step in and relieve their burden with a price increase.
98. Consistent with the requirements of AB 1890, the level of recorded transition cost recovery at any given time should reflect the total revenues collected to date during the rate freeze, as well as the total costs incurred to date in providing service during the rate freeze.
99. Adopting TURN's true-up proposal does not constitute retroactive ratemaking. Rates obviously have not changed. The TCBA is a balancing account and the TRA is simply an accounting mechanism used to determine the residual calculation of CTC.
100. The California Supreme Court in Southern California Edison Company v. Public Utilities Commission (1978) 20 Cal.3d 813 concluded that an adjustment of rates, which does not involve general ratemaking, may be retroactive in effect without violating the rule against retroactive ratemaking.
101. Because TURN's proposed accounting change at issue does not involve general ratemaking, the Commission may adopt the change without violating the prohibition against retroactive ratemaking.
102. In retrospect, the accounting treatment we adopted in Resolution E-3527 contravenes the principles promulgated in AB 1890. Given the change in circumstances, we find it necessary to modify our accounting approach, as proposed by TURN. The Commission has the authority to do so and is not preempted by any law, contrary to the claims proffered by the utilities.
103. We direct the utilities to maintain the regulatory accounting mechanisms, but we explicitly draw no conclusions as to the ultimate treatment flowing from legislative or regulatory changes that could well involve the amounts tracked in those accounts.
104. The true-up we adopt today, in and of itself, does not disallow the recovery of the utilities' cost of procuring and transmitting electricity in retail rates. Since the true-up alone does not disallow FERC-approved costs, there can be no violation of the filed rate doctrine in our adoption of the true-up at this time.
105. Under AB 1890 the utilities are at risk for the recovery of transition costs. Accordingly, we do not believe that the fact that some portion of this risk has now come to pass necessarily means that there has been an unconstitutional taking. The utilities' argument is premature. We do not find that the AB 1890 rate controls are over yet. Therefore, while adopting the accounting true-up proposal reduces prior transition cost recovery, no definitive landscape exists yet in which to ascertain the existence or extent of unrecovered costs.
106. It is reasonable to increase the CARE eligibility levels from 150% of federal poverty guidelines to 175% for electric customers of PG&E and Edison.
107. CARE changes for gas customers of PG&E, SDG&E, and Southern California Gas Company, as well as an increase in the CARE discount should be addressed expeditiously in A.00-11-009 et al.
108. It is clear that AB1X 1 continues the exemption of CARE customers from the EPS, based on the statute's references to rates in effect as of January 5, 2001, and we affirm that finding here.
109. For an alternate decision, the Commission may reduce the public review and comment period where it determines that public necessity so requires. Pursuant to Rule 77.7(f)(9), the public interest in the Commission adopting a decision before expiration of the 30-day review and comment period outweighs the public interest in having the full comment period. It is reasonable to hold oral argument on March 26th in lieu of providing for written comments on the alternate decision. In addition, we will allow for comment on the rate increase.
110. This order should be effective today in order to allow the rate surcharge and accounting true-ups to go into effect expeditiously.
IT IS ORDERED that:
1. Pacific Gas & Electric Company's (PG&E) and Southern California Edison Company's (Edison) request for rate relief is granted to the extent set forth herein. The rate surcharge of three-cents per kilowatt-hour (kWh) shall be applied to power costs incurred after the effective date of this decision. The three-cents per kWh shall be added to generation-related rates for PG&E and Edison that are adopted in Ordering Paragraph 1 of our companion decision in this docket only for the purpose of all calculations required by that decision dealing with the transfer of funds to CDWR. (D.01-03-081.) PG&E and Edison shall provide revenues from the generation-related rates and the three-cent surcharge to the DWR immediately, consistent with D.0l-03-081.
2. PG&E and Edison shall enter the revenues from the rate increases into balancing accounts and the revenues shall be subject to refund if, at a later date, we determine that the utilities failed to use the funds to pay for future power purchases. The revenues the utilities have collected and continue to collect from the one-cent per kilowatt-hour rate increase authorized on January 4, 2001 shall be used to pay for power purchases and not for any other costs incurred by the utilities. Within five days after the effective date of this decision, PG&E and Edison shall file advice letters to establish these balancing accounts, which will be effective upon approval by the Energy Division.
3. PG&E and Edison shall join with the State and take any and all actions necessary to assure that California and its utility customers realize refunds for or repayment or disgorgement of power seller overcharges.
4. To the extent that generators and sellers make refunds for overcollections, those refunds shall either be passed through ratepayers or applied to unrecovered power purchase costs. To the extent that any administrative body or court denies refunds of overcollections in a proceeding where recovery has been hampered by a lack of cooperation from a utility, today's rate increases shall also be subject to refund.
5. PG&E and Edison shall continue to provide monthly reports on their efforts in state and federal forums, beginning April 1, 2001 and continuing for twelve months.
6. The one-cent rate surcharge that the Commission authorized in Decision 01-01-018 is now permanent.
7. The Petition to Modify Resolution E-3527, filed by The Utility Reform Network (TURN), and docketed as Application (A.) 00-10-028 is granted. The balance in PG&E's and Edison's respective Transition Revenue Account (TRA) shall be transferred on a monthly basis to each utility's respective Transition Cost Balancing Account (TCBA). This action shall be effective as of January 1, 1998.
8. PG&E and Edison shall file advice letters within 15 days of the effective date of this decision to revise their tariffs as necessary. PG&E and Edison shall attach reports that restate the TRA, TCBA, and Generation Memorandum Accounts in compliance with this decision. The advice letters shall be deemed in compliance with this decision only upon the written approval of Energy Division.
9. Under Assembly Bill 1890, the rate freeze has not ended for either PG&E or Edison.
10. The California Alternative Rates for Energy (CARE) eligibility guidelines shall be updated according to the following table:
Family/Household Size |
Current Guidelines (150% of Federal Poverty Level) |
Adopted Guidelines (175% of Federal Poverty Level) |
1 - 2 |
$18,200 |
$21,233 (round to $21,250) |
3 |
$21,500 |
$25,083 (round to $25,000) |
4 |
$25,800 |
$30,100 |
Each additional person |
$ 4,300 |
$5,016 (round to $5,000) |
11. PG&E and Edison shall consult with Greenlining Institute, Latino Issues Forum, /LIF and our Public Advisor's Office so that notification by bill inserts of the revised CARE guidelines shall occur expeditiously.
12. Eligible CARE customers are exempt from the surcharge we impose today.
13. Eligible CARE customers shall continue to be exempt from the Emergency Procurement Surcharge adopted in Decision 01-01-018, based on the Assembly Bill 1X references to rates in effect as of January 5, 2001.
This order is effective today.
Dated March 27, 2001, at San Francisco, California.
LORETTA M. LYNCH
President
HENRY M. DUQUE
RICHARD A. BILAS
CARL W. WOOD
GEOFFREY F. BROWN
Commissioners
I will file a concurring opinion.
/s/ RICHARD A. BILAS
Commissioner
Appendix A
************ APPEARANCES ************ Gerald Lahr |
Carrie H. Allen |
Katherine S. Poole |
Evelyn K. Elsesser |
Marc D. Joseph |
Michael Alcantar |
William P. Adams |
Edward G. Poole |
James Weil |
Daniel W. Douglass |
Michael Aguirre |
Barbara R. Barkovich |
Marco Gomez |
Karen Norene Mills |
Roger Berliner |
Ronald Liebert |
A Brubaker |
Ed Yates |
Jonathan M. Weisgall |
Lisa G. Urick |
Fernando De Leon |
Jennifer Chamberlin |
Theresa Mueller |
Patrick Mcguire |
Bill Mc Callum |
Tom Beach |
Frederick Ortlieb |
John M Chamberlain |
Bill Powers |
Lindsey How-Downing |
Howard Owens |
Edward W. O'Neill |
Howard Choy |
Norman J. Furuta |
Dan L. Carroll |
Diane I. Fellman |
Thomas M. Berliner |
Andrew J. Skaff |
Colin L. Pearce |
Carolyn Kehrein |
Lynn M. Haug |
Patrick Mcdonnell |
Andrew B. Brown |
Nancy Ryan |
Douglas K. Kerner |
James D. Squeri |
Jeanne M. Bennett |
James Hodges |
Michael B. Day |
Jan Smutny-Jones |
Richard H. Counihan |
William B. Marcus |
Irene K. Moosen |
Norman A. Pedersen |
Jody S. London |
Ron Knecht |
Morten Henrik Greidung |
Susan E. Brown |
William H. Booth |
C. Susie Berlin |
Christopher A. Hilen |
Patricia R. Williams |
John W. Leslie |
Jeffrey H. Goldfien |
Steven Moss |
Kevin Mc Spadden |
David J. Byers |
Scott T. Steffen |
Scott T. Steffen |
Peter Hanschen |
Terry J. Houlihan |
Sara Steck Myers |
Richard Roos-Collins |
Peter Ouborg |
Janie Mollon |
Patrick J. Power |
Aaron Thomas |
Don Schoenbeck |
Joseph M. Malkin |
James Ross |
William H. Edwards |
Steven Greenberg |
Mark R. Huffman |
Keith Sappenfield |
Arlin Orchard |
Randy Britt |
Dana S. Appling |
Andrew Chau |
Phillip J. Muller |
Justin D. Bradley |
Jeffrey M. Parrott |
Frank J. Cooley |
Judy Young |
James C. Paine |
Keith W. Melville |
James Bushee |
Gene L. Waas |
Keith Mc Crea |
Chris Witteman |
Bernardo R. Garcia |
Peter Bray |
Jerry Bloom |
Regina Costa |
Jason J. Zeller |
Robert Finkelstein |
Michael Shames |
********** STATE EMPLOYEE *********** |
Michael W. Neville |
Monica Schwebs |
Lorenzo Kristov |
Ruben Tavares |
Christopher Danforth |
Peter V. Allen |
Joseph R. DeUlloa |
Robert Miyashiro |
Audra Hartmann |
Robert Kinosian |
Kayode Kajopaiye |
Laura L. Krannawitter |
A. Kirk McKenzie |
Donald J. Lafrenz |
Anne W. Premo |
Steve Linsey |
Randy Chinn |
Jeanette Lo |
Linda Serizawa |
Kim Malcolm |
Maria E. Stevens |
Rosalina White |
Zenaida G. Tapawan-Conway |
John S. Wong |
Christine M. Walwyn |
Ed Cazalet |
Scott Blaising |
Paul A. Harris |
Mona Patel |
********* INFORMATION ONLY ********** |
Stephen Layman |
David Marcus |
Derk Pippin |
Ira Schoenholtz |
J. A. Savage |
Robert E. Anderson |
Maria Crispi |
Lulu Weinzimer |
Carl K. Oshiro |
William Dombrowski |
Nicole A. Tutt |
Alexandre B. Makler |
Joseph M. Paul |
Susannah Churchill |
Gregory T. Blue |
J. Patrick Tang |
Joseph A. Young |
John A. Barthrop |
Jon S. Silva |
Angela Oh |
Douglas E. Davie |
Susan A. Huse |
Jeffrey D. Schlichting |
Jeffrey D. Harris |
Joelle Ogg |
James Meyn |
Ralph Smith |
Gary B. Ackerman |
Karen Lindh |
Robert D. Schasel |
Richard J. Mccann |
H. Bradley Donovan |
Candace A. Younger |
Kelly R. Tilton |
Sam De Frawi |
David L. Huard |
Martin Mattes |
Randall W. Keen |
Eve Mitchell |
Linda R. Beck |
Jonathan Jacobs |
Christopher J. Mayer |
Janice Frazier-Hampton |
Robert B. Weisenmiller |
Joe Migocki |
Gary Herbert |
Niels Kjellund |
Melanie Gillette |
Lynn G. Van Wagenen |
Roger J. Peters |
G. Darryl Reed |
Ron Helgens |
Bruce Foster |
George A. Perrault |
Peter S. Goeddel |
Ed Lucha |
Stephen E. Pickett |
Carrie Peyton |
Tim Haines |
Lisa Hubbard |
Peter Fox-Penner, Ph.D. |
Tony Wetzel |
Fred Wesley Monier |
Bill C. Wells |
A.00-11-038 et al.
D.01-03-082
Commissioner Bilas, concurring:
I have been advocating an increase in rates and asking whether the rate freeze has already ended since last fall. Now that the General Fund finds itself in the same position as the utilities, economic reality has finally sunk in. We are finally transfusing some blood into the utility turnips since the Department of Water Resources (DWR) now shares their turnip patch.
We have no choice but to act to raise rates. The PX is in Chapter 11 because it cannot collect its costs and pay its debts. The ISO is not getting paid and is spending money to cover the net short like a drunken sailor. It will be spending much more this summer when we run short of hydroelectric power due to drought conditions. The proper economic signals to conserve are not being sent so some citizens simply are not conserving. We have had two days of statewide rolling blackouts coinciding with warm spring, not hot summer, weather. Energy Secretary Abraham has forecast a 5000 megawatt shortage in California this summer.
Natural gas prices have quadrupled. Natural gas is the predominate fuel for California generation. Under regulation, with the attendant ECACs, these costs would have already been passed through to ratepayers. Deregulation eliminated that adjustment. So those who call for reregulation would still get fuel related rate increases. New York last year raised rates 30 percent and its power authority is arranging for expensive peakers this summer. Maine raised rates even more. This year Bonneville Power expects to raise its rates up to 60 percent. This is not just a California phenomenon.
The utilities' lenders are not getting paid and are tired of forebearing on all of the utilities' events of default. We have told the utilities that they cannot conserve cash by laying anyone off. The QFs are shutting down because they are not getting paid, and the gas fired ones cannot afford the natural gas to run. QFs are circulating an involuntary bankruptcy petition. Just today we have ordered the utilities to pay the QFs on a going forward basis under our new Malin based formula. We have also just voted out an order requiring the utilities to pay the DWR a proportionate share of utility revenue to staunch the flow of taxpayer General Fund blood. Additionally, we have today obligated the utilities to implement SB 970 energy efficiency programs and transmission upgrades and to find the cash to do them. I voted against the SB 970 order because it did not include a surcharge to cover utility costs and to ensure these programs are implemented by this summer.
DWR is not even buying the full net short position of the utilities, but the General Fund is being depleted at an alarming rate. Our State Controller has stated it must stop. Both Democrat and Republican Legislators are now calling for rate increases. So is the State Treasurer. This is no longer a partisan fight. Instead it is a fight to maintain the economic vitality of the State and its citizens. As Assemblymember Wright declared at today's Commission meeting, the transactional losses from rolling blackouts far exceed the utilities' power bills. Those transactional losses affect jobs and therefore paychecks. We can craft rate designs that spare residential ratepayers the pain of drastic increases. But, if workers have no paychecks because their employers cannot operate or have left the state, they will not be able to pay any bills. Absent today's rate increase, the utilities will be in bankruptcy court. The consequences to ratepayers will be far worse if that happens. A rate increase designed by this Commission is far superior to one designed by a bankruptcy judge. I commend President Lynch on her proposal for a rate design with tiered rates for those not on time of use meters. And I call on the Legislature to do all it can to incent the spread of time of use meters. I also urge us to carefully consider the impact on jobs and paychecks of rate design for the large commercial and industrial classes.
Today's rate increase is long overdue. I regret that we were not able to act sooner. Had we done so, we could have avoided rate increases of the magnitude we impose today and the depletion of the General Fund. Assemblymember Wright also expressed that view at today's meeting. I concur with his statement that had this Commission kept the utilities solvent, we would be looking at lower numbers in this order. I share his concerns about piecemealing increase on top of increase. Further decisions in our docket on AB1X will determine whether his fears are justified. I hope they are not. It is my hope that by raising rates today we will finally place some discipline on dysfunctional wholesale markets as a result of consumer backlash and conservation. Nothing else has worked. Maybe consumer fury will.
There continues to be one economic reality this Commission has not faced. When will the rate freeze end? Under the TURN proposal we adopt today, can it ever end? I believe it still can because TURN asserts the rate freeze is over even though its accounting proposal is adopted. I agree with TURN that AB 1X signals the end of the rate freeze. We must deal forthrightly with this issue soon.
/s/ RICHARD A. BILAS_
RICHARD A. BILAS
Commissioner
San Francisco, California
March 27, 2001
