1. Introduction
In this decision, we adopt a plan to facilitate the removal of the Department of Water Resources (DWR) from its role of supplying electric power to retail customers. Adoption of this plan completes Phase II(a)(1) of this rulemaking, which we opened to address whether, or under what conditions, "Direct Access" may be reinstituted. Pursuant to the legislative mandate, the Commission suspended the right to enter into new contracts for "Direct Access" after September 20, 2001.1
The "Direct Access" suspension was implemented pursuant to Assembly Bill 1 from the First Extraordinary Session (Ch. 4, First Extraordinary Session 2001) (AB1X) signed into law on February 1, 2001, to address the energy crisis of 2000-2001. Extraordinary wholesale power costs increases during that period threatened the solvency of California's major public utilities and their ability to maintain reliable electric service. Among other measures to ensure continued reliability of service, AB1X mandated that DWR become the electric power supplier of last resort for retail customers of the investor-owned utilities (IOUs).2 To meet this mandate, DWR entered into a series of contracts for the procurement of electric power to serve customers in the territories of the IOUs: Pacific Gas and Electric Company, Southern California Edison Company and San Diego Gas & Electric Company.3
Since that time, the energy markets have stabilized, the IOUs have resumed responsibility for procuring electric power, and DWR no longer is authorized to enter into contracts for power. DWR continues to supply power to retail customers, however, under contracts previously entered into prior to January 1, 2003. As explained below, we find it to be in the public interest to expedite the final phase out of DWR's remaining involvement in supplying electric power to retail utility customers, and to return full responsibility to the IOUs. We accordingly set a target goal for the final removal of DWR from the role of supplying power by January 1, 2010.4 We shall pursue this goal by supporting a process to implement replacement contracts between the IOUs and the suppliers under the DWR contracts, thereby relieving DWR of further supply obligations under its existing contracts.
As explained below, we recognize that various uncertainties may influence the achievement of this goal by January 1, 2010, and we shall closely monitor the progress of our adopted plan, with provision to make mid-course adjustments, as necessary, to protect ratepayers' interests.
1 See D.01-09-060 and Pub. Util. Code §§ 366 or 366.5. Direct Access was originally instituted as a retail service option where eligible customers could buy electricity directly from an independent supplier rather then from an investor-owned public utility. The Legislature mandated the suspension of Direct Access to ensure a stable customer base for DWR cost recovery and so that Direct Access customers pay their fair share of DWR costs.
2 DWR supplied the "net short," i.e., the shortfall in demand not supplied under existing power contracts of the IOU or generated by an IOU facility.
3 AB1X authorized DWR to recover its power costs from electric charges established by the Commission (Water Code § 80110). DWR entered into servicing agreements with the IOUs to collect money on its behalf for power that DWR sells to IOU customers.
4 While January 1, 2010 is the target for removing DWR from supplying power, we clarify that this is not the target date for reopening direct access.
