6. Assignment of Proceeding
Loretta M. Lynch is the Assigned Commissioner, and Burton W. Mattson is the assigned Administrative Law Judge in this proceeding.
1. Effective January 18, 2001 (the effective date of AB 6X), the transition of utility retained generation assets from regulated to unregulated status through means of Commission-approved mechanisms ended, the valuation requirement for those assets relative to the transition ended, Commission regulation of those assets continues, and those assets are to remain dedicated to service for the benefit of ratepayers.
2. The Commission has the responsibility to identify and determine recoverable costs for the purpose of determining when specified rate levels may be changed (i.e., when the rate control period or "rate freeze" ended).
3. Commission-authorized costs, full recovery of which would end the rate control period, were those that would become uneconomic as a result of the transition to a competitive market (unregulated status), and would not be recoverable in market prices in a competitive market.
4. The Commission had not completed market valuation of utility generation assets when AB 6X became effective on January 18, 2001.
5. On January 18, 2001, uneconomic costs ceased to exist as a category of separately identified recoverable costs, given the end of the transition of utility generation assets from regulated to unregulated status, the continuation of Commission regulation of these assets, and the removal of any danger that the investment in such assets may become uneconomic as a result of a competitive generation market.
6. The concept of uneconomic costs only has relevance under a market-based rate regime.
7. AB 6X stopped the transition, and ended the risk of failing to recover costs that were previously identified as uneconomic.
8. Completion of final market valuation of utility generation assets was not required by January 18, 2001.
9. Final market valuation ceased to be meaningful on January 18, 2001, because uneconomic costs as a separate cost category within the meaning of AB 1890 ceased to exist on that date.
10. Final valuation of utility generation assets performed today would be complex and controversial.
11. On January 17, 2001, the Governor proclaimed a State of Emergency in the electricity market, but the Commission was still obligated at that time to determine the end of the rate control period in terms of recovery of uneconomic costs pursuant to a transition of generation facilities from regulated to unregulated status.
12. Commission determination of uneconomic costs irreversibly changed on January 18, 2001, with the cessation of the transition to unregulated status and competition.
13. DWR acquisition of electricity was authorized to begin before February 1, 2001.
14. Rate levels could have been adjusted to prevent a negative CTC balance, among other reasons, and were adjusted by surcharges totaling $0.04/kWh in January and March 2001.
15. A determination that the rate control period did not end until March 31, 2002, would require that uneconomic costs within the meaning of AB 1890 persisted until March 31, 2002, and would also require completing final market valuation of utility generation assets.
1. The Public Utilities Code at one time provided-but not longer provides-that utility generation assets owned by a utility prior to January 1, 1997, and subject to rate regulation by the Commission, continue to be regulated by the Commission until those assets had undergone market valuation in accordance with procedures established by the Commission. (Former §§ 216(h) and 377, added by AB 1890 and deleted by AB 6X.)
2. The Public Utilities Code currently provides that the Commission shall regulate electricity generation facilities owned by a public utility prior to January 1, 1997 unless and until the Commission authorizes disposal of those facilities under § 851, with no disposal permitted prior to January 1, 2006, and with the Commission ensuring that public utility generation assets remain dedicated to service for the benefit of California ratepayers. (§ 377 pursuant to AB 6X.)
3. The Public Utilities Code provides that electric rates remain at specified levels until the earlier of March 31, 2002, or the date on which certain Commission-authorized costs for utility generation-related assets and obligations are fully recovered. (PU Code § 368(a).)
4. Commission-authorized costs, the recovery of which would end rate controls before March 31, 2002, are costs that may become uneconomic as a result of a competitive generation market, in that these costs may not be recoverable in market prices in a competitive market. (§§ 367 and 368.)
5. Uneconomic costs ceased to have meaning as a category for cost recovery on January 18, 2001, the effective date of AB 6X.
6. The end of the rate control period should be determined to be January 18, 2001.
7. Final market valuation is no longer required in order to determine the date that marks the end of the rate control period.
8. The Commission is authorized and obligated to set rates that are just, reasonable and sufficient.
9. This order should be effective today in order to permit prompt resolution of the matter being reheard.
IT IS ORDERED that:
1. The date on which Commission-authorized costs defined in Public Utilities Code §§ 367 and 368 were recovered, for the purpose of determining when rates were no longer to remain at 1996 levels fixed pursuant to § 368, was January 18, 2001. Market valuation of the retained generation assets of Pacific Gas and Electric Company and Southern California Edison Company need not and shall not be undertaken for the purpose of determining this date.
2. The portion of this proceeding that deals with the rehearing granted by Decision 02-01-001 is closed.
This order is effective today.
Dated , at San Francisco, California.
