4. The Distribution Settlement
The Distribution Settlement is 24 pages long and has four separate appendices; it is reproduced as Attachment A to this decision. As required by Rule 51.1(c), Attachment B to the Distribution Settlement is a comparison exhibit (the Agreement Comparison Exhibit) indicating the effect of the Distribution Settlement in relation to PG&E's showing and to issues ORA contested.
The Distribution Settlement would resolve all issues raised by the Settling Parties regarding PG&E's forecast TY 2003 electric and gas distribution and generation revenue requirements, and 2004, 2005, and 2006 electric and gas distribution and generation revenue requirements, with one exception. The Distribution Settlement does not address applicant's request that the Commission approve a $128.6 million (total Company) contribution to PG&E's Retirement Plan trust .
The Settling Parties request that the Commission: (1) resolve the single remaining disputed issue among the Settling Parties related to PG&E's request that the Commission adopt PG&E's forecast contribution to its pension fund; (2) adjust the revenue requirements set forth in the Distribution Settlement according to the Commission's resolution of the disputed issue; (3) resolve any issues raised by non-settling parties; (4) extend or waive the deadline in Rule 51.2 of the Commission's Rules of Practice and Procedure requiring a proposed settlement to be filed within 30 days of the last day of hearing; and (5) issue a final decision approving the Distribution Settlement. Key provisions of the Distribution Settlement include:
· Section 1 of the Distribution Settlement provides for TY 2003 revenue requirements of $2,493 million for electric distribution, and $927 million for gas distribution ($2003), representing a 10.44% increase in electric distribution revenues and a 5.90% increase in gas distribution revenues.
· Section 2 of the Distribution Settlement provides for a TY 2003 generation revenue requirement of $912 million, a $38 million or 4.35% increase from present revenues. This amount reflects reductions from the Generation Settlement associated with A&G expense, common plant, and tax issues, as discussed below.
· Section 3.1 of the Distribution Settlement provides for A&G expenses of $585 million ($2000 total utility). This amount for A&G expense does not include a pension contribution. The agreement does include an amount for net wage-related pension expense of $1.7 million. In Section 3.1.3 the Settling Parties agree on capitalization rates for those A&G items that are capitalized.
· Section 3.1.4 of the Distribution Settlement provides that the A&G expenses allocated to the Unbundled Cost Categories (UCCs) adopted in this GRC should be used in determining the A&G expenses in related proceedings in 2003 and future years until the 2007 test year, if the outcome of those proceedings would otherwise require specific calculation of A&G expenses. The specific UCCs and related proceedings are: Gas Transmission (Gas Accord II and Gas Accord III), Humboldt (Nuclear Decommissioning Cost Triennial Proceeding), Gas Public Purpose Programs (PPP) and Electric PPP.
· Section 3.2.1 provides that PG&E's distribution Operations and Maintenance (O&M) expenses will be $391.5 million electric and $118.5 million gas (expressed in $2000 FERC dollars). Section 3.2.2 provides that Vegetation Management expense (included in the above O&M total) will be $124.7 million. The one-way balancing account for Vegetation Management and the Vegetation Management Quality Assurance Program adopted in D.00-02-046 would continue, as would the tree removal program. Shareholders would no longer share in the cost of the Vegetation Management Quality Assurance Program.
· The Settling Parties agree that PG&E's distribution Customer Accounts expenses will be $199.9 million electric and $154.7 million gas. Customer Accounts expenses include several changes in PG&E's administration of the line extension process to ensure that expenses related to new customer connection applicants are charged to those applicants as opposed to the general body of ratepayers.
· The Settling Parties agree that PG&E's distribution Customer Services expenses will be $1.363 million electric and $3.483 gas ($2000). This reflects zero expense in the Account 912 revenue requirement for customer retention and economic development.
· The Settling Parties agree to the depreciation parameters resulting from ORA's position on electric, gas and common plant depreciation.
· The Settling Parties agree to use recorded 2002 plant as the starting point for calculating 2003 rate base. The Settling Parties agree to allocate residual common plant and depreciation reserve using the allocation method presented in PG&E's rebuttal testimony.
· The Settling Parties agree that net weighted capital additions for 2003 will be $292 million for the electric distribution UCCs and $89.2 million for the gas distribution UCCs ($2003).
· Section 4.8 of the Distribution Settlement provides for an annual $7 million credit against the revenue requirement to resolve TURN's recommended CIS capital disallowance. PG&E will retain the capital in question in rate base and continue depreciation using the applicable depreciation schedule for CIS.
· Section 5 of the Distribution Settlement defers PG&E's next GRC until TY 2007 and provides for an additional attrition adjustment for 2006. Section 5.2 and 5.3 provide that attrition relief for 2004, 2005, and 2006 will be authorized in this GRC and implemented by advice letter. The annual attrition adjustments in 2004 and 2005 will be equal to the previous year authorized revenue requirement times the forecast change in Consumer Price Index (CPI) - All Urban Consumers. The attrition adjustment for 2006 will be equal to the previous year authorized revenue requirement times the forecast change in CPI - All Urban Consumers, plus one percent. Notwithstanding the forecast change in CPI, Section 5.3 provides for minimum and maximum attrition adjustments.
