3. SierraPine

3.1. Background

SierraPine states that it is a family-owned producer of a variety of composite panel products. SierraPine reports that it operates nine plants, three of which are located in California. One facility is in PG&E's service territory in Rocklin, California.

Urgency legislation adopted in 2003 provided that a qualifying direct transaction customer may apply to the Commission for a waiver of the Direct Access Cost Responsibility Surcharge (DA CRS⁵). (§ 367.3.⁶) SierraPine was the only qualifying customer to apply for, and receive, this waiver. Waiver of the entire DA CRS was granted for the Rocklin facility. (D.03-09-019.)

As noted above, we authorized a regulatory asset as part of PG&E's bankruptcy reorganization, and included charges to recover the regulatory asset in rates adopted pursuant to the RDSA. (D.03-12-035 and D.04-02-062.) The portion payable by direct access customers was included as a component of the DA CRS. (D.04-06-062, mimeo., pages 14 and 30; RDSA Paragraph 8.) According to SierraPine, its Rocklin facility paid no costs related to the regulatory asset due to waiver of the DA CRS, and PG&E did not seek to collect regulatory asset charges from SierraPine by rates adopted pursuant to the RDSA.

We replaced regulatory asset charges with ERB Charges as part of the regulatory asset refinancing in order to save costs. (D.04-11-015.) For direct access customers, ERB Charges were included as a component of the CRS, just as were the regulatory asset charges.

In March 2005, SierraPine reports that PG&E informed SierraPine that it intended to pursue collection of ERB-related costs. SierraPine protested PG&E's AL, asking that the Commission find SierraPine exempt from such charges. In response to the protest, PG&E noted similarities between SierraPine's exemption claim and that of BART, and suggested that SierraPine raise the issue in this proceeding, as did BART.

On April 19, 2005, SierraPine filed motions to intervene here, and contingently add the issue of is exemption claim. SierraPine stated that it believed the appropriate resolution of this matter was in its protest to the AL, but if not addressed there, it should be resolved in this proceeding.

By Ruling dated April 28, 2005, SierraPine's unopposed motion to intervene was granted. No issue of disputed fact was identified. In response to BART's May 4, 2005 motion for an expedited interim decision, SierraPine asked that its exemption claim be decided on the same expedited schedule. The request was granted at the prehearing conference on May 17, 2005. Opening briefs were filed on May 23, 2005. Reply briefs were filed on May 31, 2005. The SierraPine issue was submitted along with the BART issue for Commission decision on June 9, 2005.

3.2. Discussion

Just as BART has unique legislation and circumstances, SierraPine also has unique legislation and circumstances. For example, SierraPine was the only qualifying direct transaction customer to apply for exemption from the DA CRS. (§ 367.3.) It was directly and expressly exempted in 2003 from the entire DA CRS. (D.03-09-019.)

Our decision implementing rates for PG&E's bankruptcy reorganization provided that:

"the charge imposed on DA customers for recovery of the Regulatory Asset, or a successor DRC, shall be recovered from such DA customers on a non-bypassable basis under the current 2.7 cent per kWh DA CRS cap pursuant to Commission decisions regarding the cap." (D.04-02-062, Ordering Paragraph 1 and RDSA, Attachment A, Paragraph 8.)

These charges are not recoverable from customers exempted from these charges unless otherwise provided under the RDSA or other relevant Commission decisions. (D.04-02-062, mimeo., page 30.) Our decision implementing ERB Charges continues to assess these charges on direct access customers subject to the applicable DA CRS cap. (D.04-11-015, Ordering Paragraph 15.)

SierraPine was exempt from the entirety of the DA CRS, including regulatory asset charges, as a result of § 367.3 and D.03-09-019. That makes the level of SierraPine's DA CRS cap zero. Regulatory asset charges, and the replacement ERB Charges, are part of, and subject to, the DA CRS cap. No other recovery mechanism from SierraPine for the regulatory asset was proposed or adopted. As a result, we conclude that SierraPine was not responsible for regulatory asset charges, and is not responsible now for ERB Charges, assessed under, or as part of, the DA CRS.

The purpose of refinancing the regulatory asset was to "lower the costs borne by PG&E's ratepayers." (D.04-11-015, mimeo., page 3.) It would be particularly unreasonable, and inconsistent with the intent of both D.03-09-019 and D.04-11-015, for SierraPine in its unique circumstances to incur a rate increase as a result of the refinancing by becoming subject to costs from which it was previously exempt.

Continuing to recognize SierraPine's exemption from the DA CRS, including ERB Charges and all other components, has no effect on the amount collected for these cost elements. In its application for waiver, SierraPine declared that absent waiver of the DA CRS it faced certain and imminent closure. We found it necessary to waive not only part, but all, of the DA CRS. We specifically found that granting the waiver would not result in any shifting of costs:

"We conclude that the waiver of the DA CRS [for SierraPine] will not result in any shifting of costs to bundled service customers or delay full and timely recovery of costs from direct access customers as a group. Any reduction in the amount of DA CRS collected will be no different than the reduction that would occur were the Rocklin facility to close, an inevitable result should the Commission decline to grant the waiver. The waiver will not shift any cost responsibility to bundled customers, since direct access customers as a group will remain responsible for the same costs whether or not a waiver is granted. Finally, deferral of the DA CRS collection would not afford SierraPine the necessary relief, since the historically thin margins in the MDF [medium-density fiberboard] business would not allow SierraPine to pay DA CRA amounts in the future." (D.03-09-019, mimeo., pages 8-9.)

No party presents evidence to the contrary. We have no reason to think this does not continue to be the case, including the infeasibility of deferral. Moreover, the period to apply for such exemption pursuant to § 367.3 has long since expired. SierraPine's Rocklin facility was the only entity to apply and qualify for the exemption. No other entity can be exempted from ERB Charges under § 367.3. Continuation of this exemption for SierraPine has no effect on the cost recovery of ERB Charges.

Thus, as described and explained above, we do nothing here that revises recovery costs, nor do we reduce or impair the value of recovery property. Continuing SierraPine's exemption from paying regulatory asset costs, and subsequent ERB Charges, has no effect on the level of ERB Charges, other customers, or the SPE.