11. Rehearing and Judicial Review
This decision construes, applies, implements, and interprets the provisions of AB 1X (Chapter 4 of the Statutes of 2001-02 First Extraordinary Session). Therefore, Section 1731(c) (applications for rehearing are due within 10 days after the date of issuance of the order or decision) and Section 1768 (procedures applicable to judicial review) are applicable.
1. The California DWR owes approximately $6.6 billion to the General Fund and $3.5 billion on an interim loan. The debts were incurred in the months following the January 17, 2001 declaration of a state of emergency which required DWR to purchase electricity for California consumers.
2. DWR plans to refinance these debts through a bond offering of up to $11.95 billion.
3. The "Rate Agreement By and Between State of California Department of Water Resources and State of California Public Utilities Commission" (Rate Agreement) states that the Commission will impose charges sufficient to provide for the payment of all bond-related costs incurred by DWR.
4. The proposed sale of bonds at close to $12 billion will be the largest municipal bond sale in history.
5. Certain DWR contracts for power, called priority contracts, have a higher priority for repayment than bond costs.
6. Several DWR contracts include terms that pass through the costs of natural gas, and fluctuations in the price of gas will lead to fluctuations in the price of power.
7. In a typical municipal bond offering, the borrowing entity has the power to provide a dedicated stream of revenues.
8. The Commission, not DWR, will set bond charges, which will be imposed on IOU customers.
9. The factual circumstances listed in Findings of Fact 4, 5, 6, 7, and 8, have resulted in a complicated credit structure with multiple reserve accounts.
10. The exact annual revenue requirement needed to support the bonds will not be known until the bond financing is complete. A more precise 2003 bond revenue requirement will be available in November after a large proportion of the bonds are placed.
11. It is possible to determine the reasonableness of methodologies for setting charges to recover bond-related costs based on the preliminary financing information presented by DWR in Exhibit 1 and Reference Exhibit 1-a.
12. DWR will present the Commission with its more precise revenue requirement for bond-related costs after a large proportion of bonds are placed.
13. The Rate Agreement provides that the Commission shall impose bond charges "sufficient to provide moneys so that the amounts available for deposit in the Bond Charge Payment Account from time to time, together with amounts on deposit in the Bond Charge Payment account, are at all times sufficient to pay or provide for the payment of all Bond Related Costs when due in accordance with the Financing Documents."
14. The Rate Agreement requires that bond charges be imposed based on the aggregate amount of electric power sold to customers in the service areas of PG&E, SCE, and SDG&E, regardless of whether the power is sold by DWR, the utility, or under particular circumstances, by an ESP.
15. D.01-05-064 exempted the consumption of CARE-eligible customers, residential usage below 130% of baseline, and usage by medical baseline customers of PG&E and SCE from the 3 cents per kWh surcharge.
16. D.01-09-059 exempted the consumption of CARE-eligible customers, residential usage below 130% of baseline, and usage by medical baseline customers of SDG&E from a 1.46 cents per kWh rate increase.
17. The long period over which the bond charges will be collected breaks the link between those for whom the power was purchased and those responsible for repayment.
18. The bond charge is a mechanism to raise revenues to pay for bond-related costs.
19. A bond charge imposed equally on all non-exempt kilowatt-hours has a simple structure that is easy to implement and is transparent and fair to all that must pay it.
20. During the period of the energy crisis, the prices charged for power had little relationship to the costs of generating electricity. Thus, the assumptions in the economics principle of allocating costs on the basis of cost causation are not met.
21. Since the bond-related costs will be repaid over almost twenty years, over time those paying the surcharges will frequently be different than those for whom the costs were incurred.
22. D.02-02-052 did not allocate responsibility for past energy purchases, but instead allocated responsibility for current and ongoing purchases by DWR on behalf of the investor owned utilities.
23. D.02-02-051 noted that the Commission has broad discretion in assessing a bond charge.
24. It is not reasonable to make departures from a methodology of allocating bond-related costs on an equal-cents-per-kWh basis to reflect the voltage of a consumer's power.
25. It is not reasonable to make departures from a methodology of allocating bond-related costs on an equal-cents-per-kWh basis to impose WAPA-related costs on PG&E's customers.
26. The Rate Agreement states that absent a decision that has become final and unappealable, power provided to customers by Energy Service Providers will not be included in the determination of bond charges.
27. If DWR borrows $11.95 billion, it projects a 2003 revenue requirement for bond-related costs of $1,140 million, and a 2004 revenue requirement of $784 million.
28. Based on DWR's assumptions, if residential sales below 130% of baseline, medical baseline, and CARE-eligible customer usage are excluded from the bond charges, we estimate that all other bundled consumption will pay a projected charge of between 0.7927 and 1.0732 cents per kWh in 2003 and between 0.7381 and 0.9141 cents per kWh in 2004. This result also assumes the adoption of a methodology that assigns a uniform charge to all non-excluded consumption. Bond charges at this level will remain in effect until a decision concerning whether Direct Access customers should pay bond-related costs becomes final and unappealable.
29. Incorporating a bond charge into PG&E's rates need not raise customers' overall rates.
30. SCE operates under Settlement Rates and incorporating a bond charge into SCE's rates need not raise customers' overall rates.
31. It is practical and in the public interest to implement a bond charge on non-excluded electricity consumption that occurs on or after November 15, 2002.
32. It is in the public interest to inform customers of the bond charges.
33. It is practical and in the public interest to include a line item on customer bills identifying the amount of the bond charge as soon as possible, but no later than February 11, 2003.
34. To impose a bond charge on non-excluded consumption occurring on or after November 15, 2002, DWR must provide a more precise bond revenue requirement for 2003 (as defined herein) to the Commission, and to SCE, SDG&E, and PG&E by November 8, 2002.
35. A reasonable estimate of the 2003 non-excluded bundled consumption of customers in the service territories of SCE, SDG&E, and PG&E is 106,222 gigawatt hours.
36. It is reasonable and practical to establish balancing accounts and subaccounts, consistent with the discussion herein, to facilitate implementation of the policies adopted in this decision and under active consideration in the other proceedings before this Commission.
37. It is reasonable and practical to require SCE, SDG&E, and PG&E to make a new advice letter filing within 10 days after a decision assigning cost responsibilities for DA customers becomes final and unappealable that imposes bond charges on those held responsible for bond-related costs and to amortize over and under payments in the sub-accounts of the Bond Charge Balancing Account.
1. It is reasonable to adopt a uniform bond-related surcharge on all non-excluded consumption.
2. Pursuant to Water Code Section 80110, the determination of the reasonableness of the costs associated with DWR's bond offering rests with DWR, not the Commission.
3. Pursuant to the Public Utilities Code, the authority to set a bond charge rests with the Commission, not DWR.
4. Pursuant to Section 80110 of the Water Code, DWR is entitled to recover as a revenue requirement amounts necessary to payoff the proposed bonds that will be issued by DWR.
5. The Commission should adopt bond charges in amounts sufficient to comply with statutory requirements of Sections 80110 and 80134 of the Water Code and the Commission's covenants in Article V of the Rate Agreement, negotiated pursuant to Section 80110 of the Water Code
6. Pursuant to California Water Code Section 80110, the Commission should not increase electricity charges for existing baseline quantities or usage by those customers up to 130 percent of existing baseline quantities at this time.
7. It is reasonable to exclude residential sales below 130% of baseline, medical baseline, and CARE customer usage from the bond charges.
IT IS ORDERED that:
1. The Department of Water Resources' (DWR) Supplemental Testimony of August 13, 2002 is identified as Reference Exhibit 1-a.
2. San Diego Gas and Electric Company (SDG&E), Southern California Edison (SCE) and Pacific Gas and Electric Company (PG&E) shall make changes to their billing systems to impose bond charges consistent with the methodology of collecting an equal-cents-per-kilowatt-hour (kWh) on all non-excluded bundled electricity consumption, as defined herein, with bond charges to be reflected as a separate line item on customer's bills.
3. No later than November 8, 2002 the Department of Water Resources (DWR) shall submit to the Commission its more precise bond revenue requirement for 2003, and simultaneously serve it on SDG&E, SCE, and PG&E. This submission shall be based upon DWR's final debt service projections (including an assumed all-in interest rate for its variable rate bonds consistent with the terms of its Bond Indenture). If the terms of all of the Department's bonds are not known by that date, DWR shall base its submission on its most recent estimates of interest rates and bond size, based on consultations with its senior managing underwriter and financial advisors.
4. No later than five days following DWR's submission of its more precise bond revenue requirement for 2003, SDG&E, SCE and PG&E shall file compliance advice letters that impose a per kWh charge on non-exempt bundled consumption (as defined herein). This bond charge shall apply to all such consumption on and after November 15, 2002 (regardless of whether the electricity is supplied by the utility or by DWR). SDG&E, SCE, and PG&E shall calculate a uniform per kWh charge by dividing DWR's more precise bond revenue requirement for 2003 by 106,222 gigawatt-hours (GWh). SDG&E, SCE and PG&E shall impose offsetting decreases in charges for electricity energy costs as part of this initial filing to insure that rates are not raised at the time of the initial imposition of bond charges. The advice letters will be effective upon filing, subject to review by the Energy Division for compliance with this order.
5. SCE, SDG&E and PG&E shall implement a separate line item for the bond charge on the customer's bill. Any utility that is unable to show this line item on customers' bills when the first bills for electricity consumed on or after November 15, 2002 are prepared, must still comply with Ordering Paragraph No. 4 and must still collect and remit to DWR the bond charges associated with electricity consumed on and after November 15, 2002. In addition, any such utility must implement the separate bond charge line item on its customer's bills no later than February 11, 2003. In the interim each such utility must include with its bills a bill insert, or bill message, informing each customer that a bond charge for DWR (based on non-exempt bundled consumption from and after 11/15) is included on the bill.
6. SCE, SDG&E, and PG&E shall establish Bond Charge Balancing Accounts consistent with the discussion herein to track payments of bond-related charges by customer categories. The details of these accounts should be described in the advice letters filed pursuant to Ordering Paragraph 4.
7. SCE, SDG&E, and PG&E shall establish sub-accounts to track bond charge payments and responsibilities consistent with the customer usage that R.02-01-011 deems responsible for paying bond-related costs.
8. Within 10 days after a decision assigning cost responsibilities on direct access customers becomes final and unappealable, the utilities shall make a new advice letter filing to impose bond charges on those held responsible for bond-related costs and to amortize over and under payments in the sub-accounts of the Bond Charge Balancing Account. These changes shall be effective as of the date adopted by the Commission.
9. SDG&E shall establish a balancing account to track the amount it remits to DWR and thus allow it to seek a change in charges or rates, to the extent necessary, to permit recovery of its own authorized costs independent of these increased remittances to DWR. This balancing account will not affect remittances to DWR at any time, but is simply an account to allow SDG&E to recover ultimately its own authorized costs from its own customers entirely independent of its remittances to DWR.
10. Within ten days of the date of this decision, SCE, SDG&E, and PG&E shall each submit to the Commission's Energy Division drafts of the advice letters they intend to submit in compliance with Ordering Paragraphs Nos. 4 and 6. These drafts will omit any numerical data that is not yet available.
This order is effective today.
