Background
In January 2001, in response to the energy crisis facing California, the Legislature gave DWR the authority to purchase electricity and sell it to the retail customers of California's electric utilities. This authority was provided for in Assembly Bill 1 of the First Extraordinary Session of 2001-2002 (Stats. 2001, Ch. 4) (AB X1).
In March 2001, the Commission ordered SCE to segregate, and hold in trust for the benefit of DWR, certain amounts its customers had paid for DWR's electricity. (D.01-03-081.) This arrangement was formalized in the "Servicing Agreement Between State of California Department of Water Resources and Southern California Edison Company," which was approved by the Commission with certain modifications in D.01-09-014.
As a result of D.01-09-014, D.02-02-051, and D.02-02-052,2 SCE and DWR discussed and negotiated amendments and restatements to the Servicing Agreement. These changes were reflected in the Amended Servicing Agreement, which the two parties signed on March 29, 2002. Subsequently, SCE sought Commission approval of the Amended Servicing Agreement by filing a petition for modification of D.01-09-014. The Commission granted SCE's petition and approved the Amended Servicing Agreement in D.02-04-047.
In D.02-07-039, the Commission approved SCE's second petition to modify D.01-09-014. This petition sought Commission approval of "Amendment No. 1" to the Amended Servicing Agreement.3 Thus, prior to today's decision, the existing servicing arrangements between SCE and DWR are composed of the Amended Servicing Agreement and Amendment No. 1.
Under AB X1, DWR's authority to contract for electricity purchases expires on January 1, 2003. (Water Code § 80260.) Rulemaking (R.) 01-10-024 was initiated by the Commission to allow the electric utilities to resume the responsibility of procuring electricity for their customers. In D.02-09-053, the Commission ordered SCE, and the other two large electric utilities, to assume all of the operational, dispatch, and administrative functions for the electricity contracts that DWR had entered into, effective January 1, 2003. D.02-09-053 also allocated the DWR contracts to the resource portfolios of the three utilities, who are to schedule and dispatch the contracts in a least-cost manner.
As a result of the assumption of the operational duties for the DWR contracts, the Contract Allocation Decision recognized that the "servicing arrangements" that DWR had entered into with SCE, would need to be altered. (D.02-09-053, pp. 15, 59.) In Ordering Paragraph 3 of D.02-09-053, DWR and SCE were directed to negotiate appropriate modifications to their servicing arrangements, and DWR was directed to "submit its proposed modifications" by October 1, 2002. DWR and the three electric utilities were also directed to jointly file proposed operational agreements and proposed standards for reasonableness review by October 1, 2002.
The three utilities requested an extension of the submission date for the proposed modifications to the servicing arrangements and proposed operational agreements. The Commission's Executive Director, in a letter dated September 27, 2002, granted an extension of one week, to October 8, 2002.
In response to the submissions ordered in D.02-09-053, on October 8, 2002, DWR electronically transmitted to the Commission, and to the service list, a memorandum from Peter Garris of DWR, along with the proposed modifications to the existing servicing arrangements for SCE, and the other two utilities.4 The document containing DWR's proposed modifications to SCE's servicing arrangements is labeled "2003 Servicing Agreement Between State of California Department of Water Resources And Southern California Edison Company." DWR also transmitted two other documents, one which contains Attachments A through I5 of the Servicing Order, and the other which contains proposed Attachment J to the Servicing Order.
Due to the earlier extension by the Executive Director, the assigned administrative law judge (ALJ) issued a ruling on October 10, 2002, allowing interested parties additional time to submit comments on the proposed modifications to SCE's servicing arrangements, and reply comments. SCE filed comments and reply comments on October 18, 2002 and October 23, 2002, respectively.6 On October 23, 2002, DWR transmitted a memorandum entitled "Comments Concerning Submissions Requested by the California Public Utilities Commission Decision 02-09-053."
2 D.02-02-051 adopted the Rate Agreement between DWR and the Commission, and D.02-02-052 allocated DWR's 2001-2002 revenue requirement among the customers in the utilities' service territories in California. 3 Amendment No. 1 implemented the 2002 20/20 Program for energy conservation, and provides for the bond charge to appear as a separate line item on a consolidated utility bill. 4 DWR also submitted the proposed operating agreement and related attachments. 5 The Letter Agreement to Attachment I, dated February 28, 2002 and as amended by the letter dated March 18, 2002, was not included in the transmittal. 6 SCE's comments and reply comments also addressed the proposed operating agreement, and were filed in this proceeding and in R.01-10-024.
