Michael R. Peevey is the Assigned Commissioner and Julie M. Halligan is assigned ALJ in this proceeding.

1. SCE's request to modify D.02-12-069 to state that Commission review of certain purchase and sale activities associated with SCE's administration of the DWR contracts is limited to the Commission's quarterly compliance review of transactions conducted under the utility's approved procurement plans is inconsistent with the Commission's responsibility to ensure that each electrical corporation optimizes the value of its overall supply portfolio, including DWR contracts.

2. SCE's request that the Commission amend Paragraph III C of the Operating Order (Exhibit A to D.02-12-069) to remove the requirement to obtain DWR agreement to its sales plans before it may sell surplus energy more than one day in advance is reasonable because it will eliminate the inconsistency between the Commission's stated intent in D.02-12-069 and the language in Paragraph II C of Exhibit A to D.02-12-069 (SCE's Operating Order).

3. DWR's request to adopt the following statement as an additional revision to Paragraph III C of Exhibit A to SCE's Operating Order is reasonable because it provides additional direction to SCE consistent with the Commission's intent in D.02-12-069: "Utility shall pursue surplus sales in a fashion reasonably designed to serve the overall best interests of retail electric customers based on information known or that could have been known by Utility at the time. Utility agrees to include sufficient details in the sales plans to allow DWR to satisfy its financial management and reporting requirements."

4. D.02-12-069 does not require the utilities to use either a pair of DWR and utility contracts with counterparties or a single utility contract for sales of surplus energy. SCE has not provided sufficient justification or identified any changed circumstances that support modification of D.02-12-069 to specify the type of sales agreement to be used by the utilities for sales of surplus energy.

5. SCE's request that the Commission modify D.02-12-069 to require DWR to provide collateral to counterparties for DWR's approximate share of surplus sales is inconsistent with the Commission's stated goal of reducing the utilities' reliance on the state's resources.

6. SCE has not provided sufficient justification to modify Exhibit F of the Operating Order to limit the data SCE is required to provide to DWR.

7. A mandatory six-month deadline for approving the utilities annual contract administration filings would unnecessarily and inappropriately limit the scope and thoroughness of the Commission's review of utility contract administration.

8. Requiring SCE to comply with one set of credit standards for SCE's pro-rata share of surplus sales and another set of credit standards for DWR's pro rata share of surplus sales is unnecessarily complex and inconsistent with the Commission's desire to reduce the need for DWR's involvement in surplus sales agreements.

1. SCE's request to limit Commission review of residual net short purchases and residual net long sales to the quarterly compliance review of transactions conducted under SCE's approved procurement plan is inconsistent with D.02-09-053, D.02-12-62, and AB 57 and should be denied.

2. Amending Paragraph III C of Exhibit A to D.02-12-069 (SCE's Operating Order) as requested by SCE will give effect to the Commission's intent in D.02-12-069 and should be approved.

3. SCE has not provided sufficient justification to deny DWR reasonable access to necessary information, therefore SCE's request to modify Exhibit F of the Operating Order should be denied.

4. SCE's request to modify D.02-12-069 to require DWR to bear responsibility for providing collateral for DWR's approximate share of surplus sales is inconsistent with the Commission's stated goal of reducing the utilities' reliance on the state's resources and should be denied.

5. The requirement embodied in D.02-12-069 that SCE apply credit risk management criteria that meet or exceed DWR credit criteria should be revised to eliminate unnecessary complexity and reduce the need for DWR's involvement in surplus sales agreements.

6. The revised Operating Order and related exhibits should be approved, and SCE should be ordered to comply with the revised Operating Order and exhibits.

ORDER

IT IS ORDERED that:

1. The March 3, 2003 Petition for Modification of Decision (D.) 02-12-069 filed by Southern California Edison Company (SCE) is granted in part.

2. Page 50 of D.02-12-069 is modified to revise the last sentence of the first paragraph to read:

We find the Department of Water Resources' request for detailed hourly and hour-ahead Final Schedule Volumes reasonable, and we will modify Exhibit F to require the utilities to provide the additional information."

3. The attached Operating Order and related Exhibits, revised as discussed above, are approved and adopted as part of this decision.

4. In all other respects, SCE's March 3, 2003 Petition for Modification is denied.

This order is effective today.

Dated December 4, 2003, at San Francisco, California.

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