V. Legal Authority for Imposing Cost Responsibility Surcharges

In D.02-11-022 we found that the Commission has legal authority to impose DWR and non-DWR surcharges on DA customers. In this decision, we conclude that the surcharges that would be imposed on Departing Load Customers are consistent with our legal authority and obligations. Various parties representing DL interests generally argued that the Commission lacks jurisdiction over the right to engage in Customer Generation. EPUC/KCC/GAG also claimed that such charges are prohibited by law and contrary to principles of cost causation. Various parties also claimed that explicit State and federal policies encouraging the development of Customer Generation would be frustrated by the imposition of CRS on DG load.

We conclude that requisite legal authority exists as a basis to authorize and implement the cost responsibility surcharges on Customer Generation load as adopted in the instant order. Under Code Section 701, the Commission has broad authority to regulate public utilities and to "do all things...which are necessary and convenient in the exercise of such power and jurisdiction."³¹ Moreover, the changes or rates imposed must be "just and reasonable" and must not be unfairly discriminatory. (See Pub. Util. Code §§ 451 and 453.) Consistent with these statutory requirements prohibiting discriminatory ratemaking, bundled customers may not be arbitrarily charged for obligations which rightfully are the responsibility of DA customers.

Within the broad statutory authority prescribed under Section 701, the Commission has specific authority to establish charges for the collection of costs incurred by DWR pursuant to AB 1X. We conclude that this authority extends to charges imposed on Customer Generation that took bundled service for some period subsequent to January 17, 2001, as prescribed in the Settlement Agreement.

DWR began buying electricity on behalf of the retail end use customers in the service territories of PG&E and SCE on January 17, 2001, and of SDG&E on February 7, 2001. AB 1X provides for funds to DWR from revenues generated by applying charges to the electricity that it purchased on behalf of retail end-users. AB 1X requires that DWR include in its revenue requirement "...amounts necessary to pay for power purchased by it..." (Water Code Section 80134(a)(2).)

Water Code Section 80002.5 states that "[i]t is the intent of the Legislature that power acquired under this division shall be sold to all retail end use customers served by electrical corporations, ...." Water Code Section 80104 explains that "the retail end use customers shall be deemed to have purchased that power from the department. Payment for any sale shall be a direct obligation of the retail end use customer to the department."

Additionally, Assembly Bill No. 117 ("AB 117"), signed into law on September 24, 2002. (Stats 2002, Ch. 838.) calls for imposing an appropriate share of cost responsibility on customers, including Customer Generation Departing Load, that took utility service on or after February 1, 2001. Although AB 117 is primarily about community aggregation programs, the Legislature took the opportunity to amend Public Utilities Code Section 366 to add subsection (d) in order to clarify its intent concerning the cost responsibility of each retail end-use customer who was a bundled utility customer on or after February 1, 2001. This subsection states:

"It is the intent of the Legislature that each retail end-use customer that has purchased power from an electrical corporation on or after February 1, 2001, should bear a fair share of the [DWR's] electricity purchase costs, as well as electricity purchase contract obligations incurred. . . that are recoverable from electrical corporation customers in commission-approved rates. It is further the intent of the Legislature to prevent any shifting of recoverable costs between customers." (Pub. Util. Code, § 366, subd. (d)(1).)

Thus, consistent with the above-referenced provisions of the Water Code and Public Utilities Code, Customer Generation load must be held responsible for a fair share of the DWR revenue requirements. To the extent that customers departed from bundled utility service to be served by Customer Generation after DWR began buying power on January 17, 2001, such customers consumed power that had been purchased by DWR. The DWR costs for which customers bear responsibility include both previously incurred costs as well as an ongoing cost component. We address the more specific applicability of each respective charge in our review of parties' positions in relation to the Settlement Agreement, as discussed below.