VI. Prevention of Cost Shifting

The Commission's policy on prevention of cost shifting has been previously set forth in D.02-03-055. Although this policy was articulated in the context of the suspension of DA load, the concern also is relevant to DL. Nonetheless, there are differences between DA and DL customer bases that are relevant in considering the effects of cost shifting. The cost shifting concerns relating to DA load, as articulated in D.02-03-055, focus on maintaining bundled customer indifference resulting from whether DA was suspended on September 20, 2001 as opposed to July 1, 2001. Between these two dates, there was significant migration from bundled to DA load. DWR did not incorporate this significant migration from bundled to DA load in its long term contracting for power during early 2001, but incurred a significant level of costs on behalf of customers that subsequently switched to DA. A cost responsibility surcharge was thus required to avoid shifting those costs incurred on behalf of DA load onto bundled customers. The question of cost shifting, therefore relates to whether or to what extent, DWR incorporated a particular segment of load into its procurement of power for bundled customers.

The circumstances giving rise to DA cost shifting, however, do not apply in the same manner to DL served by Customer Generation. In contrast to DA, for example, there has been no suspension of DL, nor any marked increase in migration to DL during the period between July 1 and September 20, 2001. Instead, the departure of load to sources served by Customer Generation has been going on for a number of years.

However, as we have articulated in D.02-11-022 the legal basis for establishing a DACRS on customers. We stated:

Further, under Pub. Util. Code § 701, the Commission has broad authority to regulate and to "do all things...which are necessary and convenient in the exercise of such power and jurisdiction."³² Moreover, as a general matter and consistent with the law, the charges or rates imposed by this Commission must be "just and reasonable" and must not be unfairly discriminatory. (See Pub. Util. Code §§ 451 and 453.) In accordance with these statutory requirements, bundled customers may not be arbitrarily charged for obligations which rightfully are the responsibility of DA customers.

Further, in the discussion above on our denial for the settlement agreement, we have explained our concerns with the use of the forecast of customer generation by Navigant. We cannot conclude that the cap proposed in the Settlement represents a reasonable approximation of the level of Customer Generation demand assumed by DWR in forecasts underlying its procurement of contract power.