VII. Overview of Parties' Positions

In their pre-settlement cases-in-chief, parties generally gravitated into one of two groups. There were also certain variations of parties' positions within a group.

One group, generally representing the views of bundled ratepayers and utility interests was composed of the utilities, ORA, and TURN. Within this group, PG&E, SCE, ORA, and TURN all argued that DL that departed the utility system after January 17, 2001, should bear a share of both past and future costs on an essentially similar basis to their respective proposals for DA customers. SCE sought to recover an HPC element from customers that became DL after March 29, 2002, the date of the ALJ ruling formally notifying DL customers that such charges were being considered in this proceeding.

SDG&E proposed that DWR Bond Charges be recovered from all customers, including all forms of DL that remain directly or indirectly connected to the grid. SDG&E proposed, however, that DL served by customer self-generation generally be excluded from paying for DWR ongoing power charges, based on the premise that DWR did not incur costs to serve this load. SDG&E is already recovering a competition transition cost (CTC) component from DL customers under its existing tariffs, and proposes no change in that process. SDG&E argues that a surcharge should apply only to DL that was not anticipated by DWR when it made purchases and for which it incurred costs that became stranded.

The other major group of parties generally comprised interests representing various aspects of the Customer Generation market. In their pre-settlement testimony, these parties generally opposed imposition of any surcharges on DL customers, citing legal, factual, and policy reasons. Parties cite state and federal statutes, including AB 1890, AB 1X, Pub. Util. §§ 216 and 281, and the Public Utilities Regulatory Policies Act (PURPA) to support their claims. Parties argue that Customer Generation projects are more appropriately characterized as demand reduction or energy efficiency measures that provide quantifiable benefits to customers and the state's energy grid.

Certain parties, including EPUC/KCC/GAG, UC/CSU, AREM, and CalSEIA, argued that the Commission lacked legal authority and a policy basis upon which to impose these charges retroactively. EPUC et al argue that Pub. Util. Code § 218(a) and (b) place customer-owned generation outside the scope of this Commission's jurisdiction, and that it is subject only to FERC regulation pursuant to PURPA. These parties argue that no legislation gives the Commission the authority to impose a surcharge for DWR costs or costs for purchased power from qualifying facilities (QFs) and utilities' retained generation. To the extent that the Commission retains any right to regulate customer generation, they claim that it is limited to the development of standby service rates.

These parties contrast the Legislature's decision to authorize the suspension of new direct access contracts (Water Code § 80110), with the Legislature's strong support for the construction of new generation, particularly cogeneration and distributed generation. These parties cite legislation such as AB 970 and SB 28X as intending to encourage private investment in new generating facilities in order to relieve the strain upon the state's system. ³³ Given the recent cancellations and delays in the planned construction of large power plants in the state, they argue that the need for small generation facilities is even more critical.

Parties further argue that Customer Generation did not cause DWR to incur costs, and accordingly, such generation should not be subject to surcharges.