8. Final Categorization and Review and Comment Period

Based on our review of this application, we conclude that there is no need to alter the preliminary determination as to the ratesetting categorization made in Resolution ALJ 176-3080 (January 23, 2002). We modify our preliminary determination that a hearing is necessary, because no hearing was necessary in this proceeding.⁶⁹

The draft decision of ALJ Prestidge was mailed to the parties in accordance with Section 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure on February 11, 2003. Comments were received from PG&E, TID, and ORA on March 3, 2003. Late-filed reply comments were received from PG&E and ORA on March 10, 2003.⁷⁰

PG&E and TID comment that the Commission should not defer its determination of the allocation of PG&E's gain on sale from this transaction between shareholders and ratepayers to a subsequent rulemaking on gain on sale issues. ORA's comments also express disappointment that the proposed decision deferred the Commission's determination regarding allocation of the gain on sale, but recognized that this issue is a policy matter for the Commission. In response to these comments⁷¹, we have modified Section 5 of the decision to address the ratemaking issues here and to allocate PG&E's gain from the sale of distribution assets to TID to shareholders pursuant to Redding II. We have also added language to clarify that PG&E shall allocate its gain from the sale of transmission assets to TID according to applicable FERC authority. ⁷²

We need not address other comments from the parties regarding the placement of PG&E's gain on sale in a holding account pending the upcoming gain on sale rulemaking, because we have allocated the gain on sale here.

ORA comments that the proposed decision errs by improperly shifting the burden of proof to ORA regarding whether TID is likely to default on its obligations to pay NBCs on behalf of departing customers and the amounts that would otherwise be owed by departing customers under PG&E energy efficiency contracts. We disagree with this comment and have added footnote 30 to clarify that while PG&E has the overall burden of proof in this matter, ORA failed to meet its burden of producing evidence in support of its affirmative recommendations. ORA further comments that the Commission lacks jurisdiction to order TID to reimburse PG&E for NBCs otherwise owed by departing customers. We have modified Section 5 to clarify that this decision does not order TID to pay NBCs in effect before the closing date on behalf of departing customers, but approves the asset sale agreement, in which TID assumed this obligation, and directs PG&E to enforce this obligation if TID should default. We have also added language to clarify that while we will not require TID to pay NBCs imposed after the closing date which it has not agreed to pay, we may require departing customers to pay these charges as consistent with state law and Commission decisions. We need not respond to ORA's other comments, which consist of rearguments of positions stated in ORA's briefs.

PG&E further comments that the proposed decision does not include a finding requested by PG&E that TID's agreement to pay NBCs established before the closing date on behalf of departing customers, according to the methodology and calculations contained in PG&E's testimony, fully satisfies any obligation of PG&E and its customers for NBCs. We have added language to Section 5 regarding ratemaking issues to deny PG&E's request and to state that TID's agreement to pay NBCs in effect before the closing date cannot satisfy the obligation of PG&E customers or departing customers here to pay their fair share of any applicable new NBCs or CRCs imposed after the closing date. As requested in ORA's reply comments, we have retained language in the proposed decision that requires PG&E to enforce TID's obligations to pay NBCs established before the closing date and amounts owed under energy efficiency contracts on behalf of departing customers through the dispute resolution process set forth in the closing agreement, if TID should default on these obligations.

PG&E's comments also ask the Commission to approve the specific methodology and calculations of NBCs to be paid by TID on behalf of departing customers contained in PG&E's testimony. We have added language to Section 5 to state that while PG&E's overall methodology appears sound, we cannot approve the specific calculations of NBCs owed because some of the calculations are based on illustrative examples, rather than actual figures. We have also added language to require PG&E to file a revised statement of its methodology and a recalculation of NBCs to be paid by TID and any new NBCs or CRS that have been adopted and apply to departing customers by advice letter within 90 days of the effective date of this decision.

PG&E and TID further comment that the Commission should permit PG&E to waive the amounts that would otherwise be owed by departing customers under PG&E energy efficiency program contracts. PG&E and TID state that since the departing customers are being transferred into TID's service area involuntarily, it is not fair to require them to pay these amounts. We need not respond to these comments, which are mere rearguments of positions argued by these parties in their briefs. PG&E further comments that waiver of the amounts owed by departing customers under energy efficiency contracts will not place an unfair financial burden on remaining ratepayers, because PG&E's remaining ratepayers will still benefit from the reduced energy load and associated savings that result from the installation of energy efficiency measures. We have added footnote 34 to state that although the installation of energy efficiency measures should result in overall energy savings, the record contains no evidence that this savings or any overall reduction in energy load would be equivalent to the amount owed by departing customers under the energy efficiency contracts.

In addition, PG&E's comments request modification of the decision to provide that if TID's agreed-upon payments up to $500,000 on behalf of departing customers for amounts due under energy efficiency contracts do not cover all amounts owed, PG&E may collect any additional amounts from departing customers who received large rebates under energy efficiency contracts, such as $50,000 or more. PG&E states that this approach would permit more efficient collection of the amounts owed than requiring PG&E to collect from departing customers on a pro rata basis, because many of the energy efficiency program contracts involve small dollar amounts. We have modified the proposed decision to make this change.

Comments from the parties also requested several minor technical corrections to the proposed decision. We have corrected the decision as appropriate. We have also made non-substantive edits to Section 5.

Since this decision results in a significantly different outcome on ratemaking issues than the proposed decision, we wish to allow an additional seven-day period for public review and comment. Any additional comments from the parties must be filed and served by no later than March 28, 2003. No reply comments will be accepted.