ASSIGNED COMMISSIONERS' RULING This ruling sets evidentiary hearings on subjects related to the electric utilities' uneconomic assets and obligations. We set these hearings on uneconomic assets and obligations in order to begin to gather additional, detailed information on what is a vital issue of concern in our examination of electric restructuring; to meet the reporting requirements set forth in Assembly Concurrent Resolution (ACR) 143; and, to respond to the "Motion for the Immediate Institution of an Investigation and Expedited Hearing Schedule on the Cost Allocation and Potential for Uneconomic Utility Assets" (Motion) filed on October 7, l994 by the Center for Energy Efficiency and Renewable Technologies (CEERT), Toward Utility Rate Normalization (TURN), and the Latino Issues Forum. ACR l43 On August 31, l994, the Legislature issued ACR l43. ACR l43 advises the Commission, prior to adopting a final policy decision, to submit to the Governor and the Legislature a report which (1) proposes policies regarding performance-based ratemaking, (2) evaluates and resolves any conflicts between those policies and existing law, (3) reports on the competition transition surcharges for each utility and allocates those charges among shareholders and customers, (4) reports the impact of those policies upon the financial status of the utilities, (5) reports on options to pay for economic development and low- income ratepayer assistance programs and programs which promote environmental protection, and (6) identifies how those policies affect existing and future investment in non-utility electric power generation ACR 143 further delineates a list of criteria and advises the Commission to report on how the proposals meet those criteria. ACR 143 requires that the Commission submit its report on these matters to the Governor and the Legislature by January 31, 1995. MOTION OF CEERT, TURN AND LATINO ISSUES FORUM Through their Motion, CEERT, TURN and Latino Issues Forum state that the Commission should resolve issues related to uneconomic assets and obligations prior to adopting any final policy on electric restructuring. They recognize that in R.94- 04-031 the Commission contemplated an investigation into uneconomic assets and obligations, the determination of the "competition transition charge," and the allocation of those charges among stakeholders. The parties to the Motion also point out that ACR l43 calls for such hearings, and argue that many parties are concerned about the liability for uneconomic assets and obligations if direct access is adopted. The parties to the Motion assert further that R.94-04-031 may be motivating proposals to make piecemeal changes in regulation which could prejudice the Commission's review of uneconomic assets and cost allocation. The California Manufacturers' Association (CMA), the California Large Energy Consumers Association (CLECA), the Division of Ratepayer Advocates (DRA), Jefferson Electric Inc., San Diego Gas & Electric (SDG&E), the California Cogeneration Council (CCC) and Southern California Edison Company (Edison) responded to that Motion. In its response, SDG&E counsels against holding evidentiary hearings on the issue of utility uneconomic assets until the Commission "...establishes policy directives based on written comments and the full panel hearing process." Edison and DRA support the Motion to hold hearings now, but refute the notion that the CTC issues must be resolved prior to consideration of Edison's performance-based regulation application. CMA, CLECA, Jefferson Electric and the CCC each support the Motion's call for hearings on issues related to the CTC, but assert that the CTC represents one among many issues, such as the unbundling of auxillary services, which the Commission should immediately address. Finally, CLECA and CMA contest the assertion by the moving parties that policy direction from the Commission cannot come prior to resolution of issues related to the CTC. The CCC and Jefferson Electric believe that the process would benefit from the Commission offering additional, specific guidance, short of making any final policy determinations. THE NEED FOR HEARINGS AT THIS TIME ON THE ISSUE OF UNECONOMIC ASSETS AND OBLIGATIONS The Commission intends to submit to the Governor and the Legislature a report consistent with ACR 143. We recognize that it is difficult to provide meaningful estimates of uneconomic assets and obligations absent policy guidance. It remains our hope that this deadline will be relaxed. These evidentiary hearings are set for the primary objective of meeting ACR 143's reporting requirements. ACR 143's timeline requires that we circumscribe both the breadth, scope and time allotted to hearings on uneconomic assets and liabilites at this time. Even so, these hearings will serve a useful purpose in providing the Commission an assessment of the parameters of the variables associated with this issue. This will be valuable to the Commission as it proceeds to further refine the methodologies and quantitative estimates in subsequent hearings. Evidentiary hearings will be held to elicit preliminary estimates of the range of uneconomic assets and obligations based on alternative methods of calculating the value of any such assets and liabilities, and alternative frameworks for cost allocation. With respect to cost allocation, we reiterate the principle enunciated by the Commission on April 20th that in any industry restructuring the costs shall not be shifted from one customer class to another during the transition to or following any such restructuring. This ruling should not be interpreted as an indication that we intend to limit any future inquiry into the issue of uneconomic assets and obligations. Several parties have suggested in their written comments, at our full panel hearings, and in responses to the Motion that the Commission's deliberations on restructuring would benefit from holding hearings and collecting additional information in a number of areas beyond uneconomic assets and obligations. We find considerable merit in the suggestions of parties that the industry and this process would be well served by initiating further detailed inquiries into additional areas, and by using informal and less litigious means of conduting those inquiries. While we are not prepared as part of this ruling to initiate any further inquiries, we are actively considering the parties' suggestions on this matter. THE SCOPE OF HEARINGS The scope of the hearings will be limited to broad conceptual issues related to uneconomic assets and obligations and their disposition if the Commission were to adopt consumer choice which would warrant separate accounting or unbundling of these costs from rates. The Commission herein directs respondent electric utilities to present, in written testimony, their definition of uneconomic assets and obligations, the items which they would include in the calculation and recovery of the "competition transition charge" and why. They should also include in their testimony estimates of the amount of uneconomic assets and obligations, and the methodology used and assumptions behind those estimates. They will also propose a charge (the "CTC") which would result from those estimates, and propose an allocation of those charges among shareholders, classes of ratepayers, and direct access and utility service customers. In addition, the respondent electric utilities shall respond to the following questions: How should the utilities recover the cost of uneconomic assets and obligations and over what period? A sensitivity analysis for various amortization periods starting in 1996 of 6, 9, and 12 years should be provided. How should the CTC or a ratemaking mechanism designed to meet the same objectives be determined? How should the Commission allocate the costs of uneconomic assets and obligations among customers, and between customers and shareholders? How would various recovery mechanisms and cost allocations affect the utility's opportunity to earn under the regulatory compact? Other parties may submit testimony responding to the utilities' written testimony and may, in that testimony, present their independent analyses of the issues raised in this ruling. CROSS-EXAMINATION, DISCOVERY AND OTHER PROCEDURAL MATTERS Because time is limited and the hearings will of necessity be preliminary, only very limited cross-examination will be allowed. Questions should seek to clarify issues raised in testimony. Parties who wish to cross-examine witnesses shall notify the assigned administrative law judge in writing via fax (415-703-1723), no later than December 9, l994 of the witnesses they propose to cross-examine and the topics of their cross-examination. These notices shall be as specific as is practical. The ALJ, in consultation with the Assigned Commissioners will determine which witnesses will be subject to cross-examination, and which parties may cross-examine witnesses to assure that hearing time is used efficiently. The assigned ALJ will announce, on the first day of hearing, witnesses who will be subject to cross-examination and parties who may cross-examine witnesses. The first day of hearing will be reserved for opening statements by respondent electric utilities and parties who submit written testimony. Witnesses need not be present at the first day of hearing unless they are making opening statements. Opening statements by respondent electric utilities shall be no longer than thirty minutes. The time for opening statements will be allotted equally among parties other than respondent electric utilities. The Commission will not seek briefs following the hearings. Instead, parties will be permitted to make brief closing statements on the last day of hearing. At this stage of the proceeding, the Commission will not require the utilities or parties to respond to discovery requests except that the respondent electric utilities shall provide complete work papers to parties who request them. The utilities shall provide the Division of Ratepayer Advocates (DRA), the Division of Strategic Planning (DSP), the Commission Advisory and Compliance Division (CACD) and the assigned administrative law judge with copies of work papers on the date written testimony is submitted. The utilities shall arrange to deliver written testimony to these Commission divisions on the date testimony is due. HEARING SCHEDULE The hearing schedule is as follows: November 18 Utilities submit testimony December 5 Other parties submit testimony December 14 Hearings begin; opening statements December 22 Closing argument IT IS RULED that, l. The Motion of TURN, CEERT, and Latino Issues Forum, dated October 7, l994 is granted to the extent set forth herein. 2. Hearings are scheduled in this proceeding, as set forth herein, beginning December 14, l994 at 9 a.m. in the Commission Hearing Room, 505 Van Ness Avenue, San Francisco. 3. Respondent electric utilities shall submit testimony as described herein no later than November 18, l994. Each utility shall serve its testimony on all parties to this proceeding, and shall serve workpapers on all parties who request them. Each utility shall, on the date testimony is due, submit workpapers to CACD, DSP, DRA and the assigned administrative law judge. The data supplied to CACD shall also be provided on Microsoft Excel 5.0. Dated October 27, 1994 at San Francisco, California. /s/ DANIEL WM. FESSLER /s/ JESSIE J. KNIGHT, JR. Daniel Wm. Fessler Jessie J. Knight, Jr. Assgined Commissioners