This case has been bifurcated to capture the ratemaking issues in Phase 1 and the quantification issues in Phase 2. Phase 1 has been limited to deciding issues related to terms and conditions for those entities which are exempted from the CTC, determining the need for a market price proxy, and establishing the transition cost balancing accounts for each utility. Several parties have addressed the eligibility of certain costs for transition cost recovery in both Phase 1A policy briefs and Phase 1 testimony, apparently because of confusion as to where these matters were to be taken up. The ALJ issued a ruling on November 21 to clarify these matters.
In Phase 1, we address the ratemaking mechanisms proposed by PG&E, Edison, and SDG&E to track and recover transition costs, as well as the various proposed approaches to flexibility in applying revenues to costs and accelerating depreciation. In addition, we discuss the CTC responsibility for departing load and the establishment of the required fire wall in the accounting mechanisms for CTC exemptions to ensure that no cost-shifting occurs between the combined residential and small commercial class and remaining customer classes. The actual operation of the fire wall will be more fully considered in the unbundling and ratesetting proceeding (A.96-12-009 et al.). Finally, we must ensure that the balancing accounts are adequate to account for any proceeds from Rate Reduction Bonds, provided in AB 1890 as a means to finance the mandatory 10% rate reduction for residential and small commercial customers beginning January 1, 1998.