The utilities each filed proposals for determining revenue requirements for each functional category: distribution, transmission, public purpose programs, and nuclear decommissioning and generation. In general, their proposals were very similar. Each would develop its competition transition charge (CTC) residually after determining other costs. They propose that the Commission adopt distribution revenue requirements by subtracting from nongeneration revenue requirements the transmission revenue requirements approved by the FERC. Each utility would allocate to distribution revenue requirement costs that they do not attribute directly to other functional categories.
AB 1890 requires the establishment of a separate rate component to collect the revenues to fund (1) energy efficiency activities; (2) research and development; (3) operation and development of renewable resource technologies; (4) low income energy efficiency services (LIEE), and (5) the California Alternative Rate for Energy (CARE) program.
AB 1890 also requires the establishment of a separate charge for nuclear decommissioning, which the utilities propose here.
Each proposal is discussed in more depth below.
PG&E proposes the following 1998 revenue requirements for each functional category:
Generation $5,222 million
Transmission 291
Distribution 2,031
Public Purpose Programs 270
PG&E derives the total by adjusting the revenue requirement adopted in its last general rate case consistent with its 1997 Energy Cost Adjustment Clause (ECAC) decision (D.96-12-080). It then increases the revenue requirements for its safety and reliability programs by an inflation factor plus two percent, or $172 million, pursuant to Section 368(e). PG&E also increases revenue requirements by $48 million to fund renewable resource technologies, consistent with Section 381(c).
PG&E states it assigned costs to various functions according to cost causation, consistent with Commission policy. Costs which it could not attribute directly to a function were allocated to distribution in most cases.
Edison proposes the following 1996 revenue requirement for each functional category:
Transmission $ 211 million
Distribution 1,816
Public Purpose Programs 178
Nuclear Decommissioning 104
To derive the generation rate, Edison proposes to subtract from the rate levels in effect on June 10, 1996, the adopted PBR distribution rates, transmission rates, public benefits charges, nuclear decommissioning charges, rate reduction bond repayment charges and other miscellaneous costs. From this, Edison would determine the CTC residually by subtracting its cost of procuring energy and other services from the ISO/PX.
Edison recommends that the Commission derive its distribution rates by subtracting FERC-adopted transmission rates from the amount identified in its PBR as nongeneration rates. Edison refers to this residual approach to allocating costs as a "rate credit" method. Edison supports this approach by observing that the Commission has already approved Edison’s nongeneration revenue requirement and that FERC is expected to rule soon on the utilities’ transmission revenue requirement proposals.
Edison proposes to allocate administrative and general (A&G) costs between functions by identifying them in one of three ways: direct, joint or common. Direct costs are those that can be associated with a single business segment and are assigned to that segment. Joint costs are those which are associated with multiple business segments on the basis of an indirect relationship or pursuant to a special study of the costs. Common costs includes those that have no causal relationship to a single business segment or group of segments. Edison refers to common costs as fixed costs because they do not vary with specific factors. Edison observes that less than five percent of its costs are fixed.
In light of its understanding that FERC will not establish a final transmission revenue requirement in time for the introduction of direct access on January 1, 1998, Edison proposes a balancing account to adjust transmission and distribution revenues at a later time.
Edison proposes a balancing account and associated nonbypassable surcharge it titles the Miscellaneous Adjustment Mechanism (MAM) that would recover numerous generation-related costs, proposing an initial revenue requirement for the account of negative $22.244 million in 1998.
Like Edison and PG&E, SDG&E proposes to establish the distribution revenue requirement residually by subtracting the FERC-approved transmission revenue requirement from the nongeneration revenue requirement. To derive its current total revenue requirement, SDG&E used its last general rate case revenue requirement as the base, and escalated it for operation and maintenance (O&M) and capital costs using its approved PBR mechanism. It increased the amount to include authorized transmission O&M expenses approved in its 1996 ECAC decision. SDG&E also included two rate increases associated with the Fuel Price Index Mechanism authorized by Section 397 of AB 1890.
SDG&E’s total revenue requirement by function is:
Transmission $ 121 million
Distribution 542
Public Purpose Programs ______
DSM 32
RD&D 4
Renewables 12
CARE 8.5
Nuclear Decommissioning 22
SDG&E assumed a revenue requirement of $73 million for repaying the bonds issued to reduce residential and small commercial rates.
Footnotes are bracketed and in blue