PG&E, Edison, and SDG&E have numerous accounts which are designed to facilitate certain ratemaking conventions. In general, all three utilities have or have had an ECAC and an ERAM, balancing accounts which guarantee recovery of past costs under certain conditions. Each serves a somewhat different function and each has numerous subaccounts.
The ECAC is a regulatory account into which the utility enters mainly fuel-related costs. Developed during the 1970s when oil prices were volatile, its original purpose was to limit shareholder risk. It has also served to stabilize rates. Using the ECAC, the Commission sets rates based on a forecast of fuel costs and adjusts rates in a later period to reflect actual fuel costs. The Commission reviews the reasonableness of costs entered into ECACs after the costs are incurred. This reasonableness review process has been the trade-off for the mitigation of shareholder risk.
Edison, PG&E, and SDG&E have ECACs, each of which includes numerous subaccounts for costs associated with such items as qualifying facility (QF) contracts, nuclear incentives, line losses, and interutility power purchases. These accounts are described in more detail for each utility in Appendix B. In general, however, most costs included in ECAC accounts are related to generation, which will be subject to competition beginning January 1, 1998, or public benefits programs, the costs of which will be recovered in surcharge beginning January 1, 1998.
The ERAM tracks customer sales and permits the utility to recover its authorized revenue requirement notwithstanding the variations between sales forecasts and actual sales. The original purpose of the ERAM was to reduce or eliminate the utilities' incentives to market energy and thereby preserve the Commission's objective of promoting energy conservation. Edison no longer has an ERAM since the initiation of its Performance-Based Ratemaking (PBR) mechanism for transmission and distribution costs by D.96-09-092. SDG&E has proposed to suspend its ERAM for 1997 consistent with an agreement it has with ORA. PG&E has an ERAM in place. ERAM accounts reconcile forecasted sales levels with actual sales levels for revenues associated with base rates. Base rates have in the past been set to recover costs related to transmission, distribution, and investment-related generation costs.
Over the years, the Commission has approved the creation of dozens of other types of regulatory accounts for a variety of purposes. Most of them assure the utilities' recovery of costs which we have authorized, such as costs associated with nuclear generation or hazardous waste cleanup. Other accounts track costs to assure that the utilities spend the funds we have allocated to a specific purpose, such as Demand-Side Management (DSM) programs or Research, Development & Demonstration (RD&D).
Some of the costs in these many regulatory accounts were allocated between various utility functions in D.97-08-056, consistent with AB 1890. Notwithstanding the order's findings with regard to the appropriate functional characterization of each, we have not yet determined the ratemaking treatment which should appropriately be applied to various types of costs. For example, we found in D.97-08-056 that costs associated with repairs to the distribution system resulting from natural disasters should be entered into the Catastrophic Events Memorandum Account (CEMA) and that costs associated with repairing generation plant may not be entered into CEMA. We did not, however, determine the appropriate treatment of costs entered into CEMA, finding that the scope of the proceeding did not include consideration of ratemaking mechanisms.
