As part of the review process here, each utility presented proposals for treatment of ECAC and ERAM accounts and other regulatory accounts. Their proposals are presented in Appendix B, Energy Division's summary of accounts and parties' proposals for their disposition, and graphically in Appendix C.
PG&E is currently subject to traditional general rate case reviews with an associated ERAM mechanism which assures recovery of the revenue requirement developed in the general rate case. PG&E proposes to replace its ERAM and ECAC with a Transition Revenue Account (TRA) beginning January 1, 1998. The TRA would be an accounting mechanism designed to facilitate the calculation of the revenues available to offset uneconomic generation costs entered into the TCBA. Specifically, the TRA would be credited with all billed revenues. From that total, PG&E would subtract the authorized revenue requirements for distribution, transmission, public benefits programs, and nuclear decommissioning. PG&E would then subtract any payments to the PX and Independent System Operator (ISO). The remaining balance would determine "headroom," the amount available to offset uneconomic generation costs entered into the TCBA. PG&E proposes that the amounts subtracted for distribution, transmission, public benefits programs, and nuclear decommissioning would be exactly the authorized revenue requirements for each category, rather than the actual revenues it collects. Accordingly, the TRA has the effect of an ERAM. That is, PG&E would not assume any risk for the difference between forecasted sales and actual sales for distribution, transmission, nuclear decommissioning, or public benefits program costs. This proposal is presented graphically in Appendix C.
PG&E would replace that portion of the existing ECAC proceeding dedicated to forecasting, believing that forecasting efforts will be accomplished in other proceedings. On September 24, the Commission issued D.97-09-102 in Rulemaking (R.) 87-11-012 granting PG&E's request for authority to forgo filing a forecast of its operations in its 1998 ECAC application.
PG&E proposes to retain the ERAM and ECAC through the end of 1997 so that it may include outstanding balances in the TCBA on January 1, 1998.
PG&E would retain the CEMA for distribution and transmission costs.
In its reply comments, PG&E proposes to retain numerous accounts that it had originally proposed eliminating. Its comments do not elaborate on the logic behind PG&E's change of position.
The Commission adopted a PBR mechanism for Edison in D.96-09-092 and, in so doing, eliminated Edison's ERAM. Edison's PBR establishes rates, rather than a revenue requirement. Accordingly, no purpose is served by accounting for differences between forecasted and actual sales and the ERAM is no longer useful.
Edison proposes here to eliminate the ECAC and the forecast phase of the ECAC proceeding on the basis that the PX will accomplish related objectives. In R.87-11-012, Edison has petitioned the Commission to forgo the forecast phase of its 1998 ECAC filing. It would eliminate the reasonableness portion of the ECAC proceeding for operations which begin on January 1, 1998. It would have the Commission review the reasonableness of such matters as QF contract administration in the annual Revenue Adjustment Proceeding (RAP) or TC proceeding.
Edison proposes to calculate revenues available to offset the uneconomic generation costs entered into the TCBA much the way PG&E would, that is, by calculating the residual after all other revenues are accounted for. The difference is how Edison would calculate the distribution and transmission revenues. Consistent with its existing PBR mechanism, Edison would debit total billed revenues with the actual revenues received from those functions, rather than the authorized revenue requirement. Like PG&E, Edison proposes dollar-for-dollar recovery of authorized revenue requirements for public benefits programs and nuclear decommissioning. Pursuant to Resolution E-3478, Edison established a memorandum account to reflect the ratepayer share of PBR-related revenue sharing and shareholder rewards and penalties. It proposes the account be used "so that the service quality incentives and net revenue sharing provision of Edison's nongeneration PBR do not affect CTC headroom during the rate freeze period."
Edison agrees with Energy Division's recommendations for eliminating a variety of accounts, including the DSM Tax Change Memorandum Account, the San Onofre Nuclear Generating Station (SONGS) 1 Memorandum Accounts, and the Women, Minority and Diabled Veterans Business Enterprises (WMDVBE) Memorandum Account, among others. It states two exceptions to Energy Division's recommendation. It proposes to retain the Palo Verde Phase-In Procedure, which will expire in February 1998 rather than January 1, 1998 as Energy Division assumed. Edison would also retain the income tax component of the Contribution Memorandum Account, which records taxes associated with transfers of QF transmission interties.
As presented graphically in Appendix C, Edison would determine revenues available to offset uneconomic costs by subtracting authorized revenue requirements from total revenues, with the exception that it would subtract actual distribution revenues from the total (as distinguished from PG&E).
By D.94-08-023, SDG&E is subject to a PBR mechanism which sets an authorized revenue requirement. A share of the revenues collected above the revenue requirement is refunded to ratepayers in a subsequent period. The revenues subject to sharing is included in the ERAM account. In this proceeding, SDG&E proposes to eliminate the ERAM, observing that it is inconsistent with a rate freeze because overcollections and undercollections may not be reflected in changed rates. SDG&E proposes to replace the ERAM with a balancing account to record rewards, penalties, Incremental Cost Incentive Plan (ICIP) costs, and revenue-sharing dollars related to the PBR mechanism. The amounts in the account would not affect headroom, and would be collected or refunded notwithstanding the rate freeze, consistent with Edison's proposal for PBR revenues subject to sharing. This account, which SDG&E titles the "Revenue Sharing, Penalties and Rewards Balancing Account" (RSPRBA), would accumulate certain costs and revenues over the rate freeze period in order for SDG&E to recover or refund the amounts following the rate freeze period. Unlike Edison, SDG&E proposes to refund overcollections in the account which exceed $10 million during the rate freeze period. SDG&E originally proposed the account in Advice Letter 1005-E.
SDG&E would also eliminate the ECAC balancing account. It observes that the existence of an ECAC could permit a utility to defer collection of costs from one time period to another, which could represent an abuse of market power. It believes the account serves no purpose during a rate freeze because the balances may not be used to affect rates.
As shown graphically in Appendix C, SDG&E would calculate revenues available to reduce uneconomic generating costs entered into the TCBA much the same way PG&E and Edison would. Like Edison, SDG&E would calculate the transmission component based on actual revenues at authorized rates. For distribution, SDG&E proposes to subtract from total billed revenues those actual revenues received from distribution services with the exception that entries into the RSPRBA would be accounted for in future rates rather than in the calculation of headroom.
SDG&E also proposes to eliminate several other balancing accounts as well in order to effect a "clean break from the past." SDG&E's proposed treatment of its 29 balancing accounts is included as Appendix B. It proposes to eliminate the Arbitration Memorandum Account (AMA), the Electric and Magnetic Fields Memorandum Account (EMFMA), the RD&D Account, the DSM Balancing Account, and the Low-Income Ratepayer Assistance (LIRA) Adjustment Clause. It also proposes eliminating the SONGS I ratemaking proceeding.
SDG&E observes that ECAC forecasting proceedings are no longer useful although it believes reasonableness reviews may still be necessary. It states it has agreed with ORA to eliminate ECAC reasonableness reviews as of year-end 1996.
SDG&E would also retain several balancing or memorandum accounts. It would retain the CEMA account on the basis that it should be permitted to recover the costs of catastrophic events, presumably after the rate freeze, for costs incurred during the rate freeze. It proposes to retain accounts which will "continue to be needed for (a) implementation of restructuring, (b) long-term or extraordinary costs, or (c) customer-specific costs." Among those accounts are the DSM Financing Rate Balancing Account (DSMFR), the Income Tax Component of Contribution and Advances Provision, the SONGS 2&3 ratemaking procedure, and Hazardous Substance Cleanup Cost Account. SDG&E proposes the first two of these be modified to provide that associated costs be allocated only to affected customers.
In general, SDG&E urges the Commission to move forward on these issues quickly. It would not delay or complicate the process by creating new forums.
ORA generally agrees with Energy Division's recommendations with regard to eliminating certain accounts. ORA observes, however, that Energy Division in several instances identifies an account for a single utility for elimination and fails to identify the corresponding accounts for the other two. Accordingly, ORA recommends that when the Commission eliminates an account for one utility, it also should order the elimination of the similar accounts for the other two.
ORA recommends eliminating the ECAC beginning January 1, 1998, observing that ECAC components will be recoverable either through the market or the CTC. Consistent with Energy Division's recommendation, ORA would retain the reasonableness review portion of the ECAC proceeding until the Commission is confident that the PX is functioning well. ORA also recommends that the Commission take steps to determine the disposition of the balances in the accounts it would eliminate. It proposes that the Commission should state its policy in this decision that future accounts include a sunset provision to help assure that an account is either eliminated automatically or reviewed to determine the reasonableness of its continuation.
ORA strongly opposes any utility ratemaking mechanisms that would have the effect of deferring rate increases for costs incurred during the rate freeze period. It interprets SDG&E's RSPRBA to be just such a mechanism.
The California Energy Commission supports the Energy Division's proposal to retain accounts for the California Alternative Rates for Energy programs (CARE), DSM programs, and RD&D, believing that the accounts are necessary to "provide the Energy Efficiency and the Low Income Boards with flexibility to administer the transition from utility administration of these programs and funds to the boards themselves in a seamless fashion." The Energy Commission supports exploring alternatives to ERAM because a utility distribution company should not have an incentive to promote increased sales.
NRDC also urges the Commission to retain ERAM or adopt some related mechanism. It observes that Pacific Power and Light Company proposes to accomplish the objective of ERAM by creating a revenue cap mechanism that effectively eliminates the utility's incentive to promote increased electricity use.
CIU comments only that it supports Energy Division's procedural recommendations to continue review of these matters in existing proceedings and to limit action at this time to matters during the transition period.
