In order to effectuate the foregoing principles and policies, we set forth the following procedural guidelines:
· ECAC reasonableness reviews will be conducted for balances in ECACs as of December 31, 1997.
· ECAC forecasts are eliminated.
· Future reasonableness reviews of issues relating to QF contract administration, market power issues and administration of public purpose programs will be conducted in each utility's annual transition cost proceeding or RAP proceeding pursuant to Commission orders or rulings .
· By June 1, 1998, each utility shall file proposals for ratemaking mechanisms that they believe should be in place after the end of the rate freeze period. Such proposals may include alternatives to ERAM.
· Tariff changes to effect the elimination of ECAC and ERAM accounts shall be filed as part of advice letters no later than November 3, 1997.
1. The Commission initiated this review of utility regulatory accounts in D.96-12-077, held workshops and received comments from parties on relevant issues.
2. PG&E, Edison, and SDG&E have ECACs which reconcile revenues and costs associated with fuel for generation operations. The original purpose of the accounts was to reduce utility risk during a period when fuel prices were volatile.
3. PG&E has an ERAM which assures recovery of authorized revenue requirement for distribution and transmission, notwithstanding sales volumes.
4. SDG&E has an ERAM which tracks revenues for the purpose of determining revenues it must refund to ratepayers in a subsequent period pursuant to the sharing rules in its PBR.
5. The original purpose of the ERAM accounts was to reduce or eliminate the incentive for utilities to market power contrary to the Commission's goal to promote conservation.
6. PG&E, SDG&E, and Edison have a variety of regulatory accounts established for a variety of costs and purposes.
7. D.97-08-056 determined the appropriate allocation of costs between utility functions but did not address the appropriate ratemaking treatment for those costs.
8. Electric industry restructuring and the rate freeze enacted by AB 1890 may conflict with the original purposes and efficacy of various regulatory accounts.
9. The Commission has stated its commitment to ratemaking policies which complement competition in generation markets.
10. The Energy Division published a workshop report summarizing the workshops held on related issues and recommending certain Commission action.
11. Issues with regard to PBR program design, cost allocation, interest rates on certain accounts, matters relating to TC recovery or accounts, and ratemaking mechanisms for the period following December 31, 2001 are outside the scope of this proceeding.
12. AB 1890 does not permit the utilities to change total rates in effect either during or after the rate freeze period to reflect the revenues received or costs incurred during the rate freeze period with specified exceptions.
13. The Commission has determined the methods for calculating the amounts available to offset uneconomic generation costs in D. 97-06-060 and D.97-08-056.
14. Some regulatory accounts have been established for the purpose of assuring that ratepayer funding of certain programs is used exclusively for those programs.
15. The Commission has determined that the efficacy of ECACs may be affected by the introduction of competition in generation markets.
16. The Commission has determined that the efficacy of ERAMs may be affected by the introduction of competition in generation markets.
17. PG&E's proposed TRA would track the revenues available to offset costs associated with uneconomic generation entered into the TCBA and would effectively permit dollar-for-dollar recovery of authorized revenue requirements consistent with its existing regulatory regime.
18. Edison proposes to account for the revenues available to offset costs associated with uneconomic generation in a way that is generally consistent with its existing regulatory regime.
19. SDG&E proposes to account for the revenues available to offset costs associated with uneconomic generation in a way that is generally consistent with its existing regulatory regime.
20. Regulatory accounts for CARE, DSM, and RD&D are required for the Commission to determine the extent to which funds expended for related programs are actually spent implementing those programs.
1. The Commission should direct PG&E, Edison, and SDG&E to eliminate their ECAC mechanisms.
2. The Commission should direct PG&E and SDG&E to eliminate their ERAMs.
3. Consistent with AB 1890, the Commission should prohibit the use of any regulatory account to accrue costs incurred or revenues collected during the rate freeze period for the purpose of affecting rates either during the rate freeze period or after it.
4. The Commission should require PG&E, Edison, and SDG&E to retain accounts related to DSM, RD&D, and CARE programs.
5. The Commission should permit the utilities to retain regulatory accounts with the exception of ERAM and ECAC and subject to the condition that they justify their maintenance in their first revenue adjustment proceedings. The Commission should permit the utilities to eliminate any accounts which are believed to be unnecessary during the transition period.
6. FERC has primary jurisdiction over transmission rates and the Commission may not adjust transmission rates to account for variations between forecasted sales and actual sales.
7. The Commission should adopt PG&E's proposal to create a TRA with the exception that the determination of transmission rates is subject to the jurisdiction of the FERC.
8. The Commission should adopt Edison's proposal to use the BRPMA to track PBR rewards, penalties, and revenue sharing.
9. The Commission should adopt SDG&E's proposal to create an account to track PBR rewards, penalties, and revenue sharing.
IT IS ORDERED that:
1. No electric utility account used for the purpose of electric regulation or ratemaking shall include costs incurred or revenues collected during the rate freeze period for recovery at any time either during or after the rate freeze period except as expressly authorized in Assembly Bill (AB) 1890 and implemented by Commission order.
2. Pacific Gas and Electric Company (PG&E), Southern California Edison Company (Edison), and San Diego Gas & Electric Company (SDG&E) shall modify their tariffs by filing advice letters no later than November 3, 1997 to eliminate Energy Cost Adjustment Clause (ECAC) mechanisms effective January 1, 1998. Balances remaining in the ECAC and ERAM accounts as of December 31, 1997 shall be transferred to the interim Transition Cost Balancing Accounts and treated according to subsequent Commission orders.
3. PG&E and SDG&E shall modify their tariffs by filing advice letters no later than November 3, 1997 which eliminate their Electric Revenue Adjustment Mechanisms (ERAM) effective January 1, 1998.
4. PG&E shall retain the regulatory accounts relating to DSM, CARE, and RD&D programs. Nothing in this order changes the operation of those programs or accounts, or amounts to be included in the accounts authorized by Commission orders.
5. Edison shall retain the regulatory accounts relating to DSM, CARE, and RD&D programs. Nothing in this order changes the operation of those programs or accounts, or amounts to be included in the accounts authorized by Commission orders.
6. SDG&E shall retain the regulatory accounts relating to DSM, CARE, and RD&D programs. Nothing in this order changes the operation of those programs or accounts, or amounts to be included in the accounts authorized by Commission orders.
7. PG&E, Edison, and SDG&E may retain any existing memorandum or tracking accounts for the purpose of identifying costs incurred and revenues collected during the rate freeze period but not for the purpose of affecting regulated rates at any time except as expressly provided in AB 1890 and authorized by Commission order. The utilities shall submit a listing of those accounts in their first Revenue Adjustment Proceeding (RAP) applications and provide a justification for retaining each at that time.
8. Nothing in this decision authorizes or implies any changes in cost allocations established or continued by D.97-08-056 or subsequent Commission orders. Utility tariff filings due November 3, 1997 shall propose no cost allocation changes.
9. Nothing in this decision authorizes or implies any changes to the performance-based ratemaking (PBR) mechanisms of SDG&E or Edison.
10. Nothing in this decision authorizes or implies any changes in the method of establishing distribution revenue requirement or rates for PG&E.
11. During the rate freeze period, Edison, PG&E, and SDG&E may retain regulatory accounts for the limited purpose of tracking costs and revenues and, if subsequently so ordered by the Commission, for the purpose of facilitating the reinstitution of ratemaking following the rate freeze period subject to the conditions set forth herein.
12. ECAC forecasts for PG&E, Edison, and SDG&E are eliminated.
13. Future review of the reasonableness of utility activities relating to qualifying facility contract administration, fuel purchases, market power issues and administration of public purpose programs will be conducted in each utility's annual transition cost proceeding or RAP proceeding pursuant to Commission orders or rulings. This decision does not, however, order new or different forms of reasonableness reviews for utility operations or expenses subject to PBR mechanisms.
14. PG&E, Edison, and SDG&E shall each file an application on January 15, 1999 which proposes ratemaking mechanisms which they believe should be in place after the end of the rate freeze period. Such proposals may include alternatives to ERAM. Nothing in this decision shall be construed to represent an approval of cost recovery or ratemaking mechanisms for the period beginning after the rate freeze period.
15. PG&E's request to establish a Transition Revenue Account is adopted with the exceptions set forth herein regarding transmission rates. PG&E shall file related tariff modifications by November 3, 1997 from the effective date of this decision. PG&E shall file further tariff modifications consistent with the determinations of the Federal Energy Regulatory Commission's (FERC) order with regard to transmission rates and transmission ratemaking. If the FERC defers to this Commission for establishing ratemaking mechanisms for the transmission revenue requirement, PG&E shall modify its tariffs consistent with its proposal herein which provides that PG&E will subtract from total billed revenues the total authorized revenue requirement for transmission.
16. Edison's request to use the Base Rate Performance Memorandum Account to track PBR rewards, penalties, sharing or other costs or revenues is granted. Balances in the account may not be carried over to affect rate following the transition period and, during the transition period, shall be added to or subtracted from total billed revenues in calculating revenues available to offset uneconomic generation costs.
17. SDG&E's request to establish a memorandum account or balancing account to defer ratemaking treatment of PBR rewards, penalties, sharing or other costs or revenues is denied. SDG&E is authorized to create such an account for the purpose of tracking PBR sharing, rewards and penalties which would be added to or subtracted from total billed revenues in calculating revenues available to offset uneconomic generation costs.
18. Parties may file comments no later than November 17, 1997, addressing the appropriate forum in which to consider all matters relating to the Energy Reliability Index.
This order is effective today.
Dated October 22, 1997, at San Francisco, California.
P. GREGORY CONLON
President
JESSIE J. KNIGHT, JR.
HENRY M. DUQUE
JOSIAH L. NEEPER
RICHARD A. BILAS
Commissioners
See Formal File for App. A-C.
INTERIM OPINION 2
I. Background 2
II. Existing Utility Ratemaking Mechanisms 3
III. The Need for and Purpose of Utility Balancing Accounts
With the Introduction of Electric Industry Restructuring 5
IV. The Energy Division Workshop Report 6
V. Utility Proposals and Intervenor Responses 7
A. PG&E 8
B. Edison 9
C. SDG&E 10
D. Intervenor Responses 12
VI. Treatment of Specific Regulatory Accounts 13
A. ECACs 13
B. ERAMs 14
C. PG&E's TRA 15
D. Accounts for Rate Changes or Rate Change Deferrals 16
E. Accounts for Public Purpose Programs 18
F. Other Accounts 19
G. Cost Allocations 19
H. Edison's Comments on the Proposed Decision 19
VII. Concluding Principles and Policies 20
VIII. Procedural Guidelines 22
Findings of Fact 22
Conclusions of Law 24
INTERIM ORDER 25
Appendix A
Appendix B
Appendix C
