D.98-07-032 tentatively resolved several issues for final resolution here, discussed below.
ORA, TURN/UCAN and Enron propose that the utilities segment the meter ownership credit for new installations where a utility meter is never installed. TURN/UCAN observes that the practice of automatically providing a meter as part of the service extension is anti-competitive and harmful to direct access. Currently, the meter does not permit time-of-use calculations, is not charged to the customer and is included in the utility's ratebase. According to TURN/UCAN,ORA, and Enron, this regulatory convention discourages customers from purchasing their own meters, from installing meters which are compatible with direct access, and creates a disadvantage to utility competitors. TURN/UCAN recommends that customers of new installations be required to choose their meters and to pay for the cost of that meter directly to the provider. TURN/UCAN observes that the result will be to reduce regulated ratebase and to eliminate prospects for stranded investments in utility meters. TURN/UCAN recommends that the implementation of changes to the rules for new installations and related changes to line extension allowances be accomplished by way of the "flow-through" mechanism adopted in D.97-12-098 in the line extension proceeding. TURN/UCAN believes this mechanism anticipated exactly the type of regulatory change it recommends here. More specifically, TURN/UCAN recommends the Commission find that the revenues associated with the newly-competitive revenue cycle services do not support line and service extensions. UC/CSU/DGS concur with TURN/UCAN on this issue.
PG&E replies that the Commission does not have a record here to adopt a credit for new installations. It also believes the issues are more appropriately addressed in the line extension proceeding where we have considered the amounts developers should receive for installing their own meters. SDG&E believes that meter installation costs are not related to the costing issues identified for resolution in this proceeding, observing that all new construction customers are affected by meter costs regardless of whether they subsequently choose the utility or an ESP to provide the meter. Edison observes that some of TURN/UCAN's related proposals raise issues that are not adequately addressed in the record.
The existing practice whereby the utility credits developers for a share of their costs for new installations or provides a standard meter at no cost which is then rate based is potentially anti-competitive for the reasons TURN/UCAN cites. TURN/UCAN has made a compelling case in favor of changing existing practices from a policy standpoint. The implications of TURN/UCAN's proposals, however, are too complicated to resolve with the record before us. Consistent with the scoping memo in this proceeding, we will not "change such things as the way that the applicants charge for providing and installing meters." We will, however, take the opportunity to state our intent to review existing practice in the near future. We will direct Applicants to propose in the line extension proceeding (R.92-03-050) changes to the line extension rules and related ratemaking arrangements to eliminate any competitive advantage provided to incumbent utilities. In addition, Applicants should propose changes to the calculation of "net revenues" as that term is used to calculate line and service extension allowances so that those net revenues do not include revenues associated with unbundled revenue cycle services.
In D.98-07-032, we left open the question of whether the Applicants should create a credit for circumstances in which the ESP would read the gas meters of dual commodity utilities (PG&E and SDG&E). The parties were divided on the wisdom of creating a credit here while the Commission considered the broader issues in its natural gas rulemaking, R.98-01-011. We find that it would be premature to order a credit at this time and defer to the matter in R.98-01-011.
Applicants propose de-averaging revenue cycle services credits according to geographic areas. They observe de-averaging will recognize that different customers impose different costs on the system. They also believe that failure to undertake some de-averaging will permit competitors to "cream-skim" by soliciting business from customers who cost the least to serve but whose credits do not recognize these lower costs. CCUE supports geographic de-averaging.
Enron objects to geographic de-averaging, mainly on the basis that underlying rates are set based on averages. As a result, de-averaging will, according to Enron, require that the utility charge an average rate for its own bundled customers and a de-averaged rate for unbundled customers. Enron argues the result is contrary to AB 1890 which requires that direct access customers pay the same as bundled customers for utility service. Enron is concerned that ESPs would be saddled with the burden of calculating as many as five different rates for their customers while the utilities need only calculate one.
TURN/UCAN also argue that the Commission should not adopt de-averaging proposals, believing the utilities have failed to support them. TURN/UCAN cites previous Commission decisions rejecting rate de-averaging proposals in favor of a more cautious approach. Farm Bureau and CCN join in opposition to geographic de-averaging for similar reasons. While not objecting to de-averaging on a conceptual basis, UC/CSU/DGS also believe the Applicants' proposals are weak.
The utility proposals for geographic de-averaging more accurately reflect costs than averaged credits or rates and would accordingly promote economic efficiency for that portion of rates subject to de-averaging. De-averaged rates would discourage competitors from focusing their market efforts on customers whose rates are set substantially above costs. In these ways, de-averaged rates are consistent with our economic policies generally. Nevertheless, we are concerned that de-averaging a portion of the utility's rates in a piecemeal fashion could undermine any gains in economic efficiency. In this case, high cost customers would receive larger credits, thereby effectively reducing their distribution rate to a level below that of a customer who is less expensive to serve. Therefore, although de-averaging revenue cycle services provides more accurate prices, it concurrently creates the opposite effect with respect to distribution rates. At this time, therefore, we reject utility proposals to de-average.
For periods in the post-transition period, we intend to adopt some form of geographic deaveraging which does not present the anomalies which would result from deaveraging revenue cycle services in isolation and during this period when our ratemaking authority is so circumscribed. We therefore, direct the Applicants to propose geographic deaveraging for revenue cycle services and other distribution services in their January 15, 1999 applications for ratemaking in the post-transition period.
