We herein adopt a costing model for each of the Applicants which is generally based on the methodology proposed by SDG&E in this proceeding. The resulting revenue cycle services credits for PG&E and the rate schedule mappings for SDG&E and SCE are presented in Appendix B. The adopted billing credits exclude the cost offsets proposed by PG&E and Edison for each category and modify the assumptions of Edison and PG&E as set forth in earlier portions of this decision. We also reject proposals for geographic rate de-averaging of meter reading credits at this time.
We recognize that the adopted costing principles and credits are not perfect. We approximate prices that might otherwise be set in a competitive market using analytical tools which are at best imprecise and which fail to recognize the dynamic and unpredictable nature of unregulated markets. Nevertheless, we believe the credits we adopt today reasonably reflect the utilities' costs and will serve as adequate price signals in revenue cycle services markets for the foreseeable future with the applicable adjustments to recognize changes in market penetration. We have also stated our intent to modify these pricing methods for the period following the rate freeze and will proceed to consider such modifications in 1999.
1. D.97-05-039 and D.98-02-111 stated an intent to develop costing methods for revenue cycle services which reflect costs which are actually avoided or avoidable by the utility.
2. Fully-allocated costing methods, as proposed herein, would require cost shifting to the general body of ratepayers or losses by utility shareholders.
3. Revenue cycle services exhibit economies of scope which suggests providers of such services may recover fixed costs by way of prices for related services.
4. SDG&E's avoided cost methodology recognizes opportunities for utilities to avoid certain types of labor costs, reflecting the behavior of successful firms subject to market discipline. As market penetration increases, supervisory costs fall.
5. The billing offsets to revenue cycle services credits proposed by Edison and PG&E may reasonably estimate the incremental cost to the utility of providing the revenue cycle services.
6. The Applicants are likely to see some improvements in uncollectibles rates and working cash balances when customers migrate to the revenue cycle services of ESPs.
7. Existing meters have some salvage value.
8. PG&E's proposal for recognizing the accounting effects of revenue cycle services credits during the transition period is consistent with our past decisions regarding ratemaking during the transition period.
9. Existing line extension rules is the appropriate forum for reviewing the regulatory and ratemaking treatment of meter installations at new locations.
10. The record in this proceeding does not provide enough information to resolve issues relating to how to change existing line extension rules affecting competitive markets and how changes should be implemented.
11. It is premature to order the utilities to create revenue cycle services credits for gas meter reading, a matter which is under consideration in R.98-01-011.
12. Geographic de-averaging of revenue cycle services credits generally reflects the costs of serving customers according to the characteristics of their location and thereby discourages ESPs from marketing to customers whose revenue cycle services are higher than costs. When overlying rates are based on average costs, however, the effect of de-averaging revenue cycle services credits is to create greater discrepancies between the rate for distribution service and the cost to provide it. Ratemaking mechanisms to compensate for this would be unreasonably cumbersome.
1. The Commission should order the applicants to implement the revenue cycle services credits using SDG&E's methodology for the reasons set forth herein.
2. In their tariff filings, the Applicants should present updated revenue cycle services credits when penetration rates exceed the 10% estimate.
3. The Commission rejects Applicants' proposals for geographic de-averaging of meter reading credits.
4. During the transition period, each utility should account for the ratemaking effects of revenue cycle services credits by increasing the amounts available for the Competition Transition Charge (CTC) consistent with Commission orders and resolutions addressing ratemaking during the transition period, as proposed by PG&E.
5. The Commission should direct each Applicant to propose in R.92-03-050 changes to line extension rules and related ratemaking which would eliminate any competitive advantage the utility may have under existing rules in markets for new meter installations, and which would remove revenues associated with unbundled revenue cycle services from the "net revenues" used to calculate line and service extension allowances. The proposed changes should (1) exclude the meter costs and associated revenues from the calculation of the allowance and (2) demonstrate how the utility would remove RCS-related revenues from the distribution revenues currently used to calculate the extension allowance, prior to dividing the "net revenues" by the cost of service factor.
6. With the exceptions set forth herein, the Commission should affirm and formally adopt the findings of D.98-07-032 with regard to billing system modifications required to implement the provisions of this order.
IT IS ORDERED that:
1. Pacific Gas and Electric Company (PG&E), Southern California Edison Company (Edison), and San Diego Gas & Electric Company (SDG&E) shall file tariffs within 20 days of the effective date of this order which implement the credits adopted in Appendix A of this order.
2. PG&E, Edison, and SDG&E shall file advice letters within 20 days to implement service fees for billing services. Energy Division shall conduct a workshop and prepare a resolution for Commission consideration addressing these service fees.
2. Except as set forth in this decision, the provisions for unbundling revenue cycle services adopted conditionally in Decision 98-07-032 are adopted.
3. PG&E, Edison, and SDG&E shall credit their respective accounting mechanisms in place during the transition period to reflect the effects of revenue cycle services credits, consistent with Commission orders and resolutions guiding ratemaking and accounting during the transition period identified in provisions of AB 1890.
4. If the market penetration for any revenue cycle service exceeds 10%, or any increment of 10% thereafter, the utility shall, in its subsequent Revenue Allocation Proceeding application, shall propose changes to that revenue cycle service credit which reflects changes in market penetration and costs, as set forth herein.
5. No later than December 1, 1998, PG&E, Edison, and SDG&E shall file in R.92-03-050, proposed changes to line extension rules consistent with this decision.
6. PG&E, Edison, and SDG&E shall include in their January 15, 1999 applications for ratemaking during the post-transition period proposals (1) to unbundle revenue cycle services and price them at long-run marginal costs or some reasonable proxy, and (2) to undertake geographic deaveraging of revenue cycle services and other distribution services, as set forth in this decision.
7. These consolidated proceedings are closed.
This order is effective today.
Dated September 17, 1998, at San Francisco, California.
RICHARD A. BILAS
President
P. GREGORY CONLON
JESSIE J. KNIGHT, JR.
HENRY M. DUQUE
JOSIAH L. NEEPER
Commissioners
(See Formal Files for Appendix A & B)
