PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA  
  
ENERGY DIVISION 					         RESOLUTION  E‑3647
								         DECEMBER 16, 1999  

  
R E S O L U T I O N  
 
Resolution E‑3647.  Pacific Gas and Electric Company requests approval to increase its total electric and gas revenue requirements, effective January 1, 2000, on an interim basis in accordance with Decision 98-12-078.  Approved subject to the outcome of the Commission’s final decision in Pacific Gas and Electric Company’s 1999 General Rate Case.

By Advice Letter 1921-E and Advice Letter 2188-G, filed on October 1, 1999. 

 SUMMARY  
  
By Advice Letter 1921-E and Advice Letter 2188-G, Pacific Gas and Electric Company (PG&E) requests approval to increase its total electric and gas revenue requirements on an interim basis, effective January 1, 2000, in accordance with Decision (D.) 98-12-078. The proposed increases are based on PG&E’s 1999 General Rate Case (GRC) Attrition requests for the year 2000.  This Resolution approves the advice letters  subject to the outcome of the Commission’s final decision in PG&E’s 1999 GRC.   The protest of the Office of Ratepayer Advocates (ORA) and the joint protest of Aglet Consumer Alliance, The Utility Reform Network (TURN), and the University of California and California State University (UC/CSU) are denied. 

BACKGROUND  

In PG&E’s 1999 GRC, PG&E requested authority to increase its electric and gas revenue requirements on an interim basis, effective January 1, 1999.  

In Decision (D.) 98-12-078, the Commission authorized PG&E to file advice letters to implement its test year 1999 electric and gas revenue requirements from January 1, 1999 until a final decision is issued in the GRC. 

The Commission approved PG&E’s requested interim 1999 electric and gas revenue requirements in Advice Letters 1836-E and 2128-G, effective January 1, 1999.

As part of its GRC application, PG&E requested that revenues be adjusted pursuant to the Attrition Rate Adjustment (ARA) mechanism on January 1, 2000, if the Commission has not yet adopted a performance-based ratemaking (PBR) mechanism by that date.  

A proposed decision and an assigned Commissioner’s alternate decision were issued on PG&E’s GRC on October 19, 1999, but a final decision has not yet been adopted. 

PG&E filed Advice Letters 1921-E and 2188-G requesting authority to increase its electric and gas revenue requirements under the Attrition Mechanism proposed in its GRC in the event a final decision is not issued by January 2000.

NOTICE  
 
Advice Letter 1921-E and Advice Letter 2188-G were served on other utilities and government agencies, and to all interested parties who requested such notification, in accordance with the requirements of General Order 96-A. 

PROTESTS

The Energy Division received timely protests to Advice Letter Advice Letter 1921-E and Advice Letter 2188-G from Aglet Consumer Alliance, TURN, UC/CSU [together, Protesting Customers], and ORA.

Protesting Customers and ORA oppose the advice letters on the basis that PG&E has no Commission authority to file them because D.98-12-078 specifically discusses and authorizes interim relief only for test year 1999.  Protesting Customers also protest the advice letters for the following additional reasons: (1) PG&E’s requests do not meet the Commission’s standards for interim relief, (2) PG&E’s requests are beyond the scope of advice letter filings, (3) there is not need for interim or permanent attrition relief, and (4) the electric attrition increase requested by PG&E greatly exceeds current inflation rates.  
 
PG&E responded to the protests. 

DISCUSSION  

PG&E filed Advice Letters 1921-E and 2188-G requesting authority, in accordance with D. 98-12-078, to increase its electric and gas revenue requirements under the Attrition Mechanism proposed in its GRC in the event a final decision is not issued by January 2000.  Specifically, PG&E has based the calculation of the 2000 interim electric and gas revenue requirements on its proposed 1999 revenue requirements presented in the Comparison Exhibit (Ex. 474) in the GRC, and updated those calculations to reflect its authorized cost of capital for 1999 from D.99-06-057.  When PG&E receives a final decision in the GRC, PG&E proposes to supplement these advice letters to reflect the results of that decision.

Protesting Customers and ORA argue that although D.98-12-078 specifically discussed and authorized interim relief at the Test Year 1999 revenue requirement levels, it never specifically authorized PG&E to increase its Year 2000 revenue requirements for attrition.  In response to the protest, PG&E acknowledges that the interim relief was explicitly addressed in the decision only for 1999 but that was because no one contemplated that the final GRC decision would be delayed beyond March 1999.  Nevertheless, PG&E believes that D.98-12-078 authorizes PG&E to increase its electric and gas revenue requirement under the Attrition mechanism effective January 1, 2000, as an integral component of the interim relief granted in the event the GRC final decision is not issued by January 2000. It argues that this authorization is inferred from the Commission’s statement of its intent in granting interim relief:

Our intent in approving interim relief at this time is to provide reasonable assurance that only the revenue requirements eventually found to be justified, just, and reasonable after consideration of the full record will be recovered from ratepayers.  With the modifications discussed herein, we find that PG&E’s proposal is consistent with this intent.  In approving these mechanisms as modified, we expect that PG&E and its customers will be placed in no different position than they would be if the same revenue requirements were adopted in December 1998 with a January 1, 1999 effective date.” (D.98-12-078, slip opinion p. 17.)

Although D.98-12-078 did not specifically refer to interim relief in 2000, we agree with PG&E that an Attrition increase in 2000 is an integral component of PG&E’s proposed electric and gas revenue requirement in the GRC.  Accordingly, if the final decision in PG&E’s GRC is issued beyond December 1999, and it approves PG&E’s attrition proposal, approval of Advice Letter 1921-E and 2188-G is necessary in order not to jeopardize PG&E’s opportunity to later recover the Attrition increases found to be justified.

Protesting Customers also argue that PG&E’s requests do not meet the Commission’s standards for interim relief.  They state that PG&E has not shown any financial emergency or extreme financial hardship.  They allege that the only two exceptions to this rule have been if the interim increase is uncontested or if the increase is necessary to ensure fairness. They point out that the advice letters are contested, and PG&E has made no showing regarding fairness. As discussed above, PG&E’s advice filings are not requesting authorization for different or new GRC interim relief, but rather are carrying out the intent of the  interim relief granted in D.98-12-078.  Thus, there is no need for a showing of fairness here because D.98-12-078 concluded that under the circumstances of the 1999 GRC proceeding, interim relief is fair.

On another point, Protesting Customers allege that PG&E’s requests are beyond the scope of advice letter filings.  They believe the issues of whether PG&E meets Commission standards for interim relief or whether there should be some new standard deserve a better record than the one before the Commission.  As well, they state that PG&E has compressed many pages of attrition calculations into four summary tables.  Because PG&E’s advice letters seek to extend the treatment already granted for 1999 to the year 2000, based upon the same reasons given in D.98-12-078 for the authorized interim relief, it is not beyond the scope of an advice letter filing.  

Lastly, Protesting Customers argue that there is no need for interim or permanent attrition relief, and the electric attrition increase requested by PG&E greatly exceeds current inflation rates. They point out that no other major California utility has an attrition mechanism and that the last time the Commission authorized PG&E attrition increases was for 1995.  They allege the state of the economy is not unpredictable and volatile and PG&E is not faced with fixed revenue requirements during a three-year GRC cycle.  Although the protestants raise some valid concerns, these issues are being addressed in the GRC.  The Commission will address the merits of its revenue requirement requests in the final GRC decision.  Since the interim revenue requirement debits recorded in the balancing account are subject to refund or downward adjustment after the Commission issues a final decision, only the revenue requirements found justified by the Commission in its final decision will be recovered from ratepayers. 

COMMENTS

The draft resolution of the Energy Division in this matter was mailed to the parties in accordance with Public Utilities Code Section 311(g).  Comments were filed on December 1, 1999 by PG&E and the Protesting Customers.

PG&E is pleased with the timely treatment of the advice letters and supports the adoption of the draft resolution as written.  The Protesting Customers disagree with the outcome of the draft resolution and recommend that the Commission deny the relief requested in the advice letters.  

We reviewed the specific comments of the Protesting Customers and modified the text in response to some of the comments.  We did not change the overall outcome, however, because the remaining comments simply re-argue points made in their earlier protest.  

FINDINGS  

1.	PG&E filed Advice Letters 1921-E and 2188-G requesting authority, in accordance with D. 98-12-078, to increase its electric and gas revenue requirements under the Attrition Mechanism proposed in its GRC in the event a final decision is not issued by January 2000.

2.	Protesting Customers and ORA protested the advice letters.

3.	Although D.98-12-078 did not specifically refer to interim relief in 2000, an Attrition increase in 2000 is an integral component of PG&E’s proposed electric and gas revenue requirement in the GRC.  

4.	If the final decision in PG&E’s GRC is issued beyond December 1999, and it approves PG&E’s attrition proposal, approval of Advice Letter 1921-E and 2188-G is necessary in order not to jeopardize PG&E’s opportunity to later recover the Attrition increases found to be justified.

5.	PG&E’s advice filings are not requesting authorization for different or new GRC interim relief, but rather are carrying out the intent of the interim relief granted in D.98-12-078. Because D.98-12-078 concluded that GRC interim relief is fair under the circumstances of the 1999 GRC proceeding, there is no need for a showing of fairness here.

6.	Because PG&E’s advice letters seek to extend the treatment already granted for 1999 to the year 2000, based upon the same reasons given in D.98-12-078 for the authorized interim relief, it is not beyond the scope of an advice letter filing.  

7.	Although the protestants raise some valid concerns regarding the need and the amount of an attrition increase, these issues are being addressed in the GRC.  

8.	Since the interim revenue requirement debits recorded in the balancing account are subject to refund or downward adjustment after the Commission issues a final decision, only the revenue requirements found justified by the Commission in its final decision will be recovered from ratepayers. 

9.	When PG&E receives a final decision in the GRC, PG&E should supplement these advice letters to reflect the results of that decision. 

10.	Based on the above discussion, protests from ORA and the Protesting Customers should be denied.

THEREFORE, IT IS ORDERED that:  

1.	Pacific Gas and Electric Company’s Advice Letter 1921-E and Advice Letter 2188-G are approved subject to the outcome of the Commission’s final decision in Pacific Gas and Electric Company’s 1999 General Rate Case.

2.	Pacific Gas and Electric Company shall supplement these advice letters, if applicable, to reflect the results of the final decision in its 1999 General Rate Case.

3.  	This Resolution is effective today.

I hereby certify that the foregoing  resolution was duly introduced, passed and adopted at a conference of  the Public Utilities Commission of the State of California held  on December 16, 1999;  the following Commissioners voting favorably thereon:  

  

  								                                                    
        WESLEY M. FRANKLIN  
    Executive Director

								          RICHARD A. BILAS
									       President
								          HENRY M. DUQUE
								          JOSIAH L. NEEPER
								          JOEL Z. HYATT	
							                      CARL W. WOOD
								               Commissioners